ATLANTA – New research quantifies the growth that can be driven via digital account opening and product origination, also known as digital sales.
The data, released in a new report from backbase called “Digital Sales Benchmarks and Best Practices for Financial Institutions,” was developed in conjunction with Cornerstone Advisors and surveyed 184 North American banks and credit unions to assess the sophistication of their digital sales processes.
The research found institutions with highly-mature digital sales processes achieved 21-44% higher growth in deposits and loans. Accordingly, institutions that “fail to make significant investments in advanced digital sales and onboarding are liable to fall far behind their peers in the race to attract and retain customers,” Backbase said.
In the new Backbase report, researchers then categorized the institutions into three groups: those with a high level of digital sales maturity (Level 3) those with a low level (Level 1), and those that fall into the mid-range (Level 2).
The study found Level 3 institutions outperformed their peers in three key business metrics: deposit growth, loan growth and online account applications. Level 3 institutions averaged deposit growth of 9.8% between 2018 and 2019, and loan growth of 10.4% during the same period.
Contrast Seen
“In contrast, Level 1 institutions averaged just 6.8% and 7.6% growth, respectively,” according to Backbase. “Moreover, the proportion of account openings Level 3 institutions secured through online channels was significantly higher than that of Level 1 institutions. However, the research found there is significant room for improvement in digital sales across the financial services industry.”
According to Backbase, just 25% of institutions surveyed achieved the highest benchmark for deposit account openings, while only 13% had done so for unsecured loan products and 3% for secured.
“The stakes couldn’t be higher for financial institutions, especially those that are just starting to dip their toes into the digital sales waters. A failure to accelerate digital sales capabilities will lead more and more customers to concentrate in the hands of fewer and fewer institutions,” said Vincent Bezemer, SVP Americas at Backbase. “Customers’ expectations for a convenient and smooth banking experience are only going to grow more demanding, and banks’ and credit unions’ futures are contingent upon not meeting, but far exceeding those expectations.”
Bigger May Not Be Better
Despite the magnitude of the pressures facing the industry, it is not a given that only the biggest players are capable of leading in digital sales, Backbase stated.
In three key areas, the largest institutions (those with $10-$50 billion in assets) underperformed compared to small (less than $1 billion in assets) and mid-sized ($1-$10 billion in assets) banks.
Specifically, the research found:
- Larger institutions lagged on speed in secured loan applications. Seventy-eight percent of large institutions have secured loan applications that require more than 20 minutes to complete, compared to 48% of mid-sized institutions and 62% of small institutions.
- Few institutions of any size offered advanced unsecured loan capabilities. Small, mid-sized and large institutions were all on roughly equal footing when it came to digital unsecured product applications, with 12%, 14% and 13%, respectively, achieving Level 3 maturity in this space.
- Mid-sized institutions outperformed their competitors on digital applications for secured loans. Six percent had reached Level 3 maturity in this realm – something no institutions in the smaller or larger categories achieved. Meanwhile, 46% of mid-sized institutions achieved Level 2 maturity, compared to 30% of smaller institutions and 26% of larger.
Tailored Experience Expected
“Technology has enabled truly omni-channel, tailored experiences to consumers in myriad areas of life, from shopping, to eating, to entertainment and more. Banking should be no different,” said Ron Shevlin, director of Research at Cornerstone Advisors. “In fact, those institutions that remain stubbornly mired in the ‘old way’ of doing things – long application processes, disjointed customer touchpoints, reliant solely on in-person visits and reams of paper – will lose out to those that are willing to invest in an approach that ensures consistent, personalized and instant encounters.”
The full report can be found here.