Effective onboarding and activation that emphasizes customer engagement can help financial institutions boost profitability by $212 per customer, according to a new study. A key part of this is making it easy, when onboarding customers, for them to transfer bill payees and direct depositors.
The study details the challenges of engaging with new and existing customers. It also examines how many banks suffer from “silent attrition”—dormant, money-losing accounts held by customers who do not engage with the bank.
The resulting white paper, “Convert `Silent Attrition’ into Banking Engagement and Profits,” was independently produced by Javelin Strategy & Research and sponsored by Deluxe Corp. The study was based on a random sample of 600 U.S. adults.
Javelin believes that banks can reap a higher long-term payoff by focusing first on engagement, with targeted campaigns and initiatives to drive adoption of online and mobile banking, direct deposit, bill payment, financial alerts, and personal finance management tools.
Among the findings:
• “Silent attrition” drains net income annually from financial institutions.
• Immediate cross-sell efforts are not regarded by consumers as an effective form of engagement.
• Fully engaged customers—those with bill pay, direct deposit, and debit purchases in past 90 days—not only own more accounts, but they intend to open more accounts in the next year.
• Expediting the onboarding and activation process for new customers who do not fully engage because they think these initial activation processes are too difficult will increase a financial institution’s profit from new checking accounts by 8%.
“A fully engaged customer will seek bill pay, direct deposit, and debit purchases within the first 90 days, providing immediate value to the financial institution that builds over time,” says Mark Schwanhausser, director of Omnichannel Financial Services at Javelin. The white paper shows that fully engaged financial customers own 2.7 times more accounts than inactive customers, and that they tend to open more accounts within the first year of switching banks.
“We commissioned this study in order to illuminate the consumer perspective and to quantify the benefits of account holder engagement,” says John Filby, senior vice-president of Deluxe Financial Services. “We learned that consumers want their financial institutions to focus on engagement first and cross-sell later.”
Filby says the research shows that dormancy is often a function of cumbersome onboarding and account setup processes, especially as they relate to outbound payments and recurring deposits.