New FICO Research Shows an Accelerated Digital-First Mindset: 71% of U.S. Consumers Willing to Open a Bank Account Digitally, Signaling the Need for More Engaging and Personalized Financial Experiences

Rhea-AI Summary

FICO's recent research reveals an accelerated digital-first mindset in financial services, with 71% of U.S. consumers willing to open accounts digitally. However, younger consumers (ages 18-24) show a surprising preference for non-digital methods, with 29% favoring phone or mail. The study indicates that 50% of users abandon digital onboarding if asked more than 10 questions. High expectations for identity verification exist, with 62% expecting a digital process. This presents a critical need for financial institutions to enhance user experience and confidence among younger consumers.

Positive

• 71% of U.S. consumers willing to open accounts digitally, indicating strong demand for digital services.
• Significant opportunity for financial institutions to educate younger consumers on digital literacy.
• High smartphone penetration in growth economies underscores a trend toward digital transformation.

Negative

• 29% of Gen Z prefer non-digital methods for account openings, suggesting a gap in financial literacy.
• 50% of customers abandon onboarding if faced with more than 10 questions, indicating poor user experience.
• Digital onboarding processes that require moving out of digital channels lead to customer abandonment.

SAN JOSE, Calif., Aug. 24, 2021 /PRNewswire/ --

HIGHLIGHTS:

• FICO released new research looking at the impact of COVID-19 on digital transformation in financial services, particularly with customer-willingness for digital account openings
• 62% expect to be able to prove their identity digitally, but if asked to move out of digital channels (such as visiting a branch) during the digital account opening process, only 21% said they would eventually complete the added steps
• A greater percent of Gen Z prefer non-digital channels than older generations – 29% of respondents between ages 18-24 prefer to use phone call or mail to open a financial account versus less than 8% of those over 65
• Half of all customers abandon the digital onboarding process if they have to answer more than 10 questions

Leading digital decision platform company, FICO, today released research which found that the COVID-19 pandemic accelerated a digital-first mindset in financial services, with 71% of U.S. respondents willing to open an account digitally (via app or website).

The research shows that the idea of a digitally savvy Gen Z does not always extend to financial services, and younger consumers may not be as financially literate as older consumers. While a majority does prefer digital, there is no definitive preference for opening accounts digitally among young respondents (ages 18-24) as nearly a third (29%) prefer to use slower and friction-filled methods, such as phone call or mail to open a financial account. This trend is not apparent in older age groups (over 65) as only 6% of U.S. respondents in this older age group want to apply by phone call and only 1% want to use the mail. This provides an opportunity for financial institutions to offer services and education programs tailored to bolster younger consumers' financial confidence.

"Digital literacy does not necessarily equate to financial literacy, and in the U.S., digital natives might not be who financial institutions think they are," said Darryl Knopp, senior director Portfolio Marketing and former Head of FICO Advisors Digital Practice at FICO. "Many financial institutions focus on encouraging more senior customers to use digital services, and while this is necessary, financial services providers also should not presume that older age groups aren't ready to use digital services or that younger customers automatically can."

Younger users may find the banking apps intimidating or unapproachable. Less than half of U.S. respondents (49%) under the age of 25 were comfortable downloading a financial institution's app to open an account.  There is an untapped opportunity for banks to pay more attention to helping younger customers become more confident with digital financial services. Comparatively, more than half of those over 65 (54%) were comfortable downloading a provider's app. However, when it came to preferences, collectively across age groups, the older the age group, particularly over 45, the stronger the preference for using a website rather than an app.

Global Growth Economies Embrace Digital with High Smartphone Penetration

The appetite for digital account opening is highest in growth economies, such as Brazil (95%), Thailand (93%), and Vietnam (92%) while developed economies like Australia (76%), Canada (79%), and the U.S. (71%) had lower appetites. This is likely due to the leapfrog effect where those economies have populations who transact largely through their smartphones.

Preferences, Preferences, Preferences

For digital account openings in the U.S., customer journeys must be intuitive yet flexible as individuals' preferences and abilities can vary. For example, credit cards (71%), cell phone billing (64%) and personal financial accounts like checking and deposits (62%) were the top accounts that customers were prepared to open digitally. Conversely, hesitancy was present in opening mortgages (24%), personal loans (24%), or "buy now, pay later" accounts (23%) digitally. This could be due to familiarity with more established products such as credit cards, and checking and deposits, while there is less trust in newer products like buy now, pay latter accounts.

When taking steps to open a digital account, for most online accounts, customers were prepared to answer up to 10 questions. If more than 10 questions were present, 50% of customers abandon the onboarding process. Digital mortgage applications were the only exception where 18% of U.S. respondents were prepared to answer 20+ questions, anticipating more rigor and security for mortgages.

Customers also have high expectations of being able to complete all related tasks for digital account opening via digital channels with 62% of respondents expecting to prove their identity digitally in particular. If asked to move out of digital channels at any point during the digital account opening process, such as posting documents or visiting branches to complete an application, 10% of respondents give up completely on an application and 15% go to a competitor. Only 21% said they would eventually complete the extra steps on a slower timeline. The friction and disruption results in lost customers—and once they're gone, they're often gone for good.

"Digital account opening services are now 'table stakes' for financial institutions to attract new customers or build more robust offerings for existing ones. The focus really should be on providing an engaging, educational, and adaptive customer experience," Nikhil Behl, chief marketing officer at FICO said. "Customers want to master their financial lives and banks can help them do that by anticipating their needs and meeting them where they are with the kind of information and services they're looking for."

Not All Friction is Bad

While frustrations like too many questions can mean abandoned digital applications, not all friction is bad. Thoughtfully designed points of friction can be extremely valuable for managing risk and making customers feel safe.

U.S. respondents have high expectations for necessary identity verification. Nearly two-thirds (62%) expect to have to prove their identity when opening an account digitally with more than half (54%) across all age groups confident in their ability to use a cell phone to scan identity verification documents, such as a passport or driving license. Respondents also expected to have to prove where they live (48%), set up biometric identification (42%) and prove how much they earn (37%).

Learn more about the research findings here, and for more guidance on effective digital transformation in financial services, check out FICO's digital banking commandments here.

FICO is committed to helping every generation build financial literacy through financial education programs like "Score A Better Future," which helps consumers improve their understanding of their FICO® Scores and overall financial health, as well as the FICO® Score Open Access program that enables participating financial institutions to offer consumers free access to their FICO Scores.   

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

FICO is a registered trademark of Fair Isaac Corporation in the US and other countries.

Learn more at https://www.fico.com.

 

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SOURCE FICO

FAQ

What does FICO's recent research reveal about U.S. consumers' willingness to open accounts digitally?

FICO's research shows that 71% of U.S. consumers are willing to open bank accounts digitally.

What are the preferences of Gen Z regarding digital account openings according to FICO's research?

FICO's research indicates that 29% of Gen Z prefer non-digital methods like phone or mail for account openings.

What challenges do customers face during digital onboarding as reported by FICO?

According to FICO, 50% of customers abandon the onboarding process if asked more than 10 questions.

How do financial institutions need to adapt based on FICO's findings?

FICO suggests that financial institutions must enhance user experience and educational resources to meet customer expectations.

What expectations do U.S. consumers have for identity verification during digital account openings?

FICO reports that 62% of U.S. respondents expect to prove their identity digitally when opening accounts.