SCOTTSDALE, Ariz.–A new analysis suggests simply looking at the total number of checking account applications by channel overlooks an important difference in consumer behavior.
Ron Shevlin, director of research with Cornerstone Advisors, noted that during 2019, half of all community banks and credit unions opened less than 5% of their new checking account applications in digital channels. “Granted, there were some who opened far more than 50% of their checking accounts digitally—but they were few and far between,” wrote Shevlin on Forbes.com. “But community banks and credit unions accounted for just 15% of all checking account applications in 2019.”
Shevlin noted the megabanks—Bank of America, JPMorgan Chase, and Wells Fargo—and digital banks, however, accounted for roughly 55% of all checking account applications in 2019, 63% in Q1 2020, and 69% in Q2 2020.
But simply looking at the total number of checking account applications by channel overlooks an important difference in consumer behavior, stated Shevlin.
“Consumers open more checking accounts through digital channels when applying for a secondary account than when they open their primary account,” he said “Nearly two-thirds (64%) of the checking account applications taken during the height of the coronavirus crisis in Q2 2020 for what consumers considered their primary account were submitted either online or on a mobile device.”
That was up from 59% in the first quarter of the year, Shevlin said.
‘An Emerging Dynamic’
According to Shevlin, the transition point was sometime in the second half of 2019 when, for the first time, digital applications for primary accounts exceeded branch applications.
“There is an emerging dynamic skewing checking account applications away from branches,” Shevlin wrote.
Secondary Account Applications
According to Shevlin, Cornerstone’s consumer research, commissioned by Velocity Solutions, found that 35% of Americans have more than one checking account. These secondary accounts are opened in digital channels at a faster pace than those intended to be consumers’ primary accounts, the company reported.
In Q2 2020, roughly three-quarters of the applications consumers submitted for their secondary checking was done through digital channels, up from 65% in the first quarter of the year.
The crossing mark happened between late 2018 and mid-2019 when 60% of applications for secondary accounts came in on digital channels.
Consumers Rate The Mobile Process Higher
According to Shevlin, across 10 aspects of the checking account opening process, a larger percentage of consumers who opened an account in the past three years rated their experience on the mobile channel as “excellent” than consumers who applied online or in a branch.
“Bankers like to believe that consumers open checking accounts in branches because they want human assistance and assurance in making the right decision,” said Shevlin.
There may be some truth to that, he added, but according to Cornerstone’s study:
- The rest of the experience isn’t as good as it is in a digital channel
- Consumer ratings of the quality of the branch experience haven’t improved over the past few years (and have actually declined in some respects)
The Hard News
According to Shevlin, the pandemic forced many mid-sized financial institutions to accelerate their digital account opening efforts as branches were temporarily closed.
“It also forced them to rethink some long-held assumptions,” wrote Shevlin. “As mentioned above, many bankers believe that consumers open checking accounts in branches because they want human assistance in making the right decision. There may be some truth to that, but it’s overstated. Choosing a checking account isn’t rocket science.
Investing in improvements to the branch-based account opening experience, at this point, is crazy,” he added.