Banks Target Account Opening Tech to Avoid Deposit Drift’s ‘Death by 1,000 Cuts’

The average consumer has 5.3 bank accounts.

Now that the Consumer Financial Protection Bureau has issued a final rule on data sharing, the age of open banking can get fully underway in the United States, and it will be easier than ever for banks’ retail and commercial clients to move accounts around and shift allegiances to banks.

The goal of any bank is account primacy, as financial institutions (FIs) compete to be the key home for customers’ direct deposits, which are then used to fund loans. Today, the landscape is getting more competitive for a staggering $19 trillion in deposits nationwide.

In an interest rate environment that is still relatively high, historically speaking, banks and credit unions need to set themselves apart. The FIs that are successful in doing so are rewarded with higher engagement rates from their clients, larger balances held within their operations, and top-of-wallet spending.

Amount Chief Revenue Officer Len Eschweiler told Karen Webster that FIs face a mounting pressure: deposit drift.

“It’s a gradual migration of funds from traditional accounts, and banks need to focus on it, otherwise they suffer death by 1,000 cuts,” he said. “Customers on both the consumer and the [small- to medium-sized business (SMB)] side are getting competitive offers all the time from FinTechs and competing banks.”

Customers are looking for more flexible banking options, for FIs to extend personalized offers in real time, alongside a seamless, digitally driven onboarding process. That’s especially true of younger generations — Generation Z and millennial consumers — starting their banking relationships.

Banks and credit unions have a vested interest in gaining sticky, long-lived deposits, Eschweiler said. They have been buffeted about by headwinds and volatility in their commercial real estate portfolios. And so, one FI’s deposit drift turns into a competing FI’s boon.

“They’re looking for ways to hold onto their customers and expand their customer bases,” he said. “That’s where deposits come into the picture in a meaningful way.”

There’s particular value in connecting those deposits into programs that offer SMBs and consumers loans tied directly to those deposit accounts, he said. The best way to do that is via a data-driven, holistic approach that uses advanced technologies to give consumers the seamless onboarding experience they expect, while extending a risk-appropriate loan offer that is personalized.

The Unified Approach

To that end, Amount last month announced the debut of its unified account opening and loan origination platform, providing client banks and credit unions with an integrated experience across deposit and lending products. It’s a single point of access for customers to open accounts and apply for credit. Centralized data also improves security, he said.

“The bar for the best-in-class experience is continuously being raised through technology,” Eschweiler said.

Amount has used artificial intelligence across its platform and Software-as-a-Service offerings to improve FIs’ operational performance and cut down on manual, back-end processes, which commonly translate into friction points for FIs and their consumers, especially when gaining insight into SMBs’ beneficial ownership structures while adhering to anti-money laundering (AML) and know your customer (KYC) mandates.

“As you get into your flow of your underwriting and your decisioning, ID verification is a big step in that process,” he said. “And if a financial institution — a bank or credit union — is bogged down by manual verification processes, that can slow things down. That frustrates consumers and SMBs.”

They may abandon the process entirely and shift their money to a competitor.

The platform on offer from Amount helps client FIs “wrap” additional services around those deposits into what Eschweiler termed an “adaptive customer journey” that takes into account data points such as what the bank or credit union “knows” about a customer, where the customer came from (i.e. from another FI), if they were “invited” by the Amount client FI, and how much risk there may be inherent in that customer’s credit profile.

“This is about the power of deposits but also about the power of deposits when you combine that with other programs,” he said. “There’s a material positive impact on banks’ return on assets.”

Amount is programmatically automating these processes, “so that the system follows up as we gather that information, saving a ton of time” and eliminating any disruption to the account opening continuum, he said. The system shares the identity and document verification that would otherwise be done on a program-by-program basis and works with third-party vendors who may be extending that credit, which ultimately improves conversion rates.

FI employees are “freed up to focus more on higher value strategies,” he said.

AI and Amount’s own historical data on accounts and lending helps FIs get in front of potential drift situations. From an opening perspective, that can “really enhance real-time analysis to spot fraudulent activities during the process, providing an additional layer of security,” he said. The platform already has some FI clients going live with the unified approach and risk decisioning.

“When you start combining deposits with lending programs, the sum is truly greater than the parts,” Eschweiler told Webster.