June 28, 2007
Boston-based
Aite Group LLC estimates that only 3% of U.S. checking accounts were opened online in 2006, a share expected to rise to 4% this year and to 13% by 2010. This activity is only the tip of the iceberg for the potential for online account opening activity, according to Sanjeev Dheer, CEO of New York City-based
CashEdge, Inc.Dheer believes there's a strong case for offering consumers the ability to open new
accounts online, based on both consumer interest and new opportunities
for banks. "This is clearly a service that, although in the early stages, is being
rapidly adopted as a mainstream application," said Dheer, whose company
provides online software and services for account opening, payments and
risk management. He made his comments during a May 3 teleconference
entitled "
Maximizing New Customer Acquisition Through An Integrated Channel Approach" hosted by Tampa-based
OnsiteConference Inc.Dheer also cited CashEdge's own October 2006 survey of
400 online banking customers which found that 78% of these customers would
open accounts over the Internet.
Top financial providers that have
begun to offer online account-opening to their customers have already
experienced a dramatic surge in the use of this service, according to
Dheer. He cited the 2006 announcement by
Citigroup Inc.
that it had gathered $3 billion in new deposits within just a couple of
months of offering its own online savings product. Similarly,
Charlotte-based
Wachovia Corp. reported in 2005 that it was opening nearly 15,000 accounts per month online, according to Dheer.
Among the "top tier of institutions, everyone
either has a solution or has it in their plans," Dheer said, adding
that the economic rationale is "compelling" from a bank's perspective.
Banks that use automated online account-opening products can open and
fund a new account for less than $20, compared to a cost of between $60
and $90 apiece for manual account openings, he said.
Also, because the online account approval and
funding process is instant, Dheer estimates that between 50% and 70% of
customers who apply actually complete the process. He suggested that
banks make more of an effort to contact customers who did not complete
the process. "Banks need to go after this low-hanging fruit," he said.
Retention rates could be improved by encouraging
customers to set up recurring deposits or bill payments at the time
they open their account, he added.
Dheer said that more banks
are choosing to buy a solution for online account opening, as opposed
to trying to build it themselves, particularly since the back-end tools
that allow a bank to verify the customer's identity, sign and fund the
account are complex and difficult to replicate.
