Financial institutions must employ customer engagement immediately after a new account is open to maximize customer value that, ultimately, drives brand loyalty.
According to a new white paper titled, “Convert `Silent Attrition’ into Banking Engagement and Profits,” effective onboarding and activation that emphasizes customer engagement can help financial institutions boost profitability by $212 per customer.
The new study, sponsored by Deluxe Corp. and produced by Javelin Strategy & Research, was released during Deluxe Exchange Conference 2015 (DX15)−Deluxe Corp.’s annual banking and financial institution forum.
According to the fascinating study, financial institutions will reap a higher long-term payoff by focusing first on customer 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.
“By commissioning this study, Deluxe understands how crucial it is for financial institutions to convert and engage with customers who are seeking more from their banking relationships,” Mark Schwanhausser, Director of Omnichannel Financial Services at Javelin Strategy & Research, said in a release. “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.”
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 an FI’s profit from new checking accounts by 8%, the study shows.
Customers need to be engaged immediately following account opening on the strength of which cross-sell opportunities will follow over time.
Here are some other key study findings:
“Silent attrition”–dormant, money-losing accounts held by customers who do not engage the FI−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 the past 90 days–not only own more accounts, but they intend to open more accounts in the next year
“While we knew that account dormancy and attrition continued to be a challenge for financial institutions intent on establishing primary financial institution status, we commissioned this study in order to illuminate the consumer perspective and to quantify the benefits of account holder engagement,” John Filby, senior vice president of Deluxe Financial Services, explained. “We learned that consumers want their financial institutions to focus on engagement first and cross-sell later. 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.”
The Javelin study is based on information collected in a random-sample panel of 600 U.S. adults. To deepen customer engagement, the white paper recommends placing a priority on “sticky” actions–encourage primary financial institution status by making it easy to establish direct deposit, enroll in new debit and credit cards, and turn on financial alerts.