Measuring and Reducing Friction in Account Opening

Long applications and difficult new account opening processes lead to lost business in banking. Now there is a way to measure and reduce this friction.

Subscribe TodayMany financial institutions have some portion of their account opening and loan/credit card application process online, but the reality is that it’s often confusing, tedious, and a lot of work for customers to complete. It’s akin to a consumer walking into a retail store, filling up their shopping cart, and walking out the door without buying anything ─ a lost opportunity for acquisition and revenue.

Application Abandon Rates at an All-Time High

In a recent webinar, Peter Wannemacher, Senior Analyst at Forrester, says abandon rates for online banking applications are at an all-time high of 97.5%. This is a huge, wasted opportunity considering that customers who attempt to complete an application are expressing a genuine interest in your products and services. The problem is we often unwittingly require a lot of effort on their part to complete a digital transaction. In fact, CEB research found that “making it easy,” or reducing effort, goes further towards building satisfaction and loyalty than the conventional wisdom of delighting customers.

Measuring Friction in Account Opening

One of the challenges with reducing friction, or effort, in digital transactions is it’s tough to know where to begin and exactly what needs fixing. Optimally, a financial marketer or product manager would like to evaluate account opening and application processes, eliminating all steps that stand in the way of a quick and easy interaction.

Unfortunately, many financial marketers would either completely throw out their current digital application process and start from scratch, or make incremental adjustments – all without knowing if the changes will make any difference at all to abandon rates.

As Ron Shevlin said in The Financial Brand article, 4 Marketing Metrics Banks Should Measure (But Probably Don’t), marketers often focus on checking things off their to-do lists rather than measuring results. This is because it’s easier to show senior management that changes are being made that can help increase customer acquisition ─ even if you’re not sure they’ll make a difference.

To assist with measuring friction in digital account opening and the applications process and reduce abandonment, Avoka has developed a tool called the Transaction Effort Score™ (TES). With this tool, a bank or credit union can quantify exactly where friction is occurring and provide guidance as to how to eliminate the most damaging steps.

How the Transaction Effort Score™ Quantifies Friction

The Transaction Effort Score evaluation tool analyzes all the steps required to complete a loan application or account opening, and generates a “score.” This score can then be used to identify specific areas of improvement in a bank or credit union’s online sales transaction processes, such as eliminating unnecessary fields or implementing a 100% digital experience.

The tool has already had an impact for some organizations. For example, a mid-size Australian bank sought to improve its 18% credit card completion rate. The application process was analyzed using the Transaction Effort Score tool, where they received a rather high (bad) TES of 1064 along with specific suggestions for improvement.

Using the TES recommendations as a guide, the application experience was redesigned, resulting in a TES of 307 (indicating a vastly simplified process) and an application completion rate of 38% ─ more than double the previous rate.

Factors Analyzed by the Transaction Effort Score

As mentioned in the Avoka white paper, The Transaction Effort Score: Driving Revenue through Reduced Customer Effort Transaction Effort, the Transaction Effort Score takes into account many factors that contribute to effort in the application and new account opening process including:

  • How many keystrokes are required to complete a field?
  • Is the required information something a consumer quickly knows (such as phone number) or something they’ll need to look up (such as their driver’s license number)?
  • Does the transaction experience support mobile responsive design?
  • Can supporting documents be submitted electronically or must they be submitted in paper format via mail or by visiting a branch office?

These are only a sample of the elements analyzed by TES that contribute to consumer effort (friction). Multiple keystrokes, confusing interfaces, requiring customers to visit a branch in person to complete a transaction, or asking for extraneous information all contribute to effort and increased abandonment. The TES tool not only helps identify the steps that can cause customer anxiety (and therefore abandonment of the process), but also provide direct suggestions that can improve results.

For instance:

  • Every additional question increases the score.
  • Asking harder to find questions increases the score.
  • Requiring the customer to visit a branch to deliver documents or deposit funds increases the score.
  • Offering a “Save and Resume” option decreases the score.
  • Supporting a multichannel experience decreases the score.
  • Minimizing keystrokes and leveraging mobile functionality decreases the score.

A major benefit of the Transaction Effort Score is that it represents a leading indicator that identifies areas for improvement before consumers complete their digital transaction. This makes it useful for analyzing how large-scale or incremental adjustments will affect the score, and in turn, reduce customer effort.

Best-in-Class New Account Opening Processes

As is discussed in the best-selling Digital Banking Report, Digital Account Opening, there are many ways banks and credit unions can improve the account opening and application process, leveraging digital technologies and common sense. Each improvement will reduce friction, simplify the process and enhance the consumer experience … leading to reduced abandonment and improved revenues.

  • Minimize fields, reduce keystrokes and minimize scrolling. Ask only for the specific information required and nothing more. Remember, the more information you require, the more effort is needed and the higher the TES. In addition to minimizing fields, require as few keystrokes as possible and make forms easy to navigate. Remember, scrolling and keystrokes take more time and effort – especially on mobile devices.
  • Collect the easiest information first. Asking for the basic information first (name, email address and phone number) not only gets the consumer engaged with the least amount of effort, this information is key if the consumer abandons the process later. With this insight, you can get back in touch immediately. In addition, the more time the consumer has invested in the process, the more likely they will complete the application rather than abandoning.
  • Offer “Save” and multichannel functionality. Consumers move from channel to channel during application and account opening, so offer “Save” functionality to help preserve information already entered. “Restarts” lead to high abandon rates. Allowing consumers to utilize different devices to complete a transaction, such as switching between digital, in-person visits, or calling a call center improves completion rates.
  • Make the experience 100% digital. A streamlined, 100% digital experience is a must. Presenting consumers with a digital form to complete and then requiring them to visit a branch office to finalize details or submit paper documents results in a much higher abandon rate. All processes should enable the ability to submit documents electronically and support digital signatures.
  • Onboard for the requested product. Resist the temptation to market or inform the consumer about ancillary products or services until after they’ve completed the application or account opening initially requested. After the primary product or service has been opening, additional cross-sell or upsell suggestions can be provided.
  • Retarget abandoned applications. Consumers abandon even the most simple application or new account opening processes for a variety of reasons – perhaps their laptop battery died, they received an urgent phone call, or they lost their internet connection. The only way to retarget these applicants for completion is to capture primary contact information early in the process (such as name, email, and phone number). Be sure to follow-up on abandoned applications quickly, however, since the prospect could be moving to a competitor.
  • Use a “Mobile First” design. Completing transactions on smart phones is all about speed and simplicity. Therefore, minimize the use of keyboard input by utilizing drop down lists, toggle/radio buttons and the photo capabilities of the mobile device to assist in data collection. Also minimize white space and use adaptive design to eliminate unnecessary images/graphics when rendering on a smartphone.

TES Can Improve Application Completion Rates

The Transaction Effort Score not only measures exactly what’s negatively impacting the completion of transactions – but also provides suggestions as to how to fix what may be wrong. Some financial institutions may realize that a measurable impact can be made with only a few simple changes, such as removing extraneous fields or making data entry more efficient. Other organizations may need to make significant changes, but will also realize substantial changes in costs, revenues and abandonment rates.

Remember – every keystroke, every mouse click contributes to abandonment. Banks and credit unions need to minimize these steps in order to create a digital new account process that is optimized and frictionless. The Transaction Effort Score is an excellent metric that can identify areas to improve to reduce customer effort and, in turn, increase acquisition rates and revenue.

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