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Online Accounts: Perception vs. Reality

By Achim Griesel

Digital channels have become an integral part of the banking industry. In today’s environment, it would be hard to imagine a relationship with your primary financial institution without these channels. Based on data shared through the Financial Brand earlier this year, and at the Financial Brand Forum in May, 60 percent of global customers primarily utilize online channels. This is right in line with our research of several million U.S. checking households. Unlike most available benchmarks, this data is driven strictly by community banks and credit unions. Statistics at top performing community FIs look like this:
Transitioning from transactional to digital channels can guide bankers down the wrong path for customer acquisition. We often hear financial industry marketers and executives say they want to attract younger customer segments and consumers who will be more driven by non-traditional channels, such as millennials, young professionals, etc. Frequently, they are looking for the answer in using the online channel for customer acquisition.
New PFI Relationships –
Online vs. Traditional
For over two years, we have tracked traditional and online checking account openings at over 15 financial institutions ranging from $200 million in assets to over $5 billion in assets. All FIs consider customer acquisition a strategic priority. They invest marketing dollars into traditional marketing in branches and through direct mail, as well as digital channels. Most of them are also active in social media. During the study participating FIs opened 340,384 core consumer relationships in the form of checking accounts, which equals approximately 350 per branch per year. 8,867 of these were opened online.
In another case study, in the first six months of 2015, FIs opened 50,188 new checking accounts of which 1,989, or 4.13 percent, were opened online. On average they opened 105 online accounts, which would results in a run-rate of 210 per year. On average 37.7 percent of online account openings were attracted though a traditional channel via direct mail.



Quality/Type of Customer
The average age of the new customer attracted from both channels is almost identical. The online acquired customer swipes their card 35 percent more often, but both segments spend $40 per average debit card swipe. The online acquired customer has a significantly higher number of overdrafts per year – almost double! While there are definitely some positive trends on fee revenue opportunities, the outlook is not as good when it comes to balances, share-of-wallet and customer retention.



Customers that opened their account online have significantly lower balances – 41 percent lower checking deposits and 57 percent lower household deposits. On the flipside, they have higher loan balances, but still relatively small amounts. Lastly their retention is 16 percent lower than accounts opened the traditional way.
If you are considering online account opening or already have it, where does that leave you? Opening checking accounts online is not wrong, but it is not the answer to the industry’s desire to get more tech-savvy and younger customers. Be aware that you will likely get a more transitional and fee-based customer, and that it will almost certainly fail to materially drive new customer growth for your organization. For the foreseeable future the branch, your people, your core products and your policies will have a lot more impact on your success in customer acquisition.■

Achim Griesel is chief operating officer at Haberfeld Associates, a provider of marketing and training services based on consumer banking data analytics.


Posted on Tuesday, November 03, 2015 (Archive on Monday, February 01, 2016)
Posted by Scott  Contributed by Scott
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