New research finds the digital playing field is wide open for banks of all sizes to vault ahead of the pack
Data released today by Engagement Banking technology provider Backbase reveals that enhancing digital account opening and product origination—collectively known as digital sales—is instrumental to financial institutions’ success.
The research shows that 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.
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The new Backbase report, 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.
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 that 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. In contrast, Level 1 institutions averaged just 6.8% and 7.6% growth, respectively. Moreover, the proportion of account openings Level 3 institutions secured through online channels was significantly higher than that of Level 1 institutions.
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However, the research found there is significant room for improvement in digital sales across the financial services industry. 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.
Vincent Bezemer, SVP Americas at Backbase comments: “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. 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 doesn’t necessarily mean 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. 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:
- 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.
Adds Ron Shevlin, Director of Research at Cornerstone Advisors: “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. 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.”
