As banks strive to adapt their financial services to the customer landscape, digital transformation is key.
Today’s clients expect seamless, efficient, and secure experiences. Traditional paper-based processes no longer suffice. Shifting customer preferences and new technologies have created the need for a shift in the way banks do business. This shift has especially impacted account opening.
Digital transformation in account opening is the integration of streamlined processes to enhance the customer onboarding journey.
This involves using online applications, electronic signatures, remote identity verification, and real-time funding. The result is an enhanced customer onboarding journey.
Additionally, regional and community banks can stay competitive in the digital age by meeting customer expectations, thus increasing customer satisfaction.
Beyond the customer experience, leveraging advanced tools and platforms can result in many improvements. These include greater operational efficiency, reduced costs, strengthened security measures, and higher productivity levels. Now you have gained a competitive edge in the market.
The path to successful digital transformation is not without challenges. Regulatory compliance and data privacy remain crucial considerations in the digital realm. You must pay close attention to ensure adherence to legal frameworks and protection of customer information.
Additionally, banks must ensure that their digital account opening processes are inclusive. The needs and abilities of customers are diverse. There must be consideration of the legacy systems and infrastructure already in place and integrate accordingly.
Let’s take a deeper look at the impact of digital transformation on account opening.
The traditional account opening process
Most adults have opened a checking or savings account, either for personal or business purposes. Until recently, this required a time-consuming effort that often took between 5 and 10 business days to complete. The process typically looked something like this:
- Choose a bank or credit union: Consumers could choose one or more institutions based on referrals from colleagues, previous banking experience, location, or just on a whim!
- Choose a product: Customers select the type of account they need to open. This may include a checking account, traditional savings account, Money Market Account, or a Certificate of Deposit (CD) account.
- Make an appointment with the financial institution: While most banks allow walk-in customers, appointments reduce waiting time for people wishing to open a new account. You can’t open an account at the teller window.
- Complete application and identity verification: At the appointment, consumers complete a paper application and provide two forms of identification.
- Make a minimum deposit: Some institutions require a deposit with new accounts, which may also be subject to a three to five-day holding period before those funds are accessible.
It’s difficult for many people to imagine putting themselves through this situation today. While older generations are still more likely to trust and prefer in-person interactions, and the average working age (or younger) individual is likely to prefer the ease of performing all those steps online. Customers want a faster, more direct user experience. They're looking for multiple banking products across digital channels at convenient timing.
The same is true of financial institutions. Traditional account opening practices require banks to struggle through manual data processing, document managing, and the associated operational costs. These can happen with the click of a button after a digital transformation project.
Fortunately, technology has evolved. Financial institutions have the potential to reshape the account opening processes using automation.
The role of digital transformation
The COVID-19 pandemic didn’t create the digital-first world that we live in today. It did, however, increase the pace at which we got here. Banking institutions during the pandemic learned that they needed to upgrade their account services to remain competitive. It became essential to improve the automation of account opening processes. According to the Digital Banking Report, 72% of financial institutions are now providing digital account opening, which increased more than 10% from pre-pandemic periods.
The need for digital transformation was heightened by the 2023 news of the Silicon Valley Bank (SVB) collapse. The panic around the SVB collapse encouraged consumers to begin looking for enhanced security. A digitized account opening process gives financial institutions more power to offer clients security, speed, and intuitive customer service.
Banks that offer digital account opening are seeing more deposits, more new accounts, and higher customer satisfaction ratings because of their cutting-edge account opening software, like that offered by Biz2X.
According to the Digital Banking Report, 72% of financial institutions are now providing digital account opening, which increased more than 10% from pre-pandemic periods.
Key components of digital transformation in account opening
While banks realize that automation is the key to decreasing costs, increasing revenues, and opening more accounts, many fail to know what to look for in an account-opening software provider.
The right software will provide customers with a simple and secure bank account opening experience. If the software is not modernized enough or integrated properly with other banking platforms, customers will not complete the account opening transaction. The abandonment rate for online account opening is 19% and it increases when the length of time required by the banking platform is increased.
To select the right digital banking platform look for the following key components.
Online applications
Digital transformation enables banks to provide intuitive online applications. These guide customers through the account opening process, capturing necessary information efficiently.
Electronic signatures and document management
- Secure electronic signatures and document management systems streamline the signing and submission of account opening documents. This eliminates manual paperwork and reduces processing time.
- Remote Identity Verification: Advanced identity verification technologies, such as biometrics and AI algorithms, enable remote and secure verification of customer identities. Facial recognition, fingerprint scanning, and document verification processes ensure accurate and efficient identification without the need for physical presence.
Automated data validation
Digital transformation incorporates automated data validation mechanisms to verify and validate customer data in real-time. This reduces errors, improves data accuracy, and expedites the account opening process.
Real-time account funding and activation
Through digital transformation, banks can offer real-time account funding and activation capabilities. This allows customers to fund new accounts instantly, allowing them access to banking services.
Benefits of digital transformation in account opening
We’ve already touched on some of the benefits of digital transformation in account opening, but here are a few more:
Improved customer experience and convenience
A bank’s account opening process is often the first interaction a customer has with the brand, so it’s important that the account opening process lays the groundwork for good customer relationships.
A streamlined account opening process delivers a great initial customer experience. This makes it more convenient for prospects to get approved and deposit their money. When you have satisfied customers, they are more likely to deposit additional funds in the future and do other business with your bank.
Plus, the positive impressions could turn into great online reviews, attracting additional prospective customers. This will help make your easy account-opening process a key feature in your marketing.
Enhanced efficiency and cost reduction for financial institutions
Digital transformation streamlines the account opening process, reducing manual intervention and paperwork. This leads to improved operational efficiency, cost reduction, and resource optimization for financial institutions.
As new customers complete online automated account applications, modern software minimizes human error while collecting valuable data about the depositor.
The automated system uses this data to customize offers for additional business accounts and loan products based on the customer’s needs. Customized data strengthens the client’s trust in the bank and improves customer feedback. In addition to building customer trust, the data is beneficial to improve cross-selling of products within the institution. This leads to increased revenues and performance metrics.
Through options like know your customer (KYC), included with the Biz2X account opening software, digitally gathered consumer information is used to identify and validate client details.
For banks to comply with anti-fraud regulations, they must qualify new business bank accounts. Automated big data collection and verification that occurs with digital account opening decreases the money spent on hours of manual follow-ups and research. Increased Security and Fraud Prevention Measures
More than 54% of business banking customers reported concerns in security when using digital banking products.
However, the right digital bank account opening software can offer more security than the traditional process. The personal and financial information shared by small business owners and individual entrepreneurs is entered into a digital platform. There, it is encrypted to prevent mass data breaches to the public. Using online automated process also cuts down on personnel fraud committed within the bank where an employee or fellow customer gains access to a customer’s financial data and illegally uses it for personal benefit or financial reward.
Some platforms, like Biz2x, offer additional security to business users. The account opening software increases the security surrounding the approval processes. Online authorization workflow features in the account opening software increase the security surrounding the approval processes.
When a new client or current customer enters account information through a computer or mobile app, an automated authorization routing feature assigns tasks, tracks progress, and sends notifications.
The enhanced workflow management system lets clients apply for new bank accounts, receive credit decisions, and sign e-documents.
The workflows benefit the bank by providing bankers more time to focus on innovating.
Challenges and considerations
Aside from customer concerns about digital security, there are still some challenges financial institutions face when offering digital account opening options.
Regulatory compliance and data privacy
The digital transformation from manual account opening processes to automated platforms is complicated.
To digitize any part of the process, banks must implement new technologies and business structures while complying with stringent regulatory requirements and data privacy laws.
Banks must ensure proper data protection, secure data storage, and compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Ensuring accessibility and inclusivity
Banks must consider the accessibility and inclusivity of their digital account opening platforms. Providing support for individuals with disabilities and catering to diverse customer needs ensures equal access to financial services.
Integration with legacy systems and infrastructure
Integrating digital transformation solutions with existing legacy systems and infrastructure poses technical challenges.
Banks must develop digital transformation strategies to seamlessly integrate new technologies while maintaining compatibility and data integrity.
Real-time integration, like that offered by the Biz2X platform, optimizes bank operations while providing the required data and formatted reporting for federal and local compliance.
Addressing security concerns and cybersecurity risks
Digital transformation introduces new cybersecurity risks and threats. Banks must implement robust security measures throughout their ecosystem. These include encryption, multi-factor authentication, and regular security audits. Everything is done to protect customer data and prevent unauthorized access. The biggest threats to a financial institution using digital banking platforms include unencrypted data, manipulated data, malware, and “spoofing,” where a bank’s website is replicated by hackers to gather financial information from consumers.
While there is no banking process that provides a risk-free guarantee, partnering with a trusted platform provider that has experience in cloud computing is the best way to address security concerns and reduce cybersecurity risks.
Future trends and predictions
Future trends in the digital transformation of account opening practices will leverage technologies like artificial intelligence, machine learning, blockchain, and open banking.
These technologies will further streamline processes, enhance security, and provide personalized customer experiences.
Implementation of most of these tools will become standard practices for most banks, so differentiation is likely to come through specialization.
With enhanced customization, banks will be able to select niche areas of the market, tailor their products to match customer needs, and increase their market share there. Predictive analytics, augmented reality, voice recognition, and advanced data analytics will play key roles in tailoring these services.
Takeaways
Digital transformation introduces new cybersecurity risks and threats. Banks must implement robust security measures throughout their ecosystem. These include encryption, multi-factor authentication, and regular security audits. Everything is done to protect customer data and prevent unauthorized access.
