All relationships evolve over time, including a customer’s relationship with their primary bank. That evolution is governed by the primary banking product lifecycle — the stages a customer progresses through from start to finish in that line of business (LoB) relationship.
Most customers consider the banks or credit unions where they deposit their salaries and maintain their checking accounts to be their primary financial institutions. That makes engagement and adoption extremely important for this LoB. By adjusting strategies from stage to stage within the primary banking product lifecycle, retail banks and credit unions can increase customer satisfaction, boost lifetime customer value, and build deeper, more profitable customer relationships.
At the first stage of the lifecycle, i.e., enrollment, banks and credit unions must start the relationship on the right foot. They must convince customers to open checking accounts and activate services like debit cards and mobile banking. To ensure these new services develop into deep primary banking relationships, banks and credit unions must also educate customers on account fees and benefits, and entice customers to set up “sticky” features like bill pay and direct deposit.
When they do this successfully, financial institutions set themselves up to serve the customer’s day-to-day banking needs and become their primary bank account— and thus build a deep and mutually beneficial relationship across the remaining stages of the primary banking product lifecycle (see the full lifecycle below). We’ll discuss the later three stages (early engagement, loyalty, and retention) in future posts. However, success at the enrollment stage is especially critical because without it, banks and credit unions will struggle to derive maximum value over the rest of the lifecycle.
Enrollment Pain Points Hamper Customer Relationships
The challenges of enrollment start with acquiring new customers. Untargeted mass marketing campaigns on expensive, third-party channels like direct mail and email yield conversion rates of less than 1% and high CAC of $200-$500 per customer. Additionally, around one-third of customers who open accounts never activate their debit cards, making it less likely banks and credit unions will earn back what they spent to acquire that new customer.
However, the real pain is felt when it’s time to onboard new customers. Onboarding usually has two goals: encouraging adoption of account features like direct deposit and bill pay, and educating customers about account fees and benefits. These steps are vital for ensuring satisfaction and continued engagement. “Sticky” repeat banking behaviors like direct deposit and bill pay are key to building a deep primary banking relationship, and a full understanding of account and mobile app features is associated with a 130-point increase in customer satisfaction on a 1,000-point scale. Unfortunately, two main barriers hold financial institutions back.
- Lack of effective onboarding programs: Many banks and credit unions don’t invest in formalized onboarding programs that nudge customers toward account feature adoption and other desirable behaviors. If a financial institution does have such a program, it often features ineffective channels like direct mail or email. So, for example, a customer may receive a paper welcome packet two weeks after opening their account, when it’s no longer top of mind. These outdated onboarding tactics rarely deliver strong results.
- Cumbersome onboarding processes: At many financial institutions, setting up direct deposit and bill pay is a tedious, manual process — so much so that many new checking account holders simply never transfer these functions from their old banks. According to a Javelin Strategy & Research report, 20% of new checking account customers say the transfer process is too difficult or inconvenient. This barrier keeps many customers from engaging as deeply with their new banks as they could.
As a result of these roadblocks, 11% of customers who open new checking accounts are inactive, making their accounts a net loss for financial institutions, according to the Javelin report. Inactive customers are those who haven’t set up bill pay, started direct deposit, or used their debit cards in the last 90 days. Another 44% of customers are only partially engaged, having met only one or two of these criteria. This “silent attrition” creates a drag on bank and credit unions’ profits, making it difficult for financial institutions to earn back the cost of acquiring the customer, much less develop a profitable primary banking relationship with them.
In the long term, the impact of these trends can be dire. Up to 40% of new checking accounts are closed within the first year, in part because customers find it too difficult to set up online banking, direct deposit, and bill pay. And each lost customer can cost a bank more than $400.
Attacking Silent Attrition With a Shift in Strategy
Inactive and partially engaged customers represent a big opportunity for banks and credit unions that are willing to change their approach. If financial institutions can increase engagement and reduce silent attrition, they’ll shift more customers to the ranks of the fully engaged, raising their profits by as much as $212 per customer, according to the Javelin report.
The key is to make the enrollment experience both digital and contextual — that is, targeted to a customer’s particular situation at a point in time. This becomes possible when customers agree to share contextual data such as location or activity (e.g., whether they are walking or driving) from their smartphones via their bank or credit union’s mobile app. By combining this information with other sources of real-time contextual data (e.g., weather), financial institutions can deliver tailored, relevant digital experiences at scale.
For example, to encourage a new checking account customer to activate their debit card, a bank or credit union could offer a free coffee at a partner restaurant as an activation incentive. To increase the likelihood of engagement, the bank or credit union could send the offer via its mobile app when the customer was close to one of the partner restaurant’s locations. By making digital experiences hyper-relevant, contextualization boosts engagement and powers deeper customer relationships during enrollment.
3 Ways to Acquire, Activate, and Onboard New Customers
Contextualization lets banks and credit unions engage customers in a smarter, more targeted way. When deployed during enrollment, this strategy helps build the deep, primary banking relationships financial institutions crave. Banks and credit unions will also reduce CAC, attack silent attrition, and set themselves up for success across the rest of the primary banking product lifecycle. Below are a few important steps to consider.
- Cross-sell checking accounts to standalone lending and savings customers. Since communicating through a bank-owned channel reduces expenses, shifting cross-sell campaigns to mobile banking apps is a key way to reduce CAC. Banks and credit unions can target standalone savings and lending customers who have already downloaded the bank’s mobile app. By leveraging customer data they already possess, financial institutions can hyper-target the primary banking value proposition based on customer fit, increasing relevance and raising conversion rates. In addition, contextual information collected by the mobile app can help banks and credit unions reach these customers at the right place and time. Together, these strategies can boost conversion rates and cut CAC by up to 80%.
- Build formalized digital onboarding processes. Banks and credit unions can also leverage their mobile banking apps to educate and motivate customers more effectively during onboarding. A customer is more likely to engage with a timely digital welcome package that appears in their mobile banking app soon after they open their new account, compared to a paper kit that arrives in the mail weeks later. Context-informed incentives for the completion of onboarding milestones such as debit card activation and direct payroll deposit will further drive engagement and increase the likelihood of feature adoption.
- Engage immediately and frequently upon account opening. Financial institutions that include five or six customer touchpoints after account opening earn the highest CSAT scores. Engaging customers regularly builds a habit of interaction, making it easier for them to cut ties with their old primary bank and become fully engaged with their new one. For example, if a customer has to receive a new debit card, engaging through the app during the waiting period keeps it top of mind, increasing the likelihood that they’ll activate the card when it arrives. Gamification can be a particularly useful tactic to keep customers coming back for personalized rewards and useful information.
Use Case Spotlight: Gamify Onboarding With Quizzes
Gamification is a useful tactic for promoting engagement at every stage of the primary banking product lifecycle. During enrollment, onboarding quizzes educate customers about account fees and benefits, while also reinforcing value propositions.
An onboarding quiz delivered via mobile banking app.
Using contextual data that captures what a customer is doing in the moment, the bank could invite the customer to take the quiz when they’re sitting still and able to focus, rather than walking or driving. To further boost engagement, the bank could offer a personalized completion incentive, like a gift card to a partner retailer where the customer frequently shops.
Gamification can also incentivize other “sticky” behaviors — for example, a customer could receive a personalized reward for using their debit card a certain number of times within a 30-day period. By boosting engagement during enrollment, tools like this reduce silent attrition and set the stage for a deeper, more profitable customer relationship throughout the rest of the primary banking product lifecycle.
Contextualization Changes the Game
The enrollment stage of a customer’s primary banking journey is usually expensive and often delivers mixed results when it comes to acquiring new customers and deepening customer relationships. Banks and credit unions often spend lavishly to acquire new customers, only to see less than half of them fully engage. The result: Silent attrition sets in, checking accounts sit idle, and financial institutions lose revenue.
Contextualization is the game-changer. By adding value in the moment, banks and credit unions can boost engagement and deepen their long-term relationships with customers. Fully engaged customers own 2.7 times as many accounts as inactive customers, according to the Javelin report. They also plan to open an average of three more accounts in the next 12 months, compared to just 0.5 new accounts for inactive customers.
By fighting silent attrition and fully engaging more customers, banks and credit unions set the stage for stronger returns across the primary product lifecycle. (In our next post on early engagement, we’ll explain how banks and credit unions can use similar strategies to build stronger customer relationships in the first 30-90 days after enrollment.)