Though digital account openings are table stakes for community banks, experts say they must also invest in physical branches over the next several years.
The percentage of online account openings (OAO) more than doubled to 8.23 percent in 2020 from 4 percent in 2012, said Haberfeld Executive Vice President Robb Rempel. That share increased to 9.80 percent in 2021 and 10.90 percent in 2022 before decreasing to 10.10 percent last year.
Bankers focusing on bulking up OAO must still strike an effective balance between customers’ in-branch experience and future investments in the technology, Rempel said. Though OAO is important, exclusively focusing on digital offerings undermines overall growth prospects.
Community bankers must be aware that customers who choose a community bank place a premium on branch banking over primarily digital services, Rempel said. There are also age differences: Whereas the 25-44 age group accounts for 56 percent of online openings, only 34 percent were from those 45 and older. “It’s a little bit of a different audience,” Rempel said.
Still, the lack of followup with customers who open accounts online is leading to worse outcomes, he noted. Checking balances are 75 percent lower when opened online rather than in a branch; overdrafts/NSFs are 171 percent more frequent; and account attrition is three times higher.
To cut down on these disparities, Rempel said community bankers must consistently follow up with customers who open accounts online to ensure they feel like a part of the institution. Also, community banks’ OAO tools are generally not as good as those offered by larger institutions with seemingly unlimited tech budgets, Rempel added. Many smaller banks’ offerings can be overly burdensome for potential customers, and require them to submit personally identifiable information.
Bankers are revamping their OAO offerings for both commercial and retail customers. Eighteen percent expect to select a new or replacement online banking platform for commercial/small businesses this year, down from 23 percent last year, according to Cornerstone Advisors’ 2024 “What’s Going on in Banking” report. Twenty-seven percent of bankers plan to select a new or replacement digital account opening application for consumers this year, compared with 19 percent who selected a new or replacement app last year.
Cornerstone Senior Director Amanda Swanson described OAO as a must-have for community banks, despite her positive view for the future of in-branch banking. Not all community banks have adopted OAO, she added.
“There are some that still have a form out online, and they think that if they build it, they will come, and that is not the case,” Swanson noted. “It really needs to be top-of-mind in regards to offering that up for consumers who may want to come bank with you, versus forcing them to go into the branch to do it.”
Swanson expects the operating hours of community bank branches will be more strictly based on consumer demand in the future. Though banks have generally opened their branches from 8 or 9 a.m. to 5 p.m., Swanson said they should be open to changing that for customer convenience. For example, suburban St. Louis-based Midwest BankCentre recently opened an innovative branch which includes a pushed back weekday lobby closing of 6 p.m. to account for the working hours of many customers.
Banks should monitor their teller transactions to be aware of high volume times and undertake a brief test trial to measure the impact of changing branch hours, Swanson noted. They must also consider reallocating branch staff to support their digital offerings as necessary.
Though loan-seeking customers are willing to navigate a bank website to secure the right loan or deposit rate, they still generally desire the personal service provided by an in-person financial consultant, Swanson said.
“A lot of consumers today still want that security of a physical branch,” she noted. “They may open it up online, but they are still going to stop into a branch sometime for more of those consultative needs.”
The industry lost 1,409 branches last year — 2,454 closed and 1,045 opened — according to S&P Global Market Intelligence data. That is lower than the 1,854 that were shuttered in 2022 and the record 2,928 that closed in 2021.
In early February, Chase announced that it plans to double its Twin Cities footprint, and expects to have more than 60 locations in the region by the end of 2027. PNC Financial Services and JPMorgan Chase & Co.