“Do you think that when they asked George Washington for ID that he just whipped out a quarter?”
— Steven Wright
Most banks, especially those that are active consumer lenders, have seen slow maturity of online loan application systems. The ability to credit score and give an immediate answer on the Web, combined with integrated fulfillment via the call center or branch, has begun to move consumer behavior toward Web-based loan application usage. Leading institutions report that as many as 50% of consumer loan applications are being submitted via the Web, with a lesser but still impressive number for mortgages.
Now, many banks are starting to eye the opportunity to sell and open more deposit accounts on the Web. For some, the thought is that niche products (money market, high-rate CDs) can be sold nationally without the need for brick and mortar. ING, NetBank and E*TRADE FINANCIAL have all been very successful with this strategy – ING has raised over $40 billion (uh huh, with a “B”) in deposits in only four years.
Others see the primary opportunity being sales to Web-savvy customers who would prefer using that channel to open deposit accounts. Others see it as a cross-sell opportunity for existing customers.
Whatever the motivation, many banks have online deposit account opening on their minds, which puts it front and center for your telepathic, eager to please and willing-to-opine-on-anything-never-mind-the-topic Gonzo homeboys in Scottsdale. So, let’s take a look at the early entrant vendors in this area and the issues banks will need to address.
What is interesting about many of the vendors in the online account opening space is the different approaches they are taking and the value proposition they want to offer.
The most recognizable name in the online space is probably CashEdge. CashEdge is touting its workflow engine that is designed to automate the account opening process and has made a splash with some of the early partnerships it has announced with Corillian and Digital Insight. An early client like Wachovia Bank hasn’t hurt, either.
Another early entrant is Andera, which has focused much of its message on enhanced security. The company announced an alliance with Digital Resolve, which offers behind the scenes security enhancements through a product called Fraud Analyst. Fraud Analyst takes the IP address of the online applicant, creates a profile, and compares the profile information against what is entered by the customer – sort of a second level of security.
A third entrant is MeridianLink, which recently was chosen by Jack Henry as its online account opening solution. MeridianLink’s angle is the offering of a single package for both loan and deposit opening. MeridianLink cut its teeth in the loan and credit scoring arena and is adding deposits to the product line.
An interesting combatant is Yodlee, whose strategy is to leverage its account aggregation solutions and layer the account opening and customer identification capabilities on top of that system. An interesting twist to Yodlee is what it calls Instant Account Verification, which takes a customer’s existing online ID and password and tests it against their bank to identify them.
Finally, and here’s one that isn’t necessarily so obvious, Adobe Systems is trying to parlay its document expertise into a place in the online account opening arena. Adobe’s angle is to start with an easy document/enrolment solution, called the Intelligent Document Platform, and partner with IBM for middleware integration to back-end systems.
Lots of approaches, lots of angles. Which will prevail? Hard to say, since we are at most 10% of the way toward a mature, robust, online deposit opening environment. It’s very likely that every vendor will make some inroads in the next few years, so banks will need to be aware of the different approaches and strengths of each.
As banks look to add these capabilities to their service offerings, several issues of strategy and delivery will need to be addressed. Some that we see:
Those banks that have been successful to date avoided most of the checking account work. ING, for example, cleverly resolved this issue by saying that customers can’t open checking accounts, only MMC’s and CD’s. That saved much of the fulfillment work and kept them out of most fraud risk. (As we speak, however, word is that ING is contemplating the offering of checking accounts – bad idea).
Rather than starting with checking accounts, banks might consider focusing on offerings that require simpler fulfillment – cross-selling a CD or MMC to an existing customer is one thought. A special money market account aimed at a particular geographic market where the bank has no branches is another.
The bottom line is this: when it’s as easy to open an account at your bank as it is to buy something on eBay, stand back.
We’re early in the game here. Investigate, monitor and try some early forays into the online account opening world. There’s time to get your share.