The ROI of improving your bank's digital sales

In our previous chapter, we highlighted how digital sales in traditional banks is broken — largely due to outdated account opening and product origination processes.

But that’s not the only problem.

The broken system is further compounded by the fact that regulatory changes now make it easier than ever for people to switch to challenger banks, which do offer the exceptionally smooth digital experiences that today’s consumers have come to expect.

If improving the customer experience isn’t a compelling enough reason for your bank to embrace digital sales, then the impact on your bottom line should be.

Let’s find out what your ROI would be if you act today to improve your digital sales process.

Banks are facing what could be described as their ‘e-commerce moment’. Firms like Amazon have reinvented funnel optimization by putting the customer at the heart of the process. As a result, regular consumers have become accustomed to simple onboarding processes and intuitive user interfaces. And we’ve rewarded the innovators — for instance, Amazon generated revenues of over $280 billion in the 2019 financial year alone.

So what does this tell us? Simple: if banks can learn from e-commerce pioneers and adopt the same best practices, the ROI will follow.

In fact, according to the Boston Consulting Group, banks with a strong digital sales process can look forward to the following benefits:

Exhibit 3 | Three Benefits for Banks with Strong Digital Sales

Source: BCG analysis

The first and most straightforward way in which banks can see a return on their digital sales investment is through an increase in account sign-ups.

That’s because digital onboarding makes the experience of applying for an account much easier. Customers can complete the process online or via their mobile, and they can even start it on one channel and finish on another without having to resubmit any of their information.

That saves the customer the time and inconvenience of having to stop by a branch to hand over paper copies of ID documents. It also reduces the abandonment rate which can cost several hundred dollars per dropout.

By offering a seamless onboarding experience, you can boost conversions – typically by 10-15% within the first year.[3]

And that’s not all – a 20% improvement in satisfaction with the customer journey translates to an additional increase in revenue of up to 15%.[2]

In other words: delivering a great onboarding experience is key to continuing to reap value from your customer over the course of their total lifecycle.

Once onboarding is complete, you can then focus on increasing your share of wallet by cross-selling and upselling higher-margin products, like loans and credit cards.

To put this in context, the average customer typically owns seven products: three with their primary bank and the rest with different providers. However, research by the RFI Group shows that customers who are highly digitally engaged hold four products with their main provider and up to 12 in total. Incidentally, they usually purchase more profitable products from other banks[5] That’s revenue that you’re missing out on if your digital sales process fails to keep your customers engaged.

Your Net Promoter Scores (NPS) – which measure whether a customer will recommend a product or service to a friend – will also improve as a result. Digitally engaged customers are more than four times as likely to endorse their main bank as those who prefer to stick to more traditional channels.

An engaging digital sales process increases product adoption, which means you can increase your revenue per customer.

One way to improve engagement is through personalization. You can use digital channels to build up a profile of your customers by capturing a wide range of data, which allows more effective targeting of new products. For instance, you can target customers who reliably pay off credit cards with other providers from their current account with a similar product. According to research firm Experian, tailored offers boost revenue by up to 19%.[6]

Personalization is also about getting the message right. You can use the data you collect to make sure promotions arrive at the most relevant time and in an appropriate format, whether that’s a text or an in-app notification.

A digital onboarding process offers much deeper insight into the customer journey.

For instance, if customers drop out when asked to provide an address history stretching back several years, then you could look into integrating one of the regtechs used by the challengers, which only require a customer’s current address to run a credit check. This added visibility can help you to figure out where friction occurs, and to optimize the process for improved conversion.

From a back office perspective, digital onboarding allows you to sign up a higher volume of customers, as you don’t have to rely on a fixed pool of branch or call center staff to process applications.

Instead, you’ll raise productivity by automating the tasks that employees currently have to perform manually due to legacy systems. That means you’ll also free up time for employees to spend on activities which ultimately increase customer lifetime value, such as relationship management.

Increasing revenue is one way for banks to increase their margins – but let’s not overlook how a great digital sales process can cut costs, too.

The truth is, a lot of banks and credit unions continue to rely on manual processes, which aren’t just inefficient and labor-intensive – they’re unnecessarily expensive, too.

You can capture big savings by offering a digital customer onboarding process. McKinsey & Co. estimates that the cost per customer of opening an account is USD $300. That figure consists of operational expenses such as branch staff, not to mention printed forms which are quickly becoming obsolete.

However, McKinsey claims that the cost per customer could drop to as little as $5 for challengers that complete the sign-up process within their apps.[7]

Needless to say, the lower the cost, the quicker a customer becomes profitable once you start to cross-sell bank products.

The majority of customer interactions today involve routine tasks which customers want to carry out quickly, and which your bank probably would like to perform as cheaply as possible.

Too often, these tasks require visiting a branch or phoning a call center. But you can cut costs by persuading customers to shift onto digital channels. Bain & Co. estimates that the average cost to a US bank of an interaction requiring human input is $4, compared to just 10 cents for digital.

That means if a customer drops into a branch twice a month, those visits cost $96 per year, whereas the digital equivalent comes to $2.40. By reducing the human element, the top 25 US banks could save over $11 billion and increase their NPS score by an average of 12 points.[8]

Unsurprisingly, a higher volume of manual processes results in an increased risk of human error. This is where machine learning and automation comes in: supporting staff in making better and quicker decisions. The end result is improved security protocols and a far more seamless customer experience.

This improvement also reduces the likelihood of losing your customers during the process. According to Capgemini, 60% of customer dissatisfaction stems from inefficiencies in the back office9. The less your customers are kept waiting for answers, the more likely they are to complete their transactions.

Banks have a unique opportunity to replicate the success of Amazon and its peers. If you choose to take it, you’ll be able to boost your bottom line, both in terms of attracting new customers and increasing share of wallet, and lower defection rates to what––for now––are your more digitally-savvy rivals.

Meanwhile, your customers benefit as banking becomes less of a chore, and your employees can spend less time on admin and more time on more valuable activities.

In short, embracing digital sales makes everyone happy.

In our next post, we’ll show you the first steps your bank can take to improve the digital sales experience for your customers.