Retail customers acquired via digital channels are significantly less sticky than those who opened accounts in the branch, according to data from Curinos.
The analytics firm used a benchmarking analysis of retail accounts at regional banks and found that 38% of accounts originated through digital channels were retained after 12 months, compared with a 73% retention rate for those opened in the branch.
Getting this process right is vital to financial institutions’ growth as more and more accounts are originated online. Thirty-six percent of new checking accounts were opened digitally in the fourth quarter 2024, up from 16% in 2019, according to Curinos.
Digital retention rates have improved somewhat in recent years, as financial institutions have closed the gap on fraud, says Andrew Hovet, managing director at Curinos. But in many ways, the technology has been a victim of its own success. Younger consumers are more likely to originate an account online, says Hovet, but these customers tend to be less sticky and hold lower balances.
“There’s a retention gap, and there’s also an average balance gap. It’s almost like a double whammy,” he says. According to the Curinos analysis, digital-based accounts have balances of $2,837 after six months, compared with $12,170 for branch-based accounts.
And by design, the digital account opening process has made opening a new account as easy — and quick — as possible. Think about what it takes to do this in person: The customer drives to and from the branch, and maybe spends another half an hour meeting with a relationship manager to discuss their financial needs. That time inherently creates some stickiness, compared with the mere minutes it takes to open an account online, says Nathaniel Harley, president of Mantl, a unit of digital banking provider Alkami Technology.
Where banks and credit unions can bridge the gap is onboarding. “Institutions are not creating a good enough onboarding experience to secure the customer and bring them toward primacy,” Hovet says. Financial institutions could rethink the funding process and use data analytics to encourage the customer to utilize the account. “The better my onboarding experience is, the more likely I will to be the winner and secure that relationship.”
Start With Funding
Sumeet Grover, chief strategic growth and digital officer at $4 billion University Federal Credit Union, in Austin, Texas, believes account opening and onboarding should go hand in hand. “In a digital environment, not only do you want that account open and funded, you also want certain elements of onboarding, like set up the user credentials, the mobile credentials,” he says. “And all this can happen in seconds.”
A lot of institutions don’t require funding at origination, and it’s a growing problem across channels, Hovet says. “We’re seeing the percentage of initially unfunded accounts going up,” he says. “We’re seeing in the branch channel a worsening for some institutions.”
And that’s a mistake, as only 20% of unfunded accounts are typically retained, Hovet says. Even requiring a customer to deposit a low amount — $50 or $100 — through various methods, including account transfer, debit card or Zelle, can make a difference.
In addition to funding, financial institutions should aim to switch the customer’s direct deposit to the new account, says Hovet. Interfaces with large payroll providers can help facilitate that.
Banks and credit unions can leverage data to improve the onboarding experience for the consumer — whether their account is opened online or in the branch. Hovet suggests that institutions rethink marketing efforts, shifting away from “batch and blast” emails to targeted in-app messaging, which customers are more likely to read.
“Our view is, you need a better, personalized journey” that reflects the actions the customer has — or hasn’t — taken, he says. Some have gamified the onboarding journey, through points or a status bar, to nudge or reward behaviors such as recurring direct deposits, debit card use and automated savings. But institutions can also arm staff with the information they need for follow-up calls with new customers.
Grover also recommends that institutions look for “drop-off signals.” That could be a customer who hasn’t logged in for 60 days, for example. “That’s where you intervene, proactively, and bring them back,” he says.
Institutions could also stop treating new customers “like criminals from day one” in an attempt to discourage fraud, suggests Stephen Bohanon, founder and chief strategy officer at Alkami. Financial institutions often limit what a new customer can do, such as preventing the use of remote deposit capture, placing a long hold on a deposited check or limiting their use of ACH or wire transfers. Banks and credit unions should leverage their knowledge of the customer to move away from those restrictions, he says.
The verification process may reveal the customer has had an account with another institution for several years, and that the balance is generally high. But to get out of the new institution’s quarantine period, customers have to call and complain. “That’s your first interaction,” says Bohanon. And unfortunately, that’s not a positive first step in a new relationship.
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