Direct Banking Market To Nearly Triple In Five Years

MORE THAN 65 MILLION CONSUMERS will open deposit accounts online in 2012–representing a 280% increase from the current level of 23 million, according to a report from Javelin Strategy & Research. The five-year increase is a result of increased consumer willingness to adapt to new technology, and a readiness among financial institutions to expand offerings.

Financial institutions must enhance existing online account opening systems to take advantage of deposit acquisition, customer retention opportunities, and huge cost savings that will materialize through the exponential growth in online account opening.

Banks that are ready for the demand will experience increased retention and services per household among existing customers, and will accelerate acquisition of new customers at one fourth the cost of offline acquisition, according to the Pleasanton, Calif.-based Javelin. Banks and credit unions need to focus on product as well as process to grow online account openings, however, says Jean M. Garascia, an associate analyst and the report’s author.

A competitively priced, basic product coupled with a simple, secure and immediate online account opening and funding process will enable financial institutions to compete with the “direct banks” that currently lead in this arena. Suggested improvements include shorter application forms, real-time security and identity authentication, and immediate funding of accounts through multiple means.

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