Account opening processes are often overlooked as a key source of customer friction and attrition. Yet, the longer it takes for someone to complete an application, the higher their chances of abandoning it. Banks that fail to provide a seamless and effortless account opening experience risk losing valuable customers to competitors.
In this article, we'll explore why some banks are losing customers due to their account opening processes, and how they can improve them using tailored workflows based on real-time risk assessment.
We'll also introduce Formica AI, a solution that can help banks deploy adaptive workflows, reduce customer friction, and increase conversion.
Opening a bank account: customer application processes applying tailored workflows compared to traditional application processes
Banks are always looking for ways to simplify the application process while mitigating risk and staying compliant. Let's follow the hypothetical journey of John, an ideal customer, as he submits his application through two different account opening processes: One that has a tailored workflow and one that's a traditional account opening process.
John is a successful entrepreneur who has been running his own business for the past 10 years. He has a good credit score and expects a quick and easy application process as a low-risk applicant. John completes two applications to open accounts through different banks. Let's call them Bank C and Bank D.
Bank C deploys an adaptive workflow that identifies low-risk applicants and recognizes them as ideal customers. Meanwhile, Bank D uses a traditional application process that doesn't automatically recognize ideal, low-risk applicants. The journey John undertakes for each account opening process contrasts drastically.
Let's see how John's account opening journeys unfold:
Bank C: John is recognized as a low-risk applicant and is guided through a tailored workflow based on his risk level. He is only required to provide the minimal data required to complete the application. The process is quick and frictionless, and John is impressed with the bank's modern approach.
Bank D: John is put through a one-size-fits-all approach that requires step-up authentication to finish his application. This required income verification and a picture of his ID, which are steps that aren't necessary for applicants like him to take. John is frustrated by the bank's outdated application process and decides to abandon his application.
Key learnings for effortless account opening
As you can see, John underwent a significantly worse customer journey with Bank D, which used the traditional application process. Bank D took a huge, unnecessary risk in applying the same level of scrutiny for all applicants. This risk frustrated John, who is in their most valuable customer segment. He could have decided to abandon his application since application abandonment rates are closely tied to the amount of time and personal information it takes to complete an application. In short, Bank D's outdated application process may have resulted in the loss of a customer, and one that would have brought good lifetime value at that.
On the other hand, Bank C's account opening process succeeded in making a good first impression on John. That's because it used rules and machine learning, proactively tagged John as a low-risk applicant, and guided him through a tailored workflow based on his risk level. In the end, Bank C was able to achieve what Bank D couldn't: mitigating risk and giving John the frictionless experience he expects.
Tailored workflows and their benefits with Formica AI
Tailored workflows based on real-time risk assessment are a win-win for both banks and customers. Banks can improve their customer experience, reduce costs, and increase growth, while customers can enjoy a faster and easier account opening process.
By adopting modern solutions like Formica AI, banks can reduce customer friction and increase conversion. This will help banks to acquire more customers and increase growth.
Formica AI is an AI-powered fraud protection platform that helps companies monitor, detect, and prevent fraudulent activities in real-time. Its product, Customer360, enables banks to deploy adaptive workflows that identify low-risk applicants and recognize them as ideal customers. This allows banks to prevent fraud and reduce unnecessary friction by requiring step-up authentication only when needed. Customer360 also provides real-time risk assessment, allowing banks to guide customers through tailored workflows based on their risk level. By leveraging AI-driven solutions like Formica AI's Customer360, businesses can gain valuable insights into their customers' behavior and preferences while also helping them form better relationships with their customers. This can help reduce customer churn rates, which is essential for businesses that want to maximize their customer lifetime value and increase profitability.