Even as consumers have flocked to web portals and mobile apps in recent years to meet their banking needs, there is one basic function they still tend to perform in person: opening an account.
Some customers clearly prefer to have a banker on hand to answer their questions when signing up for a new checking account or taking out a loan. Others — a real but shrinking percentage — are so hidebound that they remain reluctant to bank online at all.
But experts say there is another reason that digital account opening isn't more popular: Most banks' tools — when they are offered at all — just aren't up to snuff.
"As an industry, when it comes to remote account opening, I believe we're underachieving," said Andy Hernandez, the head of digital banking for Regions Financial in Birmingham, Ala. "Even for the largest banks in the country — all of us — the majority of the sales are still happening face-to-face in branches."
And yet customers' desire to use digital channels is undeniable. A report published by Aite Group last year found that in the preceding 24 months, nearly one-fourth of new checking accounts had been opened using a computer or mobile device. The percentage is significantly higher when considering account openings that began online or via mobile and were completed at a branch, according to various surveys.
In light of changing consumer expectations, said David Albertazzi, a senior analyst at Aite Group, banks "must seek to provide a quick and simple experience that spares applicants a trip to the branch."
Banks are ramping up their efforts to meet this demand, and lawmakers have begun looking for ways to make it easier for financial institutions to comply with regulations and fight fraud while allowing customers to open accounts remotely. If these efforts bear fruit, it may not be long before a majority of customers, especially younger ones, are signing up for checking and savings accounts on their phones.
Regions is among the banks leading the way. In January, the $125 billion-asset company introduced an interactive tool that helps new customers decide which checking account best meets their needs. At the end customers are given the option to sign up for an account online, if they wish, rather than making an appointment to visit a branch.
Regions has seen an "exponential increase" in customer use of the tool since it was first launched and Hernandez said that the majority of users want to finish the process online. He declined to disclose the percentage of new accounts being opened online but said the tool has become so popular that Regions has since extended it to cover savings accounts, investment products and various types of loans.
But legal and technical hurdles remain for many banks. The biggest issue with online applications is one of identity, said Robert Rowe, vice president of regulatory compliance at the American Bankers Association. Simply put, a bank needs to know for certain that the person applying for anaccount "is that person," Rowe said.
Such verification is essential not only to comply with federal Know Your Customer regulations but to prevent fraud. "There's a lot of bad guys out there," added Hernandez, "and that's just the nature of this business."
The solution sounds simple enough. Banks would like to take a picture of each customer's driver's license and keep it on file, Rowe said.
But there are obstacles. Five states — Colorado, Kansas, Mississippi, North Dakota and Tennessee — have laws that prevent banks from capturing and storing images of customers' IDs. Two others, Illinois and Oregon, have restrictions. The patchwork of state regulations makes online account opening difficult for banks that have branches in multiple states.
Enter Congress. In October, two Republican lawmakers, Rep. Scott Tipton of Colorado and Rep. Randy Hultgren of Illinois, along with Rep. Terri Sewell, a Democrat from Alabama, introduced the Making Online Banking Initiation Legal and Easy (MOBILE) Act, which, if it passes, will supersede those laws and clarify that it is legal for banks in all states to electronically capture and store information from customers' ID cards.
The bill would be most beneficial to people who lack close proximity to a bank, such as those in Colorado's rural third district, which Tipton represents. Their plight was the impetus for the bill, a member of the congressman's staff said.
Along with verifying customers' identities, the MOBILE Act could help reduce the "friction" involved in filling out lengthy forms using a smartphone keyboard. According to a survey released by digital ID-verification startup Jumio, 94% of millennials want their banks to offer digital ID scanning as a way to confirm their identities and automatically fill out forms.
"Most people have smartphones and financial institutions have the technology" to serve customers digitally, an aide to Rep. Tipton said. "It's a matter of having the law catch up."
Banks are playing catch-up too. More than 50% of visits to Regions.com are now made using mobile devices, but until late September the bank's online checking-account application wasn't optimized for them. It is too soon to say just how well the new, mobile-responsive application is doing, but Hernandez said he is encouraged by the early analytics he is seeing.
Aite's Albertazzi said that 81% new accounts today are being opened by millennials and Gen Xers. A large percentage of them — 37% of the former and 52% of the latter — start their applications online but wind up completing the process in a branch — perhaps because they can't find answers to their questions on banks' websites, he said.
The Jumio survey found that fully 80% millennials had applied — or at least attempted to apply — for a bank account using a mobile device. Many ultimately abandoned the transactions due to banks' technical shortcomings.
"There's no doubt that today banks' [online] solutions are not up to par," Albertazzi said. "Once we see that resolved, we're going to see the number [of online applications] spike."