Nearly 70% of personal banking products in North America, Europe and Australia can be applied for online. The US was a slow starter, but as Danielle Myles discovers, it is making up for lost time.
Individuals want to open bank accounts without stepping into a branch, and banks have responded by prioritising their digital onboarding capabilities for retail customers. As a result, the proportion of personal accounts that can be opened online has nearly doubled to 69% over the past two years.
This is a key takeaway from software company Avoka’s 2018 State of Digital Sales in Banking report, which reveals the online sales readiness of the 50 biggest banks across North America, Europe and Australia.
A good yardstick for each region’s progress is the ability to apply for products from smartphones, which Avoka says is becoming the norm for personal banking. Australian banks have maintained their historic lead in mobile account opening, as well as the broader race to digitise. As an advanced economy with a small bank market that escaped the global financial crisis relatively unscathed, Australian banks pioneered fintech before many of their international peers.
US picks up the pace
The big improver is North America. Its banks’ mobile readiness has soared from 39% to 61%, putting it ahead of Europe for the first time. The statistics downplay US banks’ progress, though. “In North America we included Mexico for the first time and increased the number of Canadian banks, which have been slower adopters,” says Avoka’s Don Bergal. “If we had excluded them, and instead focused on the US, the jump would have been even more pronounced.”
One reason US banks performed well is because their digital investments from several years ago are starting to bear fruit. “The US banks are quite large so move more slowly, and many of them are more conservative than a lot of European institutions, so it has taken them quite a long time to deliver on what they started,” says Mr Bergal. Another factor is consumer expectations. “It took a while for the acceptance of fintech and digital management to take hold in the US, whereas the Australians have demanded it for some time,” he adds.
In contrast, Europe’s mobile sales readiness saw a negligible increase in 2017. Avoka attributes this to tech resources being redirected to regulatory developments such as the EU’s Revised Payment Service Directive and General Data Protection Regulation (GDPR). In the long run, however, GDPR’s requirement that banks provide customers with their personal data on request is tipped to enhance customers’ digital experience.
The next battleground
Know your customer and other regulatory requirements hamper the digital onboarding of small business customers, and just 23% of business accounts can be opened online. But this is a marked improvement from 12 months earlier, when the figure was just 9%. Avoka believes these customers represent the best unexplored opportunity for digital leadership, having conducted research that shows strong demand for mobile account opening among small business owners. While business deposit accounts are not especially profitable, the follow-on services can be.
The gap between business banking’s digital aspirations and reality extends all the way up to large corporates, and encompasses much more than account opening. In Boston Consulting Group’s (BCG) latest Corporate Banking Executive Survey, 86% of the 200 respondents agreed that digitisation would fundamentally change the industry, yet just 43% believe their firm has a clear digital strategy. Fewer than 20% consider their bank to have market-leading digital capabilities; some 43% outright disagree with the suggestion.
Over the next five years BCG expects digital platforms will attract 30% of traditional corporate banking revenue. To remain competitive, lenders must move commercial banking up their digital agenda. BCG proposes streamlining and digitising customer onboarding as a possible first step.
All data sourced from Avoka and Boston Consulting Group.
