For all the advances in banking, the dread of filling out forms to open an account or rerouting automatic payments keeps many longtime retail customers from trying a new bank.
But with the Amazonification of online retail and, with it, customer expectations of simpler user experiences, banks cannot take existing customers for granted.
Younger customers are flightier: Eleven percent of all U.S. banking customers switched accounts in 2016, the latest available data provided by Accenture, but the average was 19% among millennials.
So in January, BankFirst Financial Services in Columbus, Miss., started coaching prospective customers to switch over with help from ClickSwitch, a fintech that simplifies shifting direct deposits or automatic bill payments from one bank to another.
Leon Manning, the director of marketing and training at the $975.2 million-asset institution, said front-end staff members have coached 60 customers so far. Nearly all customers are in the process of switching to a BankFirst account from a previous institution.
“I’m pleased with it, especially when you consider the fact we’re netting about 100 new accounts per month in general,” Manning said. “Our goal is to become the primary bank like anybody out there.”
Cale Johnston, ClickSwitch’s founder and CEO, said most customers are reluctant to change because the onus is on them to jump through multiple hoops to change direct deposit and bill-pay information to a new bank.
Once he started working on a solution, he "quickly realized why nobody was doing it because it’s very difficult to pull off,” Johnston said. “There’s multiple layers to what we need to do.”
One of the more pressing challenges early on for the 3-year-old Minnesota fintech was building a database with the details on how billers and employers handle payment and direct deposit information, respectively.
The company works with employers as large as Amazon and General Electric down to mom-and-pop hardware stores for payroll information. Johnston said the company is seeking to create partnerships with payroll companies such as ADP and Gusto to sidestep employers for direct deposit information. ClickSwitch also works with hundreds of billers so that customers need not worry about missing a payment for the cable or phone bill.
ClickSwitch offers financial institutions two options for its service. One is what Johnston calls a stand-alone option. “It’s really just an out-of-box option: An institution can flip a switch to turn it on and start the process for consumers to switch,” he said.
BankFirst uses this service, which is used inside the branch. Front-end staff can start the switch at the branch and then give customers unique codes they must enter on the ClickSwitch website to complete the process.
ClickSwitch’s more popular option connects to the bank’s core system, which includes account opening and online banking, so that a new customer is hit with messaging to ease the transition from another institution.
“We see much better adoption when we're integrated into the core,” said Johnston.
Johnston declined to reveal how many accounts its partners have gained through ClickSwitch. “We really try to position the product as a tool that boosts profitable accounts for the banks, but naturally financial institutions are seeing a lift in new account opening,” he said.
Whether those customers ultimately consider the new bank their primary institution will depend on a couple of factors.
Customers might not be ready to fully commit their entire paycheck to a new bank. Johnston said what usually happens at first is that customers will divvy up their paychecks among two or more institutions.
For example, a customer might keep 25% of a paycheck with what was once considered the primary bank, and divide the rest between, say, the popular microsavings app Acorns and another financial institution.
Johnston said from there, it is up to the new bank to offer the new customer products and services in an effort to persuade them to move over more of the remaining funds.
Manning said it is too early in the ClickSwitch partnership to determine how incoming customers use their new BankFirst account.
Johnston said the ideal goal is for ClickSwitch partner banks to secure 100% of a new customer’s deposit, but that might not be a simple task with today’s consumers.
“I don’t know if a bank will ever get 100% of that deposit,” said Mike McCrary, the executive vice president of e-commerce and emerging technology at the $1.2 billion-asset Lincoln Savings Bank in Cedar Falls, Iowa. “Even if they do, the customer still has the ability to push out money elsewhere.”
McCrary speaks from experience as Lincoln Savings Bank handles deposit accounts for Acorns, as well as MoneyLion. Both fintechs, and others like it, have made it simple for consumers to link checking account information to those apps to fund microinvestments.
The $1.2 billion-asset Lincoln recently became a ClickSwitch partner, and McCrary is discussing with the company how Acorns and MoneyLion also can benefit.
McCrary said that while banks for years have positioned themselves to be “sticky” for their customers to make it difficult to leave them, fintechs have altered that model.
“Some of that isn’t bad because I think customers are segmenting their own behavior and using these different platforms to meet their own needs,” he said.
Stephen Greer, a senior analyst with Celent, said that overall, consumer loyalty to a primary institution is tough to overcome.
“Even if it’s easy to switch direct deposit information and bill pay, consumers aren’t doing it much,” he said. “I think a lot of it has to do with consumers thinking all banks are the same and they don’t really see a differentiation in the products.”
ClickSwitch charges $20 to $30 for each new customer, but argues that the fee is cheaper than traditional methods of acquiring new customers.
BankFirst pays ClickSwitch $25 per new account, which is about $175 less than its average customer-acquisition cost, Manning said.
“If we can get the customer to open an account, get that direct deposit and maybe eventually their mortgage, it’s worth the $25 we’re paying them,” Manning said.
