Online Account Opening Consumer Analysis and Vendor Comparison:

Transcription

1 Online Account Opening Consumer Analysis and Vendor Comparison: How to Optimize Efficiency, Enrollment and Risk May Hacienda Drive, Pleasanton, CA USA t f

2 Table of Contents Overview... 5 Primary Questions... 5 Findings and Analysis... 5 Methodology... 6 Executive Summary... 7 Key Findings at a Glance Key Recommendations High Failure Rates Undermine an Essential Service It s a Given: Many Consumers Want to Sign Up Online Gen Y Opportunity Most Online Applicants Already are Familiar With the Bank Applicants Expect a Quick, Hassle-Free Experience Primary Motivations Vary Among Existing, Past and New Customers The Main Consumer Complaint Most Applicants Say Application Process is Easy Unlike Consumers in General, Successful Applicants Balk at Visiting Branch to Confirm Identity Female Applicants Encounter More Obstacles Females Fail Much More Often Than Men Successful Applicants Are More Profitable Successful Applicants Use More Bank Products Successful Applicants Use All Banking Channels Successful Online Applicants Embrace Online and Mobile Banking Fees and Lack of Online Services Frustrate Successful Online Applicants The Business Case for Online Account Opening Bankers and Vendors Agree on ROI How Bankers Grade Online Account Opening Products The Primary Obstacles and Why There s Finger-pointing Between Vendors and Bankers Bankers and Vendors Blame Each Other for Shortcomings How it Works: From Application to Funding Identity Verification Funding Verification Data Analysis Microdeposit Authentication

3 Table of Contents Account Aggregation Why Strategies for Large and Small Financial Institutions Vary A Checklist of Desirable Features Vendor Profiles Andera CashEdge Fiserv Jack Henry & Associates Inc. (MeridianLink) Metavante Online Resources S1 Corp. (S1 Enterprise and Postilion) umonitor Parsam Technologies Yodlee Related Research Companies Mentioned

4 Table of Figures Figure 1: Online Account Opening Process... 9 Figure 2: Efficiency Cost Savings Gained for Accounts Successfully Opened Online in Figure 3: Opened a Checking Account Online Without Needing to Phone or Visit Bank Figure 4: Last Time Attempted to Open Checking Account Online (All Consumers) Figure 5: Last Time Attempted to Open Checking Account Online (By Generation) Figure 6: Online Applicant Relationships With the Bank Figure 7: Consumer Motivations for Applying for Checking Account Online Figure 8: Motivations for Applying Online (By Relationship to Bank) Figure 9: Consumer Challenges When Opening Account Online Figure 10: Ease of Process (By Age) Figure 11: Preferences for Verifying Identity When Opening an Account Online Figure 12: Success Rates for Completing and Funding Application Entirely Online (By Gender) Figure 13: Banking Products Currently Used Figure 14: Conducted Various Banking Activities in Past 30 Days Figure 15: Banking Activities in the Previous Week Figure 16: Reasons for Switching Banks (By Success in Funding Account Online) Figure 17: Online Account Opening Cost Savings Figure 18: Primary Factors Driving Return on Investment (Bankers vs. Vendors) Figure 19: Biggest Obstacles That Stand in the Way Figure 20: Online Account Opening Workflow

5 Audience: Authors: Contributors: Editor: Financial institutions, online-banking platform providers, online-banking vendors, online-banking marketing Mark Schwanhausser, Analyst, Multichannel Financial Services Mary Monahan, Managing Partner and Research Director Stephen Matava-Knighten, Data Analyst Alan Ruperto, Associate Analyst James Van Dyke, President and Founder Levi Sumagaysay Publication Date: May 2009 Overview The need for cost-efficient online account opening processes has never been greater. Consumers routinely conduct banking transactions online at their own convenience, and they similarly expect to be able to open and fund accounts at will, quickly and easily, within a single session. Last year, anxious depositors seeking safer havens for their savings drained billions of dollars from wobbling banks, providing a dramatic example of how online opening services can give forward-thinking financial institutions a boost on their competition. And yet, many financial institutions still rely on relatively archaic, paper-driven processes that require manual review in the branch. This report analyzes ten vendors that offer compelling online account opening products, maps out how such products improve profitability, and examines what banks and vendors identify as the key obstacles slowing adoption of such products. The report profiles Andera, CashEdge, Fiserv, Jack Henry (MeridianLink), Metavante, Online Resources, S1 (S1 Enterprise and Postilian), Parsam Technologies umonitor and Yodlee. Primary Questions How many consumers open accounts online? What motivates consumers to open accounts online? Do financial institutions deliver the service experience that consumers expect? Are online applicants more profitable than consumers overall? What is the return on investment from an online account opening process? Do banks and vendors see eye to eye on the primary payoffs and obstacles? How do large and small financial institutions set strategies for online account opening? What product features are desirable? What distinguishes the nine vendors? Key Findings Nearly half of consumers have attempted to open a checking account online (45%), and 30% of Gen Y consumers have tried in the past 12 months alone. Contrary to expectations, these are not just channel seekers: About 64% of online applicants either had an existing relationship with the bank (41%) or were seeking to revive a lapsed relationship (23%). One in every five applied online because they did not live near their bank. Though consumers expect that opening an account online will be simple and quick, Javelin survey data indicates that nearly two out of five applicants and more than half of female applicants fail to complete the process without phoning or visiting a branch. Such failures can create a poor first impression for these highly desirable, tech-savvy applicants, who use a wide range of banking products, interact actively with their bank and have high expectations when it comes to online services. Financial institutions selecting a vendor to upgrade this crucial process must weigh such factors as their business strategy, their needs for customization and funding flexibility, and the riskmanagement criteria they use when verifying identities and authenticating fund transfers. When selecting a vendor, financial institutions should always check first with their core processor. Such vendors offer an opportunity to integrate into the existing infrastructure and minimize the interaction with outside vendors, keep costs low and speed up implementation. But two vendors stand out above the pack: CashEdge and the Andera/Yodlee combination. These vendors enable financial institutions to choose from the three methods used to verify funding accounts, enable applicants to fund accounts via credit, debit or ACH, and they have strong track records with clients. 5

6 Methodology The consumer data in this report is based on data collected online from a random-sample panel of 2,350 respondents in March The overall margin of sampling error is ±2.0 percentage points at the 95% confidence level. The survey targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. This report is also based on data collected online from a random-sample panel of 2,339 respondents in September The survey targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. Overall margin of sampling error is ±2.0% at the 95% confidence level. Subscribers to Javelin s syndicated research service are invited to submit inquiries related to this or any other topic. Please contact us via [email protected] with such requests. 6

7 EXECUTIVE SUMMARY Gathering assets is a top priority and online account opening paves the way. The importance of strengthening the asset base has taken on magnified importance as the financial crisis has deepened. As consumer anxiety peaked in late 2008, banks with effective online account opening stood to gain as Americans drained billions of dollars from teetering banks and sought safer havens. But installing an efficient online account opening process also can pay off by: Trimming the cost of opening and servicing accounts. Expanding a bank or credit union s footprint beyond its physical network of branches and ATMs. Serving as a building block for online and mobile banking. Freeing up tellers to focus more on selling profitable products and services. Cross-selling products and services during the application process, while banking needs are top of mind for the consumer. Wooing a profitable segment of active consumers who have a strong desire to use bank through cost-effective electronic channels and regularly use sticky services. Failure rates are disturbingly high. About 39% of consumers who attempted to open a checking account online were unable to complete the process without making a trip to a branch or phoning the financial institution. Though there are often sound reasons for weeding out dubious applicants, this is akin to barring the door to two out of five applicants who seek to enter the front door to what some financial institutions consider their most productive branch. The rejection rate is even higher for women: a worrisome 54%. Nearly half of consumers have tried. The value of this service is crucial, with about 15% of U.S. households attempting to open a checking account online in 2008 and an additional 30% trying in previous years. This service is 7

8 especially popular with Gen Y consumers. About 30% of Gen Y consumers attempted to open an account online in the past twelve months twice the rate of their elders. Hassles can leave an indelible first impression. About one out of four applicants primarily sought to open an account online because they expected it would save them time and spare them a trip to the branch. Indeed, nearly one out of five said they applied online out of necessity because they did not live near a branch. For many applicants, a trip to a branch is a deal-breaker. The high failure rates combined with the common complaint that financial institutions take too long to complete initial deposits (17%) and grant new customers access to their money (14%) means banks and credit unions routinely run the risk of unnecessarily alienating their new customers. Successful applicants tend to be more profitable but they do expect a range of online services. Javelin data shows that applicants who complete the application process entirely online are worth the trouble and investment. They buy a range of banking products, they actively interact with their bank, and they often though not exclusively are willing to use lower-cost or self-service channels and services. But they can be a challenging lot to please. Among their main gripes: a lack of online services. There s a strong business case for online account opening. Bankers and vendors surveyed for this report agree strongly that automating the process can slash the cost of opening an account, from about $60 down to $15. (Online costs estimates ranged from $3 to $25). In addition to cost savings, online account opening can draw in new customers who live far from the financial institutions geographic range, identify candidates for cross-selling, make it easier for existing customers to add accounts, lure in low-cost deposits for checking accounts, and keep them in step with competitors. For the most part, a Javelin survey of eight bankers who had installed account opening technology said their vendors had delivered on the promised results. Vendors and bankers blame each other for disappointments. Eight of 10 profiled vendors said the No. 1 obstacle is the failure of financial institutions to appoint a point person who owns the project and will referee the competing interests of those who manage e-commerce, retail banking, operations, security, marketing and other departments. Vendors also complain that institutions hobble their programs by failing to market them smartly. On the other hand, surveyed bankers said their chief complaint was that the vendors products are inadequate and reject too many applicants. The high failure rates combined with the common complaint that financial institutions take too long to complete initial deposits (17%) and grant new customers access to their money (14%) means banks and credit unions routinely run the risk of unnecessarily alienating their new customers. 8

9 Complex two-phase process has several pressure points. Online applications are authenticated in two basic steps: The first verifies the identity of a faceless applicant who might never step foot in a branch, while the second determines the legitimacy of the account that will fund the new account. Ideally, online account opening products must reach out and analyze data from third-party vendors, flag suspicious applications for manual review, accept or reject applications, identify cross-selling opportunities, minimize the risk of fraudulent transfers, help new customers switch over accounts and bill-pay chores and much more preferably within the few minutes that the applicant is engaged in the task at their computers. Three key choices for fund verification. Vendors provide three primary ways for financial institutions to verify the funding account: analyzing data, microdeposit authentication and aggregation. Each has pros and cons that will affect the risk of fraud, the likelihood of abandoned accounts, processing costs and customer satisfaction. Picking a verification method or whether to verify funds at all will depend upon a financial institution s strategic goals and tolerance for fraud risk. Figure 1: Online Account Opening Process 2009 Javelin Strategy & Research 9

10 Institutional needs and strategies vary and so will their vendor choices. Financial institutions install or upgrade online account opening solutions for a host of reasons. For example, a large national bank might place a premium on automating the process to cut costs or to make the screening process more consistent, while a community bank or credit union might be motivated to entice customers or members from outside their branch network. Similarly, one bank might be intent on wooing large CD or savings deposits, while another might be targeting transactional accounts like checking accounts. Understanding the consumers needs, the institution s strategic thinking and its limitations will strongly shape the choice of vendor. Key Findings at a Glance 39% of consumers who attempted to open a checking account online were unable to complete the process without phoning or visiting the financial institution. 54% of women failed to complete the process online compared with 30% of men. 45% of households have attempted to open a checking account online, including 15% during the past 12 months. Gen Y consumers were twice as likely as their elders to apply online 30% vs. 15% for consumers overall. That rate is even higher among 18- to 24-year-old millennials (35%). About one of four applicants tried to open an account online because they thought it would be faster and save them a trip to the bank. About 64% of online applicants either had an existing relationship with the bank (41%) or were seeking to revive a lapsed relationship (23%). About 19% to 25% of applicants applied online because they thought it would be quicker, save them a trip to a branch or because they didn t live near a branch. About 32% of women tried it primarily to avoid a trip to a branch, but 35% of men said they did so because they did not live near a branch. Existing customers applied online primarily because they wanted to save time (37%), but past customers did so mostly because they didn t live near a branch (33%). New customers were motivated by high interest rate offers (32%). About one out of three consumers complained they were required to phone or visit the bank, while others cited delays in funding their accounts (17%) or gaining access to their funds (14%). About 53% of consumers said the application was easy, five times the 10% segment that considered it a hard process. Successful applicants are significantly more likely than consumers in general to buy CDs (29%) and open money market accounts (23%). Half to three-fourths of successful online applicants used ATMs, visited branches and dialed the automated phone service in the previous month, significantly higher rates than for consumers in general. In the previous week, 58% of successful online applicants conducted online banking, 16% banked via mobile device, and they are two to six times more likely to use or text alerts, transfer funds, wire money or use alternative payments. Successful online applicants griped that they went hunting for a new bank primarily because their previous bank charged fees that were too high (36%) or offered inadequate online services (21%). Javelin estimates that banks and credit unions spend about $60 to manually process an application about four times the average cost of automated online applications. 10

11 KEY RECOMMENDATIONS Mark the process simple, clean and quick. Customers who apply online expect the process to be routine and efficient. Ideally, the process should: Take only a few minutes for a new customer and even less for an existing customer. Determine whether to accept, reject and fund the vast majority of applications in a single session. Assign an account number and order checks, if opening a demand deposit account. Give customers immediate access to their funds. Enlist the call center or branches for back-up purposes only, stepping in just when applicants get stuck. Give customers the choice of funding an account with a credit card, debit card or a transfer from another account. Pre-qualify, cross-sell, offer and open additional accounts relevant to the applicant s needs in the same session. Provide an online switch kit that will help customers disentangle from their previous bank s bill-pay, automatic deposits and other payments. Banks and credit unions can lay claim to being the customer s primary financial institution when they corner the bill-pay chores. Today s paper-intensive switch kits even if they at least partly populate the forms that customers mail later are archaic afterthoughts to an automated process that leave new customers with a headache or, worse, a continuing connection to the previous bank or credit union. This feature, currently offered only by Yodlee and its partner, Andera, deserves a look. Prioritize your strategic goals and limitations. Banks and credit unions must identify the primary goals for implementing an online account opening product. For example, does your institution seek to draw in large savings and CD deposits, or does it prefer to build relationships by wooing checking accounts? Are you seeking a solution that also could be used in branches or call centers? Is it a 11

12 primary goal to automate the system and cut back-office costs, or does your institution intend to continue reviewing many applications manually? Do you seek to offer a customized, cutting-edge service, or are you content to employ a lower-priced, plug-and-play product? Will your technology infrastructure limit what you can consider? How you answer such questions will define your needs and shape the vendor selection process. Understand the breadth of the project. Though vendors often can install a plug-and-play product within weeks, it is crucial to understand that online account opening can have a ripple effect across the institution. Installing a product will involve technology infrastructure, operations, security and compliance, online banking, branch banking, call centers, marketing and so forth. Seek input from all affected departments but assign a decision-maker who can weigh their conflicting interests and ensure your project moves forward. Don t let applicants fall through the cracks. Do not give up on applicants who fail or abandon the process. Evaluate applications that are in limbo and resuscitate applications from potentially worthy customers. Follow up with a phone call or reminder s to spur or assist them to complete the application. Analyze rejected applications to determine whether the screening or application process is flawed. One online bank discovered an unacceptable number of applications were derailed because credit bureaus could not confirm the addresses of people who had moved in the past six months. That prompted the bank to update the application so consumers could note their current address if they had moved recently. Doing so not only maintained the automated process by saving the bank from phoning the applicant, but it also helped boost its application completion rates. Today, the bank boasts it opens and funds 97% of applications. Provide funding choices. Ideally, financial institutions will give consumers the flexibility of making their initial deposit by credit card, debit card or by ACH transfer. Some vendors are now offering PayPal or Google checkout funding options. Many consumers prefer to make their initial deposit by credit or debit card so they can earn rewards or incentives, but ACH transfers can enable them to move larger deposits. Each funding method has pros and cons that include the cost of interchange fees, how quickly customers can access their funds, the risk of funding fraud, and the size of the initial deposits. Banks focused on transactional accounts and a return on investment centered on fees will be more inclined to eat the interchange costs for a relatively small initial deposit. But banks focused on savings, CDs and other non-transactional accounts will prefer larger ACH transfers if they can minimize the fraud risks. Seek vendors that offer flexibility when evaluating account funding. Offering a range of funding verification choices that appeal to different consumer groups translates into higher acquisition rates for the institution. Financial institutions must balance two types of risk when evaluating the funding phase of account opening: the risk of fraud against the risk of alienating applicants. This report focuses more on the consumer side of the process rather than security and fraud risks. Banks could do no account verification by limiting the initial deposit or placing longer holds on the customer s funds, but doing so risks alienating applicants. Using microdeposit authentication reduces the fraud risk but stretching the application process over several days boosts the odds that applicants will simply drop out and bank elsewhere. And offering only account aggregation could spook security-minded applicants who are wary of turning over their online log-in secrets. Such pros and cons underscore the need for flexibility that will enable your 12

13 institution to employ different risk-management methods that appeal to different consumer segments or are more applicable under different risk scenarios. Narrow your selection list to vendors like CashEdge and Andera/Yodlee, which offer all three options. Javelin s preference: Provide account aggregation for verified funding within a single session. A primary goal of online account opening is to minimize the risk of fraud, open the account in a single session, and put the customer in position to make transactions immediately. Account aggregation tools from CashEdge and Andera/Yodlee offer the most timely funding data available on unfamiliar applicants, a crucial factor for financial institutions that are intent on funding larger accounts during the application process. In contrast, data from third-party vendors may be quite adequate for account verification, but it may be riskier for funding verification because it is weeks or months old. Account aggregation also enables the immediate funding of the account, while traditional microdeposit authentication can delay the process for days, causing too many applicants to abandon the process in the home stretch of the process. Although flexibility in deposit verification increases acquisition, aggregation currently is the best option available if you are limited to a single solution. Tip for vendors: Share the risk. There is an opportunity for a vendor to offer a zero liability insurance guarantee to protect banks and credit unions against such fraud losses in accounts that are opened and funded simultaneously. First phone call: Your core provider. Core financial services providers play a leading role in any technology upgrade. Tier-one institutions have the financial means and internal know-how to be able to invest more heavily in new products, while mid-tier and smaller institutions typically are more constrained by available resources. Smaller institutions depend upon their core providers to develop new products and perform due diligence on the vendors to ensure that new products will plug into a financial institution s system. That relieves smaller institutions of a significant burden of overseeing a technology vendor. By buying through a core provider, the infrastructure and support are already in place, online account opening can be added easily to existing contracts, and the core provider can act as a primary go-between to ensure that services will be maintained. If your needs are more complex or cutting edge, call CashEdge and Andera/Yodlee. One risk of buying through a core provider is that it might sell the same basic product to hundreds of other institutions, and customization might be limited. Institutions with greater resources or greater ambitions for innovation and customization should put CashEdge and Andera/Yodlee on top of their short lists. These firms stand apart because of their expertise, variety of packages, opportunities for customization, and funding verification by aggregation tools. Yodlee s innovative online bill-pay switch kit also stands alone for closing the deal by prodding and enabling applicants to sever ties with their previous bank or credit union. 13

14 HIGH FAILURE RATES UNDERMINE AN ESSENTIAL SERVICE Washington Mutual s collapse last September the biggest banking failure in U.S. history triggered an exodus that sent customers running for the doors. The once mighty bank could do little as customers drained $53 billion in deposits starting in June including $17 billion in the two weeks before regulators seized WaMu and sold most of its operations to J.P. Morgan Chase. Days later, regulators were forced to step in as well at Wachovia, where jittery depositors had siphoned off $29 billion in a three-month span. Those devastating depositor runs served up an opportunity for financial institutions that were seen as safer havens especially if they could boast of an online account opening process that could enable depositors to open accounts and shift their savings with a few clicks of the computer mouse. One top 10 bank told Javelin that it saw online account openings jump 15-fold during that anxious period, and scores of banks and credit unions enjoyed a sudden influx of deposits because of such account-opening capabilities. The benefits of an efficient online account opening process are hardly limited to times of depositor fear, however. In calmer times, efficient online account opening products can pay off in numerous ways, including by: Smoothing the way for new deposits. Trimming the cost of opening and servicing accounts. Expanding a bank or credit union s footprint beyond its physical network of branches and ATMs. Serving as a building block for online and mobile banking. Freeing up tellers to focus more on selling profitable products and services. 14

15 Javelin consumer survey data underscores another compelling key finding: Customers who open accounts online are particularly attractive customers who can boost bank profits. Not only are they more likely to buy certain bank products, but they also have strong desires to continue banking online, they regularly use sticky services such as financial alerts and mobile banking, and they are much more likely to make expedited, last-minute payments to avoid higher late fees charged by billers. Furthermore, it is a means to reconnect with lost customers; about 23% of online applicants were lapsed customers who sought to renew ties. Javelin estimates that the labor-intensive process of manually opening accounts costs banks and credit unions about $60 per application more than double the cost of automated online applications at approximately $15. Vendors profiled in this report cited costs that ranged from $3 to $8 using Online Resources product, to $10 to $20 using CashEdge and to $11 to $25 using the Andera-Yodlee combination. Average costs also can decline as institutions handle higher volumes of applications and amortize the cost of software licenses. More Cost Efficiencies Can Be Captured With Better Online Processes Figure 2: Efficiency Cost Savings Gained for Accounts Successfully Opened Online in Javelin Strategy & Research 15

16 Such evidence builds a compelling case for why it is essential for financial institutions to implement an onlineaccount opening process. A Javelin scorecard in indicated that 84% of 25 leading U.S. financial institutions based on deposits had installed online account opening. Economies of scale may not provide as persuasive a reason for adoption at smaller institutions, and this is where implementation and servicing costs move to the forefront of the analysis. With the primary online vendors counting their clients by the hundreds, it is far from a standard feature at most banks and credit unions. And some institutions rely on bare-bones offerings that do little more than enable applicants to fill out a form so a bank or credit union employee can contact them later. The upshot is that even financial institutions that have installed advanced systems still struggle with frustratingly high failure rates because too many applicants give up or unnecessarily fail to pass through the screening processes. Too often, online applicants were left disappointed by processes that were clunky, frustrating slow or overly stringent. This experience runs counter to the expectations that opening an account would be fast and simple. All told, about 39% of consumers and a worrisome 54% of female applicants who attempted to open a checking account online were unable to complete the process without making a trip to a branch or phoning the financial Female Applicants institution. Encounter More (See Figure 3.) Obstacles In essence, that is (See Page 25. ) like barring the door to two out of five applicants who seek to enter what could be a bank or credit union s most productive branch. Anecdotally, some banks and credit unions complain their failure rates run as high as a staggering 70%. High Failure Rates Leave Bad First Impression Figure 3: Opened a Checking Account Online Without Needing to Phone or Visit Bank 39% Failed Successful 61% Q21: Considering the last time you attempted to open a new checking account, were you successful in opening and funding the account online, without ever nedding to call a CSR or go into a physical branch? Select one only. March 2008, n = 336 Base : Consumers opening an account online Javelin Strategy & Research Banking Identity Safety Scorecard, Javelin Strategy & Research, November

17 Financial institutions often have sound reasons for rejecting potential customers. For starters, financial institutions want to screen out applicants who are known shysters or have a track record for mismanaging their money. Furthermore, banking regulations require financial institutions to know your customer, which is cause for understandable conservatism in a process that theoretically involves no face -to-face contact with the applicant and must rely on oftenflawed credit data. Nonetheless, the application processes at many banks and credit unions are weak and flawed creating a poor first impression for a segment of banking customers who are active and profitable but also are discerning, tech-savvy and critical of disappointing online services at their previous bank or credit union. Inadequate products and cost considerations also have left financial institutions using products that suffer from high abandonment rates and can crimp the size of the initial deposits. Javelin data indicates that 15% of households attempted to open a checking account online in 2008, while another 30% have done so in previous years. (See Figure 4.) Put those two segments together and it means that nearly half of the nation s households have logged on to try to open a checking account underscoring the potential value of this It s a Given: Many Consumers Want to Sign Up Online Figure 4: Last Time Attempted to Open Checking Account Online (All Consumers) 15% In the last 12 months More than 12 months ago 30% Never 55% Q17: When was the last time you attempted to open a new checking account online? March 2008, n = 2,256 Base : All consumers Javelin Strategy & Research 17

18 service as financial institutions expand its use into a broader range of accounts and improve the experience for existing customers who seek to add accounts to their financial portfolios. Generation Y consumers led the way, with about 30% applying online double the rate of consumers overall (15%). (See Figure 5.) And interest was higher still at 35% among 18- to 24-year-old millennials, providing undeniable evidence that future generations of self-service banking customers will expect online account opening. Gen Y Opportunity: They re Twice As Likely to Try Applying Online Figure 5: Last Time Attempted to Open Checking Account Online (By Generation) Gen Y 30% Gen X 14% 35% of Millenials (18-24) attempted online account opening Baby Boomers 12% All Consumers 15% 0% 5% 10% 15% 20% 25% 30% 35% Q17: When was the last time you attempted to open a new checking account online? (In the last 12 months only, other options available) March 2008, n = 448;867;840;2,256 Base: All consumers Javelin Strategy & Research 18

19 It is also noteworthy that only one-third of the applicants were strangers to the bank or credit union. The majority of applicants either already had an existing account with the institution (41%) or were seeking to revive a lapsed relationship (23%). (See Figure 6.) Existing customers should be identified early in the process, and the online opening procedures should be adapted and made easier for this group. Most Online Applicants Already are Familiar With the Bank Figure 6: Online Applicant Relationships With the Bank 36% No, I had never had accounts with the institution Yes, I had other accounts at the same institution 41% No, but I was a customer in the past 23% Q23: Considering the last time you attempted to open a new checking account online, did you apply for a new checking accounts at an FI you had other accounts with? March 2008, n = 336 Base : Consumers opening an account online Javelin Strategy & Research Javelin Takeaway: Mid-tier banks, community banks and credit unions that hope to compete with the banking giants in the online banking have little choice but to implement a smooth account opening process. To date, account opening products have focused on welcoming new customers and efficiently screening newcomers using outside data sources. But Javelin s data underscores the critical need to install a product that also can satisfy existing customers, starting with the ability to streamline the process by approving applications based on internal data or at least prepopulating applications with information the bank has on file. 19

20 But the high failure rates and other obstacles can leave consumers with an unsatisfactory first impression that runs counter to their hopes and expectations. About one out of four consumers who attempted to open a checking account online were motivated by two simple desires: to save time (25%) and to avoid the hassle of visiting a bank or credit union branch (23%). Close behind, 19% said they applied online because they do not live near their bank. Financial institutions might not get a second chance with this last group, which likely includes far-flung rate-shoppers and transient Gen Y consumers. (See Figure 7.) Applicants Expect a Quick, Hassle-Free Experience Figure 7: Consumer Motivations for Applying for Checking Account Online I wanted to take advantage of a high interest checking account 28% I thought it would be faster 25% I didn t want to go into a branch 23% I don t live near my bank 19% I wanted to try something new 15% Other, please specify 15% 0% 5% 10% 15% 20% 25% 30% Q18: What was most important in motivating you to go online to open a new checking account? Select up to three. March 2008, n = 2,256 Base : All consumers Javelin Strategy & Research 20

21 The primary motivation to apply online shifts significantly, however, depending on whether the applicant is an existing customer, a past customer who is trying to renew ties, or is a stranger to the bank. (See Figure 8.) Existing customers are most interested in a speedy process (37%), double the rate for previous or new customers (17% each). Past customers are more likely to be compelled to apply online because they don t live near a branch (33%), double the rate for existing and new customers. New customers are motivated primarily to lock in a high rate of interest (32%), double the rate for past customers. Note: The Other responses at 15% for all consumers varied with such responses as fees too much, money incentives and opened a high interest savings account. Primary Motivations Vary Among Existing, Past and New Customers Figure 8: Motivations for Applying Online (By Relationship to Bank) I wanted to take advantage of a high interest checking account I thought it would be faster I didn t want to go into a branch I don t live near my bank I wanted to try something new Other, please specify 3% 8% 19% 29% 28% 17% 17% 25% 23% 26% 21% 23% 15% 14% 19% 18% 13% 14% 15% 31% 15% 32% 37% 33% Existing customer Past customer Never a customer All Consumers Q18: What was most important in motivating you to go online to open a new checking account? by Q23: Considering the last time you attempted to open a new checking account online, did you apply for a new checking account at an FI that you had other accounts with? 0% 10% 20% 30% 40% March 2008, n = 336,138,78,120 Base: All consumers opening an account online in the last 12 months Javelin Strategy & Research 21

22 Many applicants encountered a disappointing experience, however. The primary complaint was that the process broke down. To finish the process, financial institutions required nearly one out of three applicants to either visit a branch (21%) or phone a call center (11%). In addition, many applicants grumbled that financial institutions took too long to fund and wouldn t let them immediately withdraw money from their new accounts (17% and 14%, respectively), while 14% said the process was too cumbersome. (See Figure 9.) Note: The Other responses at 25% were not significant enough to be grouped individually but included having to mail in information, did not trust and no challenges. The Main Consumer Complaint: Process Required Visiting Branch or Calling Bank Figure 9: Consumer Challenges When Opening Account Online I was required to go into a branch to finish the process. 21% I wasn t able to fund the account immediately. 17% The process took too long and I didn't have the time. 14% I couldn t get immediate access to the funds. I was required to call a CSR to finish the process. 11% 14% (32%)1 out of 3 applicantsneeded to visit branch or phone the bank The process required information I was not willing to give. 10% I did not trust the Web site. 10% The process required information that I couldn't find. 8% Other, please specify 25% 0% 10% 20% 30% Q22: What were your challenges in opening a checking account online? (In the last 12 months only) March 2008, n = 336 Base: All consumers opening an account online Javelin Strategy & Research 22

23 The good news is that despite the high failure rates, consumers were likely to consider the process to be relatively simple and secure. Overall, 53% of consumers rated the process of opening an account online to be easy five times the 10% segment that rated it hard. Financial institutions seeking to target Gen Y customers also can take heart that 73% of the comparatively tech-savvy 25- to 34- year-old applicants gave the process an easy grade, nearly 15 times the 5% segment who considered it hard. (See Figure 10.) Similarly, 51% of applicants gave their financial institution good grades for safeguarding their private information, vs. 10% who felt their information was at risk. Most Applicants Say Application Process is Easy Figure 10: Ease of Process (By Age) 65 or older 6% 30% % 44% % 53% % 60% % 73% % 43% All Consumers 10% 53% Easy Hard 0% 20% 40% 60% 80% Q19: Considering the last time you attempted to open a new checking account online, how would you rate the ease of the process? On a 1 to 5 scale, let 1 represent "Very hard" and 5 represent "Very easy".(1 and 2 combined, 4 and 5 combined, other options available) March 2008, n = 336 Base : All consumers opening an account online Javelin Strategy & Research 23

24 In the broad universe of consumers those who apply offline as well as online nearly half (46%) said they would prefer a face-to-face visit at a branch to verify their identity. That willingness is not evident among those who initiate the process online, however. Instead, they prefer identityverification techniques that could be applied on the phone or online. About 27% preferred to confirm details contained in credit reports and other public records, while 22% preferred This suggests that many applicants who succeeded in opening an account online might view a trip to a branch as a deal-breaker. Just 15% of successful applicants prefer that means of verifying identity, ranking it far down their list at No. 4. Instead, 33% said they would prefer to answer indentifying questions only they would be likely to know the answers to, 22% would prefer to use their Social Security number, and 19% prefer a phone call from the bank. relying on their Social Security number. Visiting a branch ranked third for online applicants at 19%. (See Figure 11.) Unlike Consumers in General, Successful Applicants Balk at Visiting Branch to Confirm Identity Figure 11: Preferences for Verifying Identity When Opening an Account Online I prefer to go into a branch for final verification 15% 19% 26% 46% By answering questions only I would know the answer to based on my credit report I prefer to receive a call from the bank for final verification Using my Social Security number 18% 21% 19% 12% 16% 14% 22% 21% 22% 10% 27% 33% Successful in funding account Unsuccessful in funding account All Online Applicants All Consumers 0% 10% 20% 30% 40% 50% Q24: If you were attempting to open a new checking account online, how would you prefer to verify your identity? Select one only.(top four results only,other options available) by Q21: Considering the last time you attempted to open a new checking account, were you successful in opening and funding the account online, without ever needing to call a CSR or go into a physical branch? March 2008, n = 2,256;336,205,131 Base: All consumers Javelin Strategy & Research Javelin Takeaway: Financial institutions puzzle over whether online applicants represent net new business. At the heart of the issue is the question of whether they must invest in online systems if applicants would have been willing to visit a branch anyway. These findings underscore that it is shortsighted to take a branch-only or branch-centric approach. Significant numbers of potential customers live outside the bank s footprint, strongly prefer the convenience of the online channel, and chafe when the process breaks down. Many would be unlikely to do business with the bank if they discovered that the door provided by online account opening was bolted or jammed. 24

25 FEMALE APPLICANTS ENCOUNTER MORE OBSTACLES More than half of the women who applied online to open and fund a checking account were unable to do so without phoning the bank or visiting a branch an alarmingly high rate that is verging on twice the failure rate of men (54% vs. 30%). Though income rightfully is a central factor, Javelin s data suggests that women apply online for different reasons and encounter tougher hurdles than male applicants. These are issues that financial institutions are wise to keep in mind to ensure that they are not inadvertently treating women inequitably. Women Fail Much More Often Than Men Figure 12: Success Rates for Completing and Funding Application Entirely Online (By Gender) Men Women 30% Failed Successful 54% Failed Successful 46% 70% Q21: Considering the last time you attempted to open a new checking account, were you successful in opening and funding the account online, without ever nedding to call a CSR or go into a physical branch? Select one only. March 2008, n = 208 Base: Men opening an account online Javelin Strategy & Research Q21: Considering the last time you attempted to open a new checking account, were you successful in opening and funding the account online, without ever nedding to call a CSR or go into a physical branch? Select one only. March 2008, n = 208 Base: Women opening an account online Javelin Strategy & Research These findings highlight areas that bear further scrutiny: Convenience motivates women, but geography and rates motivate men. Women applicants said the No. 1 reason for applying online was to avoid a trip to a branch (32%), followed closely by the expectation that it would be speedier (28%). In contrast, 35% of male applicants tried it because they did not live near a branch, followed by a desire to open a checking account with a high interest rate (24%). It is interesting to note that 33% of men who failed to complete the application process online said they had been motivated to try something new, double the 17% rate for women who failed to make the cut. Tough hurdle for women with current and former accounts. Most women who failed to complete the process entirely online either were or previously had been a customer. In contrast, 47% of the men who failed had no previous relationship with the bank. The failure rate for women with current accounts was double that of men with existing accounts (49% vs. 24%). 25

26 Lower incomes rightfully play a key role. About 57% of female applicants had incomes of $35,000 or less, compared with only 42% of male applicants. Similarly, 63% of women who failed to complete the application online had incomes in this range, vs. 52% of the men who failed. Income is a key variable, but the higher failure rates for women suggests that financial institutions should examine whether screening processes make it harder for lower-income women to make the cut. Women and men encounter different obstacles. Male applicants said their No. 1 challenge was collecting the required information. That was a stumbling block for 23% of male applicants overall, and 32% of those who failed to complete the process online. This was closely followed by a lack of trust in the Web site s security (22% of all male applicants, and 29% of men who failed.) In contrast, female applicants were more likely to cite the inability to fund the account immediately, the hassle of visiting a branch and the lack of trust. Those answers applied to 14% to 19% of female applicants, both successful and unsuccessful. Men are more likely to carp about security. Applicants who fail to complete the process online have heightened concerns about online security, but anxiety is higher among the men. For example, 22% of failed male applicants said the process was unsafe, double the 12% rate among women. Javelin Takeaway: Applicants who encounter difficulties in completing the process entirely online are more likely to distrust the process and emerge with an unfavorable impression of the process. This backlash underscores the importance of implementing an online process that stays online and does not run counter to consumer expectations by forcing them to phone or visit the bank or credit union. 26

27 SUCCESSFUL APPLICANTS ARE MORE PROFITABLE A key question is whether applicants who apply online are worth the trouble and investment. In short, do they make better customers than those who open accounts through offline channels? The short answer is they do. The highlights: They use more banking products than the average consumer providing a rich source of cross-selling opportunities They actively interact with their bank or credit union. They frequently visit branches, but they are inclined to use lower-cost self-service channels and services, too. They are more sensitive to banking fees, and they respond to higher rates. One big gripe: They want more online services. They Have an Appetite for Bank Products One compelling finding is that successful online applicants are strong candidates to use more bank products and services. This inclination means there is an opportunity to deepen the relationship by cross-selling other profitable products or services. From the product side, the relationship typically includes a checking account (75% vs. 71% of consumers), but they are often looking for places to invest or park funds. For example, successful applicants are more likely to buy CDs (29% vs. 21%) and open business bank accounts (23% vs. 15%). Some of those business owners undoubtedly opened an account because they had been hunting for higher returns on their idle cash. (See Figure 13.) 27

28 Successful Applicants Use More Bank Products Figure 13: Banking Products Currently Used Personal checking account Personal savings account Joint checking account Retirement account (401k, IRA, etc) Certificate of Deposit Mortgage Shares of stock or investment funds Business bank account (checking, savings, or other) Money market account Another type of loan Home equity loan or line of credit 24% 25% 29% 11% 21% 27% 17% 26% 17% 25% 23% 23% 15% 23% 17% 20% 16% 12% 16% 15% 10% 15% 40% 38% 36% 40% 35% 75% 67% 71% 61% 56% 62% Successful in funding account Unsuccessful in funding account All Consumers 0% 20% 40% 60% 80% Q3: Which of the following financial banking products do you currently use? by Q21: Considering the last time you attempted to open a new checking account,were you successful in opening and funding the account online, without ever needing to call a CSR or go into a physical branch? March 2008, n = 205;131;2,256 Base: All consumers who opened an account online Javelin Strategy & Research 28

29 They Actively Interact With Their Bank or Credit Union Successful online applicants are an enticing segment for financial institutions that prize repeat e-commerce customers. By measure after measure in Javelin s surveys, they are significantly more active banking customers. To be sure, they continue to regularly visit branches, a fact that could reflect the needs of business owners. Three out of four successful applicants made a deposit or withdrawal at a branch in the previous month, mirroring the pattern of consumers overall. But successful applicants were significantly more likely to walk into a branch for other transactions (56% vs. 33%). But they also are quite comfortable with self-service channels. That s a plus at times like these when opportunities to shave costs are at a premium. Successful online applicants are more inclined than customers in general to hit an ATM (75% vs. 65%), and more than four out of 10 picked up the phone to contact an automated system, talk to a call center representative or trade s with a bank rep. Indeed, these customers were three times more likely to exchange than consumers in general (41% vs. 13%). (See Figure 14.) Successful Applicants Use All Banking Channels Figure 14: Conducted Various Banking Activities in Past 30 Days Visited a branch to make a deposit or withdraw cash Used an ATM to make a deposit or withdraw cash 65% 76% 78% 75% Visited a branch for a reason other than deposits or withdrawals 33% 56% Used an automated telephone system to perform any banking function Spoke by phone with a bank or credit union representative 31% 28% 42% 48% Exchanged with a customer service representative 13% 41% Successful in funding account All Consumers 0% 20% 40% 60% 80% 100% Q5: Please indicate the last time you conducted each of the following financial activities with a bank or credit union. (In the last 30 days only, other options available) by Q21: Considering the last time you attempted to open a new checking account,were you successful in opening and funding the account online, without ever needing to call a CSR or go into a physical branch? March 2008, n = 2,256;205 Base: All consumers Javelin Strategy & Research 29

30 Successful applicants also are very active users of online banking and mobile banking. Over the previous year, virtually all of them conducted online banking (94% vs. 79% of consumers). And more than half banked via a mobile device an astounding 54%, nearly triple the 19% rate for consumers. Simply put, these are stunning penetration rates. And they are habitual users, too. In just the previous week, 58% conducted online banking, while 16% made a mobilebanking transaction. That mobile-banking usage rate is more than double the rate for consumers. They also are two to six times more likely to use or text-based alerts, transfer funds, wire money or use alternative payments. (See Figure 15.) Successful Online Applicants Embrace Online and Mobile Banking Figure 15: Banking Activities in the Previous Week Online banking Transfer funds between your own accounts from one institution to another institution online Sent money by to another person Transferred funds to another individual online Received a financial alert by Mobile banking Transfer funds using a wire transfer using a money service business Received a financial alert by text message(sms) Transer funds using a wire transfer through a bank or credit union 30% 19% 13% 24% 6% 10% 20% 6% 7% 18% 12% 8% 16% 7% 6% 12% 10% 3% 12% 2% 2% 12% 8% 4% 58% 59% 50% Successful in funding account Unsuccessful in funding account All Consumers Q11,12,13, 25: Please indicate the last time you conducted each of the following activities. (In the last 7 days only, other options available) by Q21: Considering the last time you attempted to open a new checking account,were you successful in opening and funding the account online, without ever needing to call a CSR or go into a physical branch? 0% 20% 40% 60% 80% March 2008, n = 2,256;205;131 Base: All consumers Javelin Strategy & Research Javelin takeaway: The high interest in funds transfers and mobile banking could be influenced by the fact that nearly one out of four successful applicants maintains a business account. This makes the online account opening process an ideal time to tout and pitch services for microbusinesses and mobile banking. 30

31 One in Four Are Wishy-Washy About Their Current Banking Relationship Although successful applicants are no more likely than consumers overall to be dissatisfied with their current banking relationship, a significantly higher proportion of successful applicants is ambivalent (25% vs. 15% of consumers). And only about 73% of successful applicants are satisfied with their current banking relationship, vs. 80% of consumers in general. This could signal a willingness to look elsewhere. Satisfaction levels are even lower for unsuccessful applicants. Only 63% are satisfied with their current bank, while nearly one out of five is dissatisfied with their bank. That dissatisfaction rate is nearly four times higher than for consumers overall (19% vs. 5%). That s one reason it s important for the online account opening procedure to take into account whether the applicant is already a customer, and to route these clients to an easier application process pathway. One Big Gripe: They Qant More Online Services Typically, the primary reason most consumers shop for a new bank or credit union is because they moved. For successful online applicants, however, the No. 1 complaint by far is that their previous bank s fees were too high (36% vs. 23% of consumers overall). It s also instructive to note that many had grown frustrated with their previous bank s lack of online services, a complaint cited by 21% of the successful online applicants. That s three times the rate for consumers in general. Without a doubt, many of these applicants were drawn to their new bank specifically because they wanted to bank online, and the accountopening process undoubtedly was a litmus test. (See Figure 16.) Fees and Lack of Online Services Frustrate Successful Online Applicants Figure 16: Reasons for Switching Banks (By Success in Funding Account Online) Too many fees Moved to a new area Wanted more online service capabilities Wanted higher rates Unsatisfactory customer service Limited access to branches Limited access to ATMs Wanted more product selection Wanted superior protection from ID fraud Other, please specify 8% 7% 6% 8% 12% 11% 9% 11% 7% 10% 8% 5% 4% 6% 2% 2% 8% 16% 15% 36% 22% 23% 26% 30% 31% 21% 19% 29% 21% Successful in funding account Unsuccessful in funding account All Consumers 24% 0% 10% 20% 30% 40% Q7: The last time you switched banks, what was the main reason for doing so? (select up to three) by Q21: Considering the last time you attempted to open a new checking account,were you successful in opening and funding the account online, without ever needing to call a CSR or go into a physical branch? March 2008, n = 2,256;205;131 Base: All consumers Javelin Strategy & Research 31

32 This pattern is underscored when successful applicants described factors they would weigh most heavily if they were to shop for another bank. Though rates and fees still rank No. 1 at 47%, that is significantly lower than for consumers overall (66%). But more to the point, online services are of nearly equal weight at 43%, while 23% cited a desire for a breadth of banking products. In contrast, the majority of applicants who failed to make the cut are more inclined to lean toward picking a bank based on fees (62%), access to ATMs (61%), and access to branches (55%). Online services rated No. 4 with them (42%). Javelin Takeaway: These customers also were drawn to a greater extent than consumers in general by higher interest rates (19% vs. 8%) and a broader selection of banking products (10% vs. 5%). The latter appetite presents an opportunity for banks to deepen the relationship by cross-selling profitable products. 32

33 THE BUSINESS CASE FOR ONLINE ACCOUNT OPENING There are numerous ways to build a case to invest now to install an effective online account opening system. It is interesting to note, however, that banking executives do not always see things the same way. These two constituencies sometimes disagree about the obstacles that impede banks and credit unions from installing or upgrading their accountopening process and vendors direct much of the blame at clients. Where they tend to agree most is on the primary payoffs of such products. The majority of vendors profiled in this report and executives with 11 banks and credit unions agree that the No. 1 benefit is that online account opening can significantly reduce the cost of opening and servicing accounts. Javelin estimates that processing an application manually costs banks and credit unions an average of about $60, mostly because of the labor involved by tellers and backoffice personnel. Vendors suggest the price tag sometimes runs as high as $70 to $80. 33

34 That s markedly higher than the cost estimates from online account opening vendors, showing a mid-range of $15. Their estimates range from $3 to $8 using Online Resources product, to $10 to $20 using CashEdge and to $11 to $25 using the Andera-Yodlee combination. 2 S1 didn t cite a figure for its new AccelAccount but said the cost per application would drop as application volumes grow because financial institutions buy a software license rather than paying per application. umonitor said its costs would fall into a mid-range. Fiserv, Jack Henry, Metavante and Postilion declined to disclose a price range. Cost Savings Mainly Attributable to FTE Expense Reduction Figure 17: Online Account Opening Cost Savings $70 $60 $60 $50 $40 $30 Additional costs of offline account opening attributed primarily to FTE costs $20 $15 $10 $0 Online account opening Offline account opening 2009 Javelin Strategy & Research 2 Costs will vary depending on such factors as whether financial institutions have negotiated volume discounts with data providers such as Equifax, Experian and Trans Union, and how far applicants go during the process. For instance, CashEdge charges separate processing fees when verifying an applicant s identity and another when the funding account is evaluated. An applicant rejected in the ID verification phase would trigger just the first fee. An application for a joint account would trigger fees for each applicant. In contrast, Andera charges only for successfully completed applications. And in April 2009, Andera announced a tiered pricing plan that assesses higher fees for packages with additional services. 34

35 There also was strong agreement that installing such a product is an effective way to expand an institution s footprint beyond its branch network an important factor during these unsettling times when it is cost-prohibitive to build new branches. (See Figure 18.) There s less consensus beyond that, however. From the viewpoint of banks and credit unions, online account opening also is a building block for the online- and mobilebanking channels. Meanwhile, vendors are more likely to tout the idea that customers who open accounts online are likely to be more profitable than those who signed up offline a hypothesis strongly supported by Javelin data. In addition, bankers and vendors suggest that installing such products also could enable banks and credit unions to: Increase deposits by approving more applications. Identify cross-selling opportunities in real time as they analyze an applicant s financial data. Deepen relationships by making it easier for existing customers to add accounts. Keep in step with competitors. Apply consistent, objective verification and funding standards to all applications. Maintain regulatory compliance throughout the opening process. Reduce processing errors. Improve risk management of new accounts. Free up tellers and call center representatives to focus on cross-selling products. Bankers and Vendors Agree on ROI Figure 18: Primary Factors Driving Return on Investment (Bankers vs. Vendors) Lower costs to open and service accounts 27% 29% Expands bank's footprint beyond branch network 20% 23% It is a building block for online- and mobilebanking 7% 16% Other (please specify): Higher completion rate boosts deposits 6% 10% 10% 10% Frees up tellers to focus on sales 0% 6% Higher profitability from customers who open accounts online 6% 17% Data analysis to identify immediate cross-selling opportunities 3% 10% Banks Vendors 0% 10% 20% 30% 40% Q: Please select the top three reasons that an effective online account opening process would provide a return on investment (ROI) vs. manual account opening. (select up to three) March 2009, n =11,10 Base: All banks and vendors surveyed Javelin Strategy & Research 35

36 HOW BANKERS GRADE ONLINE ACCOUNT OPENING PRODUCTS When asked to rate the return on investment, the eight bankers whose institutions had installed an account opening product typically gave satisfactory marks and said the products had delivered as expected. They gave the highest grades for slashing the cost of opening and servicing accounts, with five bankers saying they were very satisfied and only one somewhat dissatisfied on that score. Five bankers also said they were satisfied that their products had enabled them to use data analysis to identify immediate cross-selling opportunities, while four each were satisfied that the tools had freed up tellers to focus on sales or had lowered fraud losses by improving the identity verification or account funding procedures. The bankers were of mixed opinion, however, about whether the new tools had boosted deposits by increasing the completion rate. Five registered ambivalence when asked whether online applicants had proven to be more profitable than offline applicants. (One strongly disagreed.) 36

37 THE PRIMARY OBSTACLES AND WHY THERE S FINGER-POINTING BETWEEN VENDORS AND BANKERS Despite the numerous benefits of installing online account opening, the list of obstacles that stand in the way is nearly as long. There also is less agreement on the primary roadblocks a reflection of the disappointment when such programs fail to live up to expectations. Though some bankers cite a host of problems, vendors primarily blame financial institutions when results fall short. (See Figure 19.) Notably, eight of the 10 profiled vendors said the No. 1 obstacle is the failure of financial institutions to appoint a point person who is responsible for owning the project. Too often, vendors say, the process bogs down because responsibility falls to a committee, with no person or department appointed to sort out the conflicting needs and concerns raised by officials in charge of e-commerce, retail banking, operations, security, marketing and other departments. One vendor cited channel competition, saying that some institutions fear they will undermine their investment in their branches by steering resources to the online channel. In contrast, just three financial institutions saw this as a key obstacle. Five vendors said some financial institutions effectively sabotage their program s success by failing to market online 37

38 account opening aggressively and consistently a problem none of the banking executives cited. And one vendor said the process bogs down when institutions learn that plug-and -play doesn t necessarily mean cut-and-dried. Many institutions struggle to decide what products to offer, tie in marketing, sort out the risk and compliance issues, and establish procedures for handling rejected applications, the vendor said. But some bankers said vendors deserve a share of the blame, too. Four executives complained that vendors are peddling inadequate products. And a similar number of executives said they plugged in products that struggle to verify an applicant s identity or reject too many applicants. One extremely dissatisfied executive complained that 70% of applications fail the identity verification testing, apparently because his product taps into inadequate data bases. Bankers and Vendors Blame Each Other for Shortcomings Figure 19: Biggest Obstacles That Stand in the Way Rejection rate for online applicants is too high Difficulties in verifying identity of the applicant Inadequate products from vendors Incompatible banking systems Lack of a single project owner with the FI Back-end security-related issues Lack of consumer demand Other (please specify): Cost of online account opening solution Difficulties verifying the availability of funds Inadequate marketing roll-out 0% 0% 0% 0% 3% 3% 4% 7% 8% 7% 8% 7% 12% 10% 12% 12% 15% 15% 15% 17% 17% Banks 28% Vendors 0% 10% 20% 30% Q: Please identify the three biggest obstacles that stand in the way of online account opening implementation. (select up to three) March 2009, n =11,10 Base: All banks and vendors surveyed Javelin Strategy & Research 38

39 HOW IT WORKS: FROM APPLICATION TO FUNDING When it s done smoothly, consumers who log on to open a bank account online should come away with the impression that the process is simple, quick and gives them immediate access to their money. But what customers do not see behind the scenes is a complex, two-phase process that is designed to screen out risky or fraudulent applicants by verifying the applicant s identity and assessing the odds that the new account is being funded from an illegitimate source. With identity fraud rates rising for the first time in five years 3, it is more crucial than ever to minimize the risk that faceless online applicants actually are fraudsters. This process has many pressure points and often involves humans who step in to oversee the supposedly automated process. Understanding the basics of this process helps to identify the sticking points that different vendors can address better than others. At the heart of this process are two straightforward questions: Is the faceless applicant who he or she claims to be? Does the applicant actually own the account that will be tapped to fund the new account? Identity Fraud Survey Report: Identity Fraud on the Rise But Consumer Costs Plummet as Protections Increase, Javelin Strategy & Research, February

40 How the Account Opening Process Works Figure 20: Online Account Opening Workflow 2009 Javelin Strategy & Research Copyright 2009 Javelin Strategy & Research. All rights reserved. This report is licensed for use by xxxxxxx only. It is protected by copyright and other intellectual property laws. You may display or print the content available for your use only. You may not sell, publish, distribute, re-transmit or otherwise 40

41 Identity Verification The first step in this procedure known as identify verification is designed to screen out fraudsters and comply with federal know your customer regulations. Even as the applicant fills out the boxes, financial institutions often can begin to reach out to third-party data providers, such as LexisNexis, that compile mountains of public records, credit bureau files and government data to assess the validity of Social Security, driver s license, passport and address information the applicant has provided. For example, rather than verifying information, some simply analyze whether the applicant s age is internally inconsistent with the listed Social Security number. This process can dig deeper, however. Some search internal and external hot lists to determine whether the applicant has a record of fraud or suspicious or high-risk activity. Some adopt device-recognition tools to evaluate the computer being used to complete the application, for example, to flag whether it is hundreds of miles away from the applicant s listed address, is set to a suspicious time zone, uses a browser that is configured in Russian rather than English or has been used to apply for a number of other accounts at other financial institutions. Some employ knowledge-based authentication techniques, in which they ask applicants to confirm personal, out of wallet details that only the consumer would be likely to know, such as the size of a car loan or the name of the lender. While such steps are mostly motivated by fear of fraud, they also can benefit applicants with thin credit files, such as recent college graduates or the underbanked. For example, financial institutions might evaluate cell phone bills or driver s license data to develop a better sense of whether the applicant is reliable enough to invite in as a customer. The actual account verification process can vary markedly from one financial institution to another, depending upon which data providers are selected, whether they tap data bases from multiple providers and the authentication techniques employed. The outcome also will be influenced by the institution s own risk-management criteria, which often must be adjusted after the online account opening product is plugged in. Ideally, this process is automated and will generate an approval or a rejection decision immediately. But many banks examine rejected or flagged applications manually, and some will review accepted applications for possible follow-up and cross-selling. In either case, delays can be costly. Financial institutions can miss cross-selling opportunities while the applicant is logged on, focused and intently interested but, worse, they risk losing worthy applicants altogether. Funding Verification The process of verifying the applicant s identity sometimes overshadows the importance of the second phase known as funding authentication. This process is designed to help financial institutions determine whether applicants are making authorized deposits to fund the new account. This stage is critical. Financial institutions not only want to get their hands on the applicant s deposits as quickly as possible, but delays in funding can cause applicants to abandon the process altogether. Financial institutions also are likely to accept larger initial transfers if they are confident that they come from a valid account. However, initial deposits by credit or debit cards trigger costly interchange fees, while the risk of immediately accepting ACH transfers is higher. Some financial institutions do not verify account ownership. They apparently are content to accept initial deposits charged to credit or debit cards, accept the higher risk, cap the initial deposit or hold the initial deposit until the transfer clears. But those that do want to verify account ownership typically have three choices: 41

42 Data analysis. Financial institutions once again turn to data from third-party providers, this time to evaluate the applicant s ownership of the funding account and the initial deposit. Some worry that such data is often weeks old, however. Microdeposit authentication. Financial institutions make small trial deposits into the funding account and ask the applicant to confirm the amounts. This process typically takes two days or more, boosting the odds that the applicant will lose interest or forget to follow through. Account aggregation. Applicants provide log-in information to the funding account, enabling the financial institution to confirm information while the applicant is still logged on. The downside is that some applicants are uncomfortable sharing their financial passwords, plus this process adds another layer of cost. Selecting a Vendor The primary goal of an effective online account opening process is to approve all qualified, legitimate applicants in a smooth, automated single session. As simple as that goal sounds, there is no perfect system yet. The methods of verifying identities and funding accounts remain flawed, difficulties in knitting together the infrastructure continue to inhibit the process, and consumers are prone to abandon the process if glitches arise. In short, there is much room for innovation. To boost the number of consumers who complete the account opening process in a single session without phoning the financial institution or visiting a branch, it is important to pick a vendor that enables banks and credit unions to use the three primary methods of verifying funding, permits applicants to choose whether to fund accounts via credit, debit or ACH, and has a track record of expertise. CashEdge and the combination of Andera and Yodlee rise to the top in our analysis of the vendors. In the funding verification stage, each offers financial institutions the ability to use data verification, account aggregation and microdeposit authentication for consumers who are wary of handing over their banking log-ins. Each offers the ability to fund accounts with credit, debit and ACH. And each has achieved a notable record of pleasing clients, with CashEdge holding the advantage with larger financial institutions and Andera holding the advantage with smaller institutions. Andera has struggled to keep pace with its rapid growth, but the growing list of clients and the surge in applications funneled through the Andera/Yodlee product points to the strength of this combination. For many financial institutions, however, the selection of a vendor will be framed initially by the desire to integrate the product into the existing infrastructure, minimize the interaction with outside vendors and keep costs low. Those criteria will tend to drive financial institutions to contact their core provider first. 42

43 WHY STRATEGIES FOR LARGE AND SMALL FINANCIAL INSTITUTIONS VARY On the face of it, large and small financial institutions have the same overarching goal for implementing an online account opening product: to provide a smooth, speedy application process. But how they evaluate the potential return on investment or set it up can vary significantly depending upon each institution s strategic goals, infrastructure needs, budget restrictions, vendor relationships, management limitations, risk-management concerns and other factors. For instance, large banks that deal with a high volume of online applications or serve a broad geographic market are likely to place a premium on automating processes. That not only can eliminate manual steps and back-office costs, but it also is necessary if they hope to serve customers who don t live near a branch. Because their needs are unique and the account opening product can be a competitive differentiator, larger banks also are more likely to buy modules and tie them into their banking platforms on their own. That enables them to maintain control over security, better customize the product to add new types of accounts, and adjust risk-management criteria to meet evolving fraud threats. 43

44 Community banks and credit unions typically have a different set of priorities and limitations, however. Those that serve smaller communities and pride themselves on face-toface service might see less value in a fully automated process because they will face lower volumes of applications and have either the desire or the capability to manually review applications. The flow might even be too low for smaller entities to cut costs by eliminating back-office personnel. Smaller institutions also are more price-sensitive, making them more likely to buy an off-the-shelf product. And because installing new technology can strain the resources and expertise of smaller banks and credit unions, their first call should be the vendor that provides its core banking platform. That will enable them to sign a single contract with a company rather than attempt to manage multiple vendors. One trade-off is that prepackaged products typically give banks and credit unions less customization and control over risk-management criteria. Strategic considerations also will come into play. A financial institution that wants to be a direct bank or lure larger deposits with high-rate offers, for example, might give extra weight to account verification using aggregation because such tools can speed deposits. Understanding your customers needs and desires, along with your corporate strategies, values and limitations will shape the vendor-selection process. 44

45 The wish list of desirable features is quite extensive. Here s a checklist to evaluate and weight in importance before you start comparing vendors. CHECKLIST OF DESIRABLE FEATURES FOR ONLINE ACCOUNT OPENING v BASIC REQUIREMENTS Handle applications for a broad range of deposit, credit card, loan, investment, insurance and other financial accounts. Seamless integration with core systems (online, mobile, ATM, etc.). Implemented as a hosted or an on-premises product according to need. End-to-end system, modular, or customizable products to suit an institution s evolving needs. The ability to brand the account opening process. Intuitive user interface and process that allow for easy, fast, step-by-step single-session completion of account opening. Ability to handle joint account applications and/or to add additional users to account. Compliance with OFAC, Patriot Act and other regulations. Speedy installation. Fair pricing structure. Reliable and efficient servicing and upgrades by software and/or service provider. APPLICATION PROCESS AND ID VERIFICATION Enable applicants to open multiple applications simultaneously. Ability to streamline application process for existing customers. Chat online with consumers who have questions while completing forms. Immediately approve or reject applications based on parameters your institution chooses. Retrieve real-time credit report and fraud detection from third parties such as Experian, Equifax, TransUnion, ChexSystems and other preferred providers. Easily adjust risk parameters for specific products, customer segments, banking channels and marketing promotions. Flag applications if they are prepared on a computer that does not match the applicant s stated physical address or is suspicious for other reasons. Request additional documentation from applicants during the application session. FUNDING VERIFICATION Permit deposits to be made through multiple of funding options at institution s choice: i.e. ACH/A2A transfers, debit, credit, wire transfers, PayPal, Google Checkout. Verify the funding account using microdeposit authentication, data analysis, and/or real-time aggregation. Fund accounts during the application process ( same-session funding ),. within several hours, or by the next day. CROSS-SELL AND REPORTING Analyze applicant data to solicit cross-selling offers during the application process. A paperless online switch kit to help consumers shut down accounts with previous bank and port over their bill-pay, direct deposits and scheduled transactions to the new institution. Generate reports on performance, regulatory compliance and marketing campaigns. Track, analyze and follow up on abandoned applications. Enable applicants to save and resume online applications. Enable tellers or call centers to pick up and complete applications where applicants left off, regardless of channel. Branches and call center can use same application tools. Send alerts to remind consumers to finish the application or update them on progress of the application and funding. 45

46 VENDOR PROFILES Andera Javelin Takeaways Key partnership with Yodlee extended instant account verification and funding to institutions of all sizes. Numerous reseller agreements open the door for Andera to reach thousands of banks and credit unions through core integration. 100% growth in revenue, transaction volume and headcount over the past year has strained Andera s capacity at times. Javelin Analysis Tight focus: strength or limitation? Founded in 2000, Andera s goal is to focus exclusively on the online account opening process, handling the application and then handing the new customer over to servicing platforms designed by Digital Insight, Metavante and the like. We re 55 people, and all day long all we do is figure out how to do better online account openings, CEO Charlie Kroll said. But that strategy sometimes costs Andera when financial institutions want more functionality such as online banking, bill-pay, account-to-account funding and personal finance management tools. To offset that weakness, Andera signed a deal with Yodlee in 2007 that created a compelling 1-2 combination that extends through to the actual funding and 46

47 onboarding functions. Financial institutions can upgrade so they can use Yodlee s aggregation tools to derive real-time data when evaluating account-funding risks, its automated bill-pay switch kit and other services. Pricing: Under Andera s three-year contract, financial institutions pay a fee for every successful completed application, but nothing for applications that are rejected or abandoned. In April, Andera announced it has implemented a price plan featuring four packages with escalating start-up fees and services: Community ($1,495), Premium ($5,000), Premium Plus ($10,000) and Enterprise ($20,000). Pertransaction fees rise for the higher-grade packages that offer more bells and whistles. Andera charges a subscription for banks and credit unions that also use its application in their branches. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 Fis Fis Andera 1% 8% 91% Target market: The vast majority of Andera s business is with financial institutions with $250 million to $50 billion of assets and a focus on progressive technology rather than the lowest-cost option. But it is growing rapidly and is aiming to bag bigger clients like PNC Bank, which is a customer signed through Andera s reseller s agreement with Yodlee. Since announcing its partnership with Yodlee, the two partners have teamed up to serve 55 customers. Key clients: PNC Bank, M&T Bank, Hudson City Savings Bank, First Citizens, Umpqua Bank. Percent of revenues from online account opening product: 100%. Partner strategy: This start-up has rapidly become a powerful player in online account opening. To open the door to thousands of potential banks and credit unions who prefer to install such products through their core provider, Andera has moved strategically to sign reseller s agreements and referral partnerships with Fiserv, S1, Postilion, Yodlee, Harland and others. In March, it added Digital Insight to that list. Such deals are likely to fuel Andera s growth far faster than it could achieve as a standalone technology company. Core integration: Andera s partnership strategy hinges on the ability to plug its account opening product into a wide range of core systems, so it is not surprising that it boasts it has a longer list of application program interfaces (APIs) than any of its competitors. Andera promises to add to that list in 2009 by adding APIs for Fidelity Horizon, Fidelity Miser, Fidelity Systematics, Jack Henry Silverlake and Open Solutions. Adjustable fraud settings: Andera brags that it enables financial institutions to adjust maximum deposits from applicant to applicant based on a variety of riskmanagement criteria. For example, an applicant who lives in a bank s area and is opening a non-transactional account could be cleared to deposit $100,000, while an out-of-town customer with a poor credit score who is seeking to open a checking account might be capped at $100. Though the latter deposit might be small, the financial institution can still open the account and begin building the relationship. Rapid growth: Founded in 2000, Andera now boasts of having 250 clients, with 150 added the past two years and six added in one week alone in December For the second consecutive year, Andera s revenues and transaction volume doubled, and it paved the way for clients to take in more than $250 million in deposits. It doubled the size of its workforce in 2008 to 65 employees. And the traffic through Andera s Web site quadrupled to nearly 155,000 unique visitors in February, up from 40,000 in February 2008, according to Compete.com. Growing pains: Andera s rapid growth has come with growing pains and frustrations for clients. In his refreshingly frank blog, Kroll acknowledged in a 2008 recap that we found ourselves overcommitted and really dropped the ball with some customers. 47

48 Kroll told Javelin later: We had a bottleneck in our implementation process about a year ago that limited our capacity to get above a certain level. We made a lot of changes here in the middle of last year. We added a lot of people, built out our technology, and added a lot to our processes. That bottleneck has pretty much been eliminated. We re not perfect, but we re positioned nicely at this point to scale the company. Weeks later, however, Kroll apologized again in his blog, saying that clients had suffered frustrating slowness and some downtime because Andera s customer base had swollen rapidly and the volume of online applications had surged faster than anticipated. To address the problems, Andera is accelerating its plans to upgrade its infrastructure, including the addition of more servers, database management and a bevy of software enhancements. Kroll is admirably forthright for acknowledging Andera s problems, but the growing pains are a cautionary note in an industry that demands reliability. Corporate background Founded: 2000 Employees: 57 Venture capital: Small undisclosed rounds of angel capital. Milestones: 2009: Reaches resellers agreement with Digital Insight. 2008: Signs 200 th customer. 2007: Reaches resellers agreements with Yodlee and S1 (S1 Enterprise and Postilion). 2006: Signs 100 th customer. 2003: Goes live with first customer. Headquarters: 204 Westminster Street, Providence, RI Web: Client contact: Kevin Conway, VP Business Sales and Development, or [email protected]. In The Vendor s Own Words Resellers and alliances: Digital Insight (contract signed in March 2009), Fidelity, Q2 Software, Postilion, S1 Enterprise and Yodlee. It also has referral partnerships with Financial Fusion, FirstROI, several Fiserv units, Harland, ipay Technologies, NCR, NeoSaej and Open Solutions. Existing application program interfaces (APIs): Fiserv AFTECH, Fiserv CBS, Fiserv IntegraSys, Fiserv ITI, Fiserv SourceOne, Fiserv Summit, Fiserv USERS, Fiserv VISION, Fiserv XP, Harland Phoenix, Harland UltraData, Metavante, Open Solutions TotalPlus, and Symitar. Andera is the No. 1 provider of online customer acquisition technologies for retail financial institutions. Andera has built more account opening interfaces to banking and credit union core systems than any provider in the industry. Andera offers a suite of products and services for automated account opening for new and existing customers, fraud and risk management, account funding, and cross-selling online as well as in the branch and call center. Andera is the only provider to offer fully integrated payment. Funding methods: Andera offers transfers by ACH, credit and debit. 48

49 CashEdge Javelin Takeaways End-to-end product provides real-time funding verification based on account aggregation, in addition to data records and microdeposit authentication options. Full-service package designed for larger banks, plus a streamlined offering tailored for smaller banks and credit unions. Strong track record with large financial institutions and its funds transfer capabilities. Javelin Analysis Flexible suite: CashEdge offers a complete product that spans all the steps from identity verification to account funding, with one product designed for larger financial institutions and a newer, streamlined version for smaller banks and credit unions that prefer a plug-and-play option. It also can sell products in modules. For example, institutions that already have an online account opening product can tack on CashEdge s funding product, or plug in an accountopening product for call centers. In October 2008, it began offering the ability to fund accounts by credit and debit cards, in addition to ACH transfers. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs CashEdge 10% 30% 60% Target market: Founded in 1999, privately held CashEdge initially focused on and made notable inroads with large financial institutions, but it began to broaden its scope in Its OpenNow/FundNow Express product is aimed directly at small and mid-size banks and credit unions. Currently, CashEdge says 60% of its account-opening clients are smaller institutions, while 10% are top 20 banks. (The number of applications remains weighted toward big, higher-volume institutions.) Key clients: CashEdge s client list includes some of the biggest financial institutions in the nation, including 23 of the nation s 100 biggest banks. Online account opening clients include Capital One, HSBC and Citibank. In addition, Bank of America, Wells Fargo and Wachovia use its funds transfer services, and Vanguard and Lincoln Financial Group use its wealth management product. Percent of revenues from online account opening product: Declined to state, saying it does not release figures by product line. More funding verification options: CashEdge s mainstay is the OpenNow/FundNow product, which stretches across the whole process of opening and funding an account. In addition to offering funding verification based on data records and microdeposit authentication, it stands out along with Yodlee in using aggregation to confirm that funding accounts are legitimate. This boosts the odds that applicants can fund their accounts electronically in one session, resulting in fewer lapsed applications. CashEdge claims that 50% to 60% of applications successfully open, and 80% to 90% of those are funded electronically. In addition, it offers a service from efunds that compares applicant information against a check-printing data base. CashEdge also offers an additional risk-monitoring service that tracks the transactions it handles for its clients and assesses risk scores to every funding transaction based on the sources and method of account verification used. When high-risk transactions arise, CashEdge investigates with the financial institution that is the intended source of the funds before approving the transfer. During the second quarter, CashEdge also plans to tie into the fraud data base from Early Warning Services, a joint effort by Bank of America, BB&T, JPMorgan Chase, Wells Fargo, Wachovia and First Data. 49

50 Simpler product for smaller institutions: Introduced in September 2008, the Express version is available as a hosted ASP model. While the full version enables institutions to weight risk-management parameters, the Express version simplifies the task for smaller institutions by letting them choose preset parameters that range from conservative to aggressive. The idea is that newcomers can start conservatively, then loosen the parameters as their comfort with online account opening grows. They also can upgrade to the fuller package when they are ready to adjust the parameters on their own. Follow-up capabilities: Though it is not alone in this regard, CashEdge s product enables call centers and tellers to complete unfinished applications where the applicant left off. It also says its product boosts completion rates by tracking the progress of lapsed applications, enabling financial institutions to winnow out promising applicants and follow up by mailing signature cards or beaming out reminder alerts. Rapid growth: In 2008, CashEdge reported that it handled more than $4.5 billion in assets for clients using OpenNow/ Fund Now or its streamlined OpenNow/FundNow Express, up 27% from 2007, when it processed 1.7 million applications. Beyond its account-opening services, CashEdge moved nearly $50 billion via online transfers in 2008, up more than 32% from its 2007 volume. The number of end users also grew about 30%. In 2007, it ranked 92nd in Deloitte & Touche s annual list of the fastest-growing technology companies in North America, based on 1,858% revenue growth from 2002 through Resellers and alliances: Fiserv s CheckFree, Digital Insight. Existing application program interfaces (APIs): Equifax and Trans Union, RSA Verid, Quova and efunds QualiFile, plus three other data sources that cannot be disclosed because of confidentiality agreements. Corporate background Founded: 1999 Employees: More than 300 Venture capital: Declined to state Milestones: 2008: Rolls out OpenNow/FundNow Express in September. 2007: Agrees to pay Yodlee for a license to settle a patent-infringement lawsuit. 2006: Launches OpenNow/FundNow. 2004: Citibank introduces online account opening with real-time decision-making powered by CashEdge. Headquarters: 215 Park Avenue South, Suite 1300, New York, NY Web: In The Vendor s Own Words CashEdge's instant online account opening and funding product suite, OpenNow/FundNow, enables an institution's prospective customers to apply, be approved and fund a new account in a single online session through an automated, remote identity verification and electronic account funding process that satisfies all business, risk and compliance requirements. By leveraging CashEdge OpenNow/FundNow product suite, which gathered more than $4.5 billion in new assets for financial institution clients in 2008 alone, financial institutions can cost-effectively scale customer acquisition, improve customer experience and increase account close and funded rates to 60+ percent. All OpenNow/FundNow products are supported by CashEdge's risk management capabilities that leverage comprehensive, proprietary technology and the insights gathered from managing risk for the world's largest financial institutions, helping institutions mitigate risk and decrease fraud exposure. 50

51 Fiserv Javelin Takeaways Fiserv s own Galaxy product, iswitchkit, designed for credit unions, integrates online account opening into the core processing unit and across the onlinebanking platform on a hosted basis. Fiserv s iswitchkit can tie into Gen Y MyMoney application for Facebook that allows customers to view balance and transaction information within their Facebook account. Also continues to offer, service and upgrade products from Andera, CashEdge and umonitor for larger institutions. Javelin Analysis Fiserv rebrands, rethinks: The financial services giant that has acquired more than 140 companies in its nearly 25-year history including powerhouse CheckFree in 2007 unveiled a new look and, supposedly, a new way of thinking in February. Fiserv s goal is to unify business units, strategies, online-banking technologies and such so that the $4.7 billion publicly held conglomerate seems less like pieces stitched together by acquisition. This has been the broad vision since CEO Jeffery Yabuki mapped out Fiserv 2.0 in 2006, but now Fiserv has a new orange logo to enliven the message. Galaxy first: What this means to financial institutions looking for an online account opening product is that Fiserv is likely first to push a house product from its Galaxy unit that was designed for credit unions. If that product, known as iswitchkit, is not the answer, then Fiserv will talk about products made by its referral and reselling partners at Andera, CashEdge and umonitor agreements struck by CheckFree and Corillian when they were independent. Obviously, we would love to sell Fiserv products at the forefront. That is the vision, one executive said. If you want to go with our products, great. If not, we value ourselves as a flexible partner, and if there s a technology they value, we ll do that. And though Fiserv s intent is to build more products in-house in the future, executives say they will continue to support, maintain and upgrade the Andera, CashEdge and umonitor products for their existing clients. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs Fiserv (Galaxy) 10% 90% Target market: For now, Galaxy will aim iswitchkit at credit unions, the market it was designed for. But Fiserv hopes to push more assertively into the community bank market, perhaps by the third quarter. Currently, Galaxy serves more than 400 credit unions. Key clients: Police & Fire Federal Credit Union, Christian Financial Credit Union and West Community Credit Union. Percent of revenues from online account opening product: Less than 1%. iswitchkit overview: The Galaxy product is provided on a hosted basis. This generally will be preferable for smaller credit unions that seek a turn-key, simple product that gets them into the game. But it is unlikely to be as compelling for larger financial institutions that anticipate high volumes of applications and want to maintain the product in-house and customize it as their needs evolve. Experience also has shown that iswitchkit clients tend to be conservative when they implement it, executives say. Though iswitchkit can automate the account opening process, most credit unions elect to maintain manual oversight because they want to review applications, contrary to the needs of larger institutions. Executives also tout Fiserv s ability to integrate online account opening into the core processing unit and across the online-banking platform. It is likely to be most appealing to institutions that prefer to deal with a single provider rather than disparate technology vendors. 51

52 Targeting Gen Y: iswitchkit also can tie into Fiserv s MyMoney, an innovative product that targets Gen Y through social networking. This year-old product enables credit union members to log onto their Facebook pages to perform a number of banking functions, such as to check their balances, review transactions and transfer money between accounts. One hope is that the power of Facebook s viral marketing will enable credit union members to attract Gen Y members as friends see friends using MyMoney. Coming attraction: Fiserv is developing an online educational center that will feature educational materials and money management tools for its online banking platform. The aim is to make these features engaging and interactive and tap the power of multimedia. Executives hope such tools could reduce the abandonment rate by explaining the online account opening process to potential members and advising them what information they will need to have handy when they apply. These tools are not ready yet, but an executive said Fiserv is adding such material systematically. Resellers and alliances: Andera, CashEdge and umonitor. Existing application program interfaces (APIs): All Fiserv core CU systems, Fiserv ITI & Fiserv CBS Communicator. Corporate background Founded: 1984 Employees: 27,000 Milestones: 2009: Fiserv unveils new logo and brand identity in February. 2007: CheckFree buys Corillian, then is acquired by Fiserv. 1991: Fiserv acquires Galaxy Credit Union Solutions. Headquarters: 255 Fiserv Dr., Brookfield, WI Send mail to P.O. Box 979 Brookfield, WI Web: Fiserv.com Client contact: For sales and marketing information phone In The Vendor s Own Words iswitchkit provides value in a number of ways: Acquire new members: Members can apply over the Internet, on the phone, at a kiosk, or in person. Enroll even more prospects by attending off-site community or workplace events containing a high population of the eligible member base. Improve member satisfaction: Online flexibility enables existing members to apply for new Accounts when it is most convenient for them: New accounts are approved and processed on a much more timely and efficient basis, resulting in improved member satisfaction. Increase cross-sell opportunities: Included cross-sell capabilities allow credit unions to promote specific products and services to applicants when they are most likely to participate at the time of opening a new account. Standardize the application process: Consistently obtain and evaluate credit union applications and cross-sell products and services across all channels. Improve bottom line: Increase revenue from new accounts while eliminating time and expenses associated with traditional manual account opening procedures. 52

53 Jack Henry & Associates, Inc. (MeridianLink) Javelin Takeaways Low-cost, hosted basic package for smaller community banks and credit unions. Particularly attractive to existing customers. Does not offer microdeposit authentication or aggregation for funding verification. Javelin Analysis Partner s technology: Jack Henry offers the hundreds of banks and credit unions it serves Opening Act, an online account opening product created by MeridianLink of Costa Mesa, Calif. MeridianLink first came to market with loan and credit-scoring products for mortgage lenders starting in 2001, then added an account opening product that combines loan and deposit opening into one package. Though Opening Act is designed to be fully automated Jack Henry boasts that applications can be approved in as little as 15 seconds Hoemann estimates that 60% of the company s clients insist on reviewing applications manually because they worry about Internet fraud. Key clients: Susquehanna Bancshares. Percent of revenues from online account opening product: Declined to state. Basic offering: MeridianLink hosts and stores all the applications, relieving banks and credit unions of the need to install a server or hardware. Opening Act offers neither microdeposit authentication nor aggregation to verify the funding account. Instead, banks must use the identity verification process to provide out-of-wallet questions that only legitimate applicants presumably can answer reliably. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs Jack Henry & Associates, Inc. 100% Target market: Publicly held Jack Henry, which was founded in 1976 with the mission to provide off-the-shelf banking software for community banks, typically serves smaller institutions. Many of its clients have assets of about $200 million and have a heightened need for inexpensive products. Corporate background Founded: 1976 Employees: 3,824 Venture capital: None. Headquarters: 663 W. Hwy 60, P.O. Box 807, Monett, Mo Web: Client contact: (417) In The Vendor s Own Words Internet latecomers: Many of Jack Henry s clients serve smaller communities where customers don t find it inconvenient to head to a branch, reducing the demand for online banking. Now, though, some are adding online banking to avoid becoming banking dinosaurs. You d be surprised how many banks have never dived into Internet services and this is their initial offering, said product manager Kurt Hoemann. A lot of community banks have never touched it before. For such customers, there s little choice but to install a plug-and-play product. Opening Act is a Web-based origination system that enhances Internet banking sites with the capabilities to securely and seamlessly originate deposit accounts, loans, and credit cards. This solution account origination capabilities that include multiple identity verification including OFAC checks. Opening Act provides the necessary tools to fund new Accounts via ACH transactions and other means. This solution s switch kit allow customers to close accounts with competitive institutions and designate new accounts for direct deposits and electronic bill payments. A sophisticated pre-qualifying engine analyzes loan and credit data in real time and typically generates lending decisions in 15 seconds. 53

54 Metavante Javelin Takeaways Powerhouse offers much more than online account opening with its fully integrated online banking suite. ASP hosting like it or not. Lacks aggregation capability for funding verification. Javelin Analysis Fidelity acquires Metavante: Fidelity National Information Services announced April 1 that it has entered into an agreement to acquire Metavante for $2.9 billion. FIS is a leading technology and service provider to the financial services industry, servicing more than 14,000 financial institutions. Metavante is a leading provider of banking and payments technologies to approximately 8,000 financial services businesses. The combined company creates a $5.2 billion financial behemoth with complementary customer bases, significant economies of scale and global market penetration that puts it shoulder to shoulder with $4.7 billion Fiserv. The merged management team is strong, but the acquisition is likely to slow innovation over the short run and create uncertainty about which product and services the combined company will continue over the long haul. Metavante s online account opening product is a homegrown product developed by one of the most respected names in bank processing and payments, a company so big that its Online Account Creation product is but one modest facet in a notable banking suite that includes account servicing and administration, funds transfer, product-offer management, data analysis and marketing services. Wide-ranging strength: The company is noted for the breadth of its services, which include issuing debit and credit card processing, image products, payment network and acquirer products, as well as services for financial institutions that administer health care accounts such as FSAs and HSAs. In Metavante s first full year as a public company after its spinoff from Marshall & Illsley in November 2007, it rang up $1.7 billion in revenues and $147 million in net income. Overall, Metavante serves more than 500 financial institutions that cater to more than 1.7 million consumers and 300,000 business users. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs Metavante * 1% 5% 84% * Based on clients assets, not Metavante s revenues. Target market: Metavante claims to be the No. 1 core provider for financial institutions with assets of $6 billion or more. Clients that already use its core services undoubtedly should make their first call to Metavante, but the company does not want to be limited to core customers. Its products and services are designed to fit a vision of the future in which all accounts will be opened online, they ll be funded immediately, and the process will be completely automated. Currently, 6% of Metavante s clients rank among the nation s top 100 financial institutions, 19% have at least $1 billion in assets, but 75% have less than $1 billion. Key clients: El Dorado Savings Bank. Percent of revenues from online account opening product: Declined to state. ASP hosting: Though larger financial institutions often prefer to operate technology products in-house, Metavante is unapologetic in offering only ASP hosting on its own servers for its software applications. Metavante said it typically upgrades its applications three to four times annually. By hosting its applications, the company says it is able to deliver upgrades simultaneously to clients, and generally at no additional cost. In contrast, Metavante contends that some competitors take six to 18 months to implement enhancements at each client and charge for the upgrades. Our model makes sure clients are using those services once they re rolled into production, said Margie Cieplak, vice president of the e-banking division. 54

55 Account verification shortcoming: Despite its size, Metavante does not yet offer account verification using aggregation, putting it a step behind CashEdge and Yodlee. Cieplak says this service is on its roadmap, but she downplayed the lack of an aggregation because she claims Metavante s microdeposit authentication process is so effective that 90% of applicants follow through. High tech enables high touch: Metavante s product is designed to rely on internal systems to streamline the process for existing customers. It boasts that it takes just 30 seconds for existing customers to open checking, savings and money market accounts, as well as CDs and health savings accounts. In addition, when new accounts are created in the deposit system, the product automatically can assign a branch of customer representative to follow up to smooth the onboarding process and capitalize on crossselling opportunities. Existing application program interfaces (APIs): Metavante uses the FIS efunds product components for identity verification and applicant screening. In The Vendor s Own Words There is an undisputed trend in consumers seeking to open deposit accounts online. Metavante's Online Account Creation Solution is deeply integrated into our Banking Solutions products with some significant benefits beyond the obvious gains in production support and real-time processing. Integration at this level allows us to: Process new accounts for current customers in a streamlined fashion; Automatically activate Online Banking to provide immediate access to the new account; Consolidate administrative tools; Effectively hand-off applications between channels. When our Clients are ready to move into Online Deposit Account Acquisition, we are able to provide a solution that cannot be matched. Corporate background Founded: 1964 Employees: 5,900 Milestones: 2009: Acquisition by Fidelity National Information Systems announced in April. 2007: Metavante goes public on New York Stock Exchange after spin-off from Marshall and Ilsley Bank. Headquarters: 4900 W Brown Deer Road Milwaukee, WI Web: Client contact: Kathy Hadermayer, , [email protected] 55

56 Online Resources Javelin Takeaways Online account opening is integrated into its online banking platform. ORCC targets community banks and credit unions seeking an enterprise-wide product that can be used by tellers, too. Continuing losses have forced cutbacks in staffing, pay and investment. Javelin Analysis A mission critical component: Online Resources starts with the premise that its customers already buy the best billpay product available, and upgrading online account opening provides a powerful means to take online banking to the next level and push ahead of competitors. ORCC s product enables applicants to open more than one account during a session and be approved in real time. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs Online Resources 1% 2% 97% Target market: ORCC serves 17 of the nation s top 50 banks, but its Community Bank and Credit Union Services unit serves about 850 institutions. The mix between community banks and credit unions is about 50/50. Its main competitors are Andera, CashEdge and MeridianLink. Key clients: Tinker Federal Credit Union, Apple Bank, KleinBank, San Antonio Credit Union, Provident Credit Union. Percent of revenues from online account opening product: Less than 5%. Integrated in online-banking platform: Executive VP Ron Bergamesca acknowledges that ORCC s product does not always match up feature by feature to its rivals products. But he counters that ORCC has an overall advantage because its product is fully integrated into its online-banking platform, along with lending, servicing and acquisitions. That eliminates the needs for APIs to patch together systems, and it makes repairs and software upgrades more speedy. It also eliminates the need for community banks and credit unions to administer products from multiple vendors for online banking, bill-pay, electronic statements, security and such. Teller-ready: The online account opening product also can be used by tellers in the branch, improving the efficiency of a time-consuming process for many community banks and credit unions. This is a money-saver for financial institutions with lower volumes, but piggy-backing on the online product rather than developing one specifically for tellers might not be ideal for institutions with higher volumes of applications at their branches. Fee structure: ORCC charges a nominal setup fee to install the online account opening product to ensure that clients are committed, then charges a fee per application that makes it through the verification gauntlet. In return, ORCC requires that clients use its marketing to promote online opening capabilities. Host or in-house: ORCC can provide a hosted product, where it handles the log-in, administration and all other tasks, or it can sell the software to financial institutions that would prefer to operate it in-house. Cutbacks during turbulent times: ORCC, which went public in 1999, saw its revenues climb to nearly $152 million in 2008, up 12% from But its net losses deepened to $7 million in 2008, up from $2.6 million in Looking ahead through 2009, it projects that revenues will climb 9% this year to between $160 million and $170 million, but its losses are expected to mount. In reaction to the economic uncertainty, in 2008 ORCC froze hiring, cut staffing, halted non-essential capital expenditures and offered executives equity stakes in lieu of cash compensation. This year, it has cut back staff salaries, too. 56

57 Resellers and alliances: Referral agreement with Deluxe. Existing application program interfaces (APIs): Deluxe Detect; efunds ChexSystems; Experian Authentication Services (level 1-3); Equifax Eid Verifier; TransUnion Fraud Management Platform; Core systems: Symitar, Kirchman, Fiserv CBS, Miser (2009), OSI (2009), Summit (2009). Corporate background Founded: 1989 Employees: 625 Milestones: 2007: Acquires Internet Transaction Solutions. 2006: Acquires Princeton ecom. 2005: Acquires Integrated Data Systems, which provides custom products for ORCC s banking services unit. 2004: Acquires Incurrent Solutions, which becomes its card and credit services division. 2003: Introduces MoneyHQ account aggregation and money-movement service. 1999: ORCC completes $43 million initial public offering, turns first profits in Headquarters: 4795 Meadow Wood Lane, Chantilly, VA Web: Client contact: Ron Bergamesca, [email protected], In The Vendor s Own Words Financial institutions' drive to cut costs and raise deposits are leading them to online account opening. What separates Online Resources' account opening is it that it offers financial institutions increased efficiency and increased sales through a full suite of online services. Account opening is integrated with online banking, online bill pay and consumer marketing, increasing efficiency through only managing a single vendor relationship. FI sales are increased through this full suite. For example, if a consumer pays their Capital One credit card bill through their credit union s bill pay service, the credit union can then use that information to present a targeted marketing offer and have them sign up for the credit union s credit card immediately through online account opening. 57

58 S1 Corp. (S1 Enterprise and Postilion) Javelin Takeaways S1 Enterprise offers a new but as yet unproven product for big and mid-tier banks, while sister unit Postilion serves up Andera s product to community banks and credit unions. S1 s AccelAccount provides a tool-kit designed to be customized and serviced in-house, while the Postilion/Andera product is ready out of the box and is delivered on a hosted basis. Postilion is particularly attractive to existing customers who prefer not to deal directly with technology providers. Javelin Analysis Business unit strategy: Publicly held S1 reorganized in 2007, breaking into three units that are in charge of their own product development, marketing and management: S1 Enterprise, Postilion and FSB Solutions. Both S1 Enterprise and Postilion offer online account opening products, with S1 targeting large institutions and Postilion targeting smaller institutions. S1 Enterprise announced the rollout of AccelAccount in November 2008, while Postilion resells Andera s product. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs S1 (AccelAccount) Target markets Postilion (Andera) 100% Target market: S1 Enterprise boasts of serving 10 of the nation s 15 largest banks and targets mid-tier to large financial institutions with more than $1 billion in assets. Initially, S1 Enterprise is aiming AccelAccount at large institutions. In time, perhaps by 2010, S1 Enterprise hopes to develop a more packaged AccelAccount Lite version for smaller financial institutions. Postilion targets community banks and credit unions with assets of $10 billion or less. It currently serves about 1,250 institutions in this market. Key clients: S1 Enterprise s AccelAccount remains unproven. Postilion s clients include First Community Bank, Bryn Mawr Trust and Savings Bank of Walpole. Percent of revenues from online account opening product: AccelAccount is too new to measure, and Postilion does not break out revenues by product. The parent company posted revenues of $228.4 million for the fiscal 2008 ended Dec. 31, up 11% from $204.9 million the previous year. Profits rose to $21.9 million, up from $19.5 million. S1 Enterprise s key differences: AccelAccount is designed to be customized to suit each client s individual needs and desires. The ability to customize is critical to financial institutions that seek to go beyond simply matching competitors or are not satisfied with offering consumers the same experience as their rivals. S1 boasts that its user interface tool kit enables banks to create their own accountopening processes, circumventing the need to consult and pay vendors when adaptations, tweaks and new processes are necessary. This is not an out-of-the-box, one -size-fits-all solution, an S1 executive said. In addition, the AccelAccount product resides on the financial institution s premises. An ASP model is not offered. S1 Enterprise also charges a one-time license. That means the financial institution owns the software and has a fixed cost that will be amortized as applications come in. It also means clients will not eat fees every time a consumer applies but is rejected or drops out. Postilion s main advantage: It already is a trusted provider for its clients that prefer not to deal with individual technology companies like Andera. 58

59 S1 Enterprise s weakness: AccelAccount remains unproven at this early stage. Before S1 s reorganization, it suffered a black eye because it fell short of its promises to consolidate multichannel banking onto one platform. Much has changed at S1 since then, including top leadership and corporate strategy, but financial institutions understandably might be anxious about being the first to try AccelAccount. Existing application program interfaces (APIs): S1 Enterprise has built adapters to connect to data providers FIS efunds, TransUnion and Experian. The company promises to add Equifax, Deluxe and Yodlee soon. Corporate background Founded: 1996 Employees: More than 1,400 for parent S1 Corp. Milestones: 2007: S1 reorganizes into three separate business units. Headquarters: 705 Westech Drive, Norcross, GA Web: S1 Enterprise: Postilion: Client contact for online account opening: S1 Enterprise: Jenni Palocsik, Senior product marketing manager, , or [email protected]. Postilion: Contact [email protected]. In The Vendor s Own Words S1 AccelAccount is a flexible, multi-channel, enterprise account opening solution. The flexible design allows financial institutions to significantly tailor the account opening workflow to match their business strategy and processes. By supporting multiple channels, the product provides a consistent experience across the online, call center, and branch sales channels. AccelAccount supports all consumer and small business financial products enabling one solution to deliver account opening for banking, lending, investment, and insurance accounts. Finally, AccelAccount is priced to allow the financial institution to benefit from its own success rather than burden it with additional fees. Postilion offers the only product today that can offer community financial institutions critical retail and business solutions across four self-service banking channels: Internet banking, mobile banking, voice banking and ATM-Driving. Additionally, the worldleading transaction switch architecture upon which these customer touch-point solutions are built enables a financial institution to easily add payment depth to an already broad range of offerings, through the introduction of debit and pre-paid card management. Through a best-of-breed online account opening solution from Andera, Postilion is able to further level the playing field for community banks and credit unions to compete with larger institutions. 59

60 umonitor Parsam Technologies Javelin Takeaways Broad suite integrates account opening with backend onboarding and servicing. New upgrade just released. Successful pursuit of mid-tier banks has enabled umonitor to outgrow its image as a credit-uniononly vendor. Fixed plus variable pricing translates into lower rates as the volume of applications rises. Javelin Analysis New upgrade, broad suite: UMonitor just released uopen & ufund 5.0, claiming that it is more user-friendly and has more useful back-office tools than previous versions. The privately held company also offers a range of other u- products that are designed to facilitate electronic transfers, help applicants shut down accounts and move them to new bank or credit unions, aggregate customer account information, assist financial advisers, simplify the administration of IRAs and HSAs and view and pay bills. umonitor says its offerings run the gamut from cookiecutter products for low-end community banks and credit unions to custom work for high-end banks. Percent of Revenues Top 20 Top 21 to Smaller in Each Tier banks 100 FIs FIs umonitor 5% 20% 75% Target market: Until 2005, privately held umonitor focused on credit unions, scoring contracts with 20 of the top 100 credit unions in the nation. But starting in 2006 it began to target banks, and they now account for nearly half of umonitor s clients. Today, umonitor s clients range in asset size from $50 million to more than $50 billion, and about 25% of its revenues come from top 100 financial institutions. In 2008, it signed what appears to be its biggest client: Sovereign Bank. Key clients: Sovereign Bank, Glacier Bancorp, Arvest Bank, Boeing Employees Credit Union, Golden One Credit Union and Star One Credit Union. Percent of revenues from online account opening product: More than 50%. An old-timer: In a testament to how new a concept online account opening is in relative terms, umonitor frequently touts its experience and lessons learned since it rolled out its first version of uopen & ufund five years ago. For example, CEO Dinesh Sheth describes S1 a newcomer to the game and four years too late. He also portrays CashEdge as a relative late-comer to the credit union market. Back-end capabilities: UMonitor made a strategic decision early on to develop a product line that extends well beyond online account opening. That is a stark difference from Andera, which focuses on the front-end process of opening the account, then hands off applicants to back-end systems from other vendors for onboarding, cross-selling and other servicing. UMonitor says its tools can help clients analyze applicant data to identify candidates for additional products and services, assist new banking customers to switch over their accounts from the previous institution, greet and follow-up with new customers, etc. Its tools also can be used to follow up with applicants who abandoned the application process. UMonitor says it can fully integrate with most host banking platforms, including those by Fidelity, Fiserv, Jack Henry, Open Solutions, Symitar, CSI, Harland and Metavante. Star One, a former Lockheed credit union in Sunnnyvale, Calif., upgraded its umonitor product because it wanted realtime account opening, to improve the process for existing customers, enable tellers to use the same online process, assign check cards when accounts are opened and to improve cross-selling for credit cards, mortgages and home equity loans. All applications like Andera had the same 60

61 thing, said Margarete Mucker, vice president of remote services. What intrigued us was the back-office piece. Cost drops as volumes climb: UMonitor charges a flat fee to host its products, with a variable fee that is designed to decline as application volumes grow. By and large you pay as you go, Sheth said. If you re successful, you are rewarded. If not, the cost is still minimal. One downside of buying out-of-the-box products is that costs can rise if customization is required. Star One worked around that when it renewed its contract by agreeing to be a beta tester, a status that enabled it to influence the design more than it could as one of many clients to an established product. Three-channel product: Applicants who can t finish the application online can phone customer service or pop into a branch, and the bank employee can pick up where they left off. Strategic partners: Equifax, Fidelity, Open Solutions, Experian, TransUnion, Fiserv, ACI and NCR. Others are confidential because of mutual confidentiality agreements. Existing application program interfaces (APIs): UMonitor said it has component architecture with open API to all its components such as identity authentication/verification service, funding service, product management, document management service and so on, but it declined to state specifics. Corporate background Founded: 1999 Employees: More than 70. Venture capital: UMonitor s growth was funded from internal cash flow, with no external funding. Milestones: 2008: Sovereign Bank signs contract. 2006: UMonitor broadens focus to include banks, reaches resellers agreement with Corillian (now part of Fiserv). 2004: Deploys uopen and ufund. 2003: Releases first version of utransfer. Headquarters: 3197 Players Club Pkwy, Memphis, TN Web: Client contact: [email protected] or (option 1) In The Vendor s Own Words The financial services industry is extremely competitive, and Americans are leading increasingly mobile lives. As the economy continues to decline and inflation rises, banks are finding it harder to increase, or even maintain, their profit margins. UMonitor's solutions help customers improve their positioning by leveraging the online channel to offer all of the services found in a brick-and-mortar branch. The solutions are completely configurable, scalable and customizable, giving banks of all sizes the ability to reach out to untapped markets, increase customer satisfaction and improve cross-selling ratios via the Internet. 61

62 Yodlee Javelin Takeaways Pairing with Andera makes big-bank capabilities available to smaller financial institutions. Yodlee s aggregation tools enable FIs to verify deposits and fund new accounts while the applicant is still logged on. Smaller institutions can mix and match Yodlee modules, including an automated bill-pay switch kit. Javelin Analysis Big-bank capabilities: Yodlee s partnership with Andera enables smaller banks and credit unions to take advantage of Yodlee s account verification and fund transfer capabilities that previously were available only to much larger financial institutions. It also potentially opens the door to Yodlee s other aggregation-related products, including personal finance tools and data-mining for cross-selling. This complementary pairing makes for a compelling option. Percent of Revenues Top 20 Top 21 to in Each Tier banks 100 FIs Yodlee 50% 50% Smaller FIs Target market: Since its founding in 1999, privately held Yodlee has focused most its attention on top 150 financial institutions, but for the past three years it has worked to develop modules that work for banks, credit unions and other institutions of any size. It s targeting smaller institutions primarily through its agreements with partners that serve that market, including Andera, Digital Insight and Fidelity. Since announcing its partnership with Andera in 2007, the duo announced they had teamed up to serve 55 customers, including PNC Bank. Key clients: PNC Bank and First Citizens Bank, both in tandem with Andera. Percent of revenues from online account opening product: About 5%. Same-session speed: The appeal of Yodlee s AccountVerification is that it uses aggregation technology, though it can default to microdeposit authentication. In a matter of seconds, Yodlee s tools can evaluate the legitimacy of an account that will be used to fund the newly approved account, then fund the new account while the applicant is still logged on. Yodlee claims the entire application and funding process can take as little as 90 seconds. This immediate gratification leaves newly approved customers with a markedly better first impression than microdeposit authentication, a process that can take days and causes some applicants to give up in frustration. Aggregation provides financial institutions with a snapshot based on real- or near real-time account data, a potential improvement over relying on potentially stale or errorplagued credit files. The downside: It s an extra cost. Yodlee also beams alerts to applicants to update them on the status of their applications and the funding. Mix-and-match modules: Yodlee has designed its software so it can be sold in modules, enabling customers to install just the pieces they want. For example, a community bank could install the account verification module without the funds transfer module if they aren t convinced that aggregation tools are worth the added expense. Yodlee claims this approach can speed deployment, and it leaves clients with the option of easily adding modules later. Streamlined switch kit: Yodlee s BillPay Account Accelerator uses data from the aggregation process to identify which bills new customers pay via bill-pay. An online wizard then guides them through the process to switch over those bill payments from the previous financial institution, automatically filling in and verifying information to save the customer time. This process is critical because converting a 62

63 customer to bill-pay almost certainly guarantees a financial institution has locked up the customer s primary deposit account. It also reduces the odds that a customer will keep the old account open and potentially revive the relationship later. Yodlee s product is a step up from switch kits that do little more than provide new customers with the paperwork needed to transition from one bank to another. Yodlee charges fees only for bill-payers who complete the switch. Resellers and alliances: Has a strategic alliance and mutual reseller agreement with Andera. Existing application program interfaces (APIs): None, but it takes advantage of Andera s APIs on joint projects. Corporate background Founded: 1999 Employees: About 450 Venture capital: More than $100 million raised, including a $35 million round led by Bank of America in June Warburg Pincus is Yodlee s biggest shareholder. Other big backers include Institutional Venture Partners, S1 Corp. and Accel Partners. Milestones: 2008: Secures $35 million in additional venture capital. 2007: Allies with Andera for account opening. 2007: CashEdge agrees to pay Yodlee for a license to settle patent-infringement lawsuit. 2006: Unveils its account opening product. Headquarters: 3600 Bridge Parkway, Suite 200, Redwood City, CA Web: Client contact: Melanie Flanigan, [email protected], In The Vendor s Own Words The combined Yodlee-Andera online account opening solution is unmatched in the marketplace in terms of its end-of-end capabilities and market experience. Yodlee uniquely brings the ability to verify account ownership, available balance, and other pertinent information in real-time as part of the account opening and funding process to mitigate risk, improve the consumer experience, and accelerate the opening process. No one else can do real-time verification and money movement to/from as many online financial accounts with the scale, speed, accuracy of Yodlee. 63

64 Related Research 2008 Banking Identity Safety Scorecard: Authentication and Alerts are Keys to Acquiring, Retaining and Empowering Customers address change 68% Physical address change 64% Changes to login password 64% Phone number 56% Addition or subtraction of registered users 16% Changes to PIN 8% 0% 20% 40% 60% 80% n = 25 Base: All FIs surveyed Javelin Strategy & Research (November 2008) Javelin s 2008 Banking Identity Safety Scorecard ranks banks and credit unions on their customer-facing identity fraud Prevention, Detection and Resolution capabilities. Leveraging the nation s most comprehensive study on identity fraud, Javelin updates the Prevention, Detection and Resolution criteria each year to show specific ways that individual financial institutions (FIs) can increase customer safety and loyalty by partnering with account holders to fight identity fraud criminals. Using a combination of mystery-shopper (averaging 5.8 calls per institution) and Web site research to score 25 leading U.S. providers against relevant Prevention, Detection, and Resolution criteria, collectively this study represents 50% of the U.S. market in 2008 by dollar value of deposits, according to the FDIC. (in Billions) $70 $60 $60 $57 $50 $40 $ % 4.00% $20 $10 $ Q32: What is the approximate dollar value of what the person obtained while misusing your information? 10% 9% 8% $50 $48 7% $45 6% 5% 4.32% 4% 3.74% 3.58% 3% 2% 1% 0% (Incidence Rate) 2008;2007;2006;2005;2004,n = 4474;5075;5008;5003;5004 Base: All respondents Javelin Strategy & Research 2009 Identity Fraud Survey Report: Identity Fraud on the Rise But Consumer Costs Plummet as Protections Increase (February 2009) For the first time in the past five years, identity fraud rates increased over the prior year. Yet during the same period, average consumer costs decreased sharply. The Javelin 2009 Identity Fraud Survey Report provides a detailed, comprehensive analysis of identity fraud in the United States in order to help consumers and businesses better understand the effectiveness of methods used for its prevention, detection and resolution. A nationally representative sample of almost 4,800 U.S. adults, including 487 fraud victims, was surveyed via a 50-question phone interview to gain insight into this crime and the effects on its victims. This report, supported by the Better Business Bureau, is issued as a longitudinal update to the Javelin 2005, 2006, 2007 and 2008 Identity Fraud Survey reports. 64

65 Companies Mentioned Andera Bank of America BB&T Capital One CashEdge Citibank Digital Insight Early Warning Services efunds El Dorado Savings Bank Equifax Fidelity First Citizens First Data First ROI Fiserv Harland HSBC Hudson City Savings Bank ipay Technologies JPMorgan Chase Jack Henry & Associates Lincoln Financial Group Metavante MT&T Bank NCR NeoSaej Online Resources Open Solutions PNC Bank Q2 Software Quova RSA S1 Susquehanna Bancshares Symitar Trans Union umonitor Umpqua Bank Vanguard Wachovia Washington Mutual Wells Fargo Yodlee LexisNexis 65