Online account opening's not exactly on the IT frontier , but its potential as a low- cost engine for deposit growth provides a new option for the future of community and regional banks.

"It's...almost a standalone branch without overhead," says Stratton Huggins, a vp of marketing for Renasant Bank, a $4 billion institution based in Tupelo, MS.

Renasant generated $1 million in online account openings in five months starting in late in 2008 after it outsourced the function to Goldleaf Financial Solutions. The bank achieved those results with minimal increase to call center staffing and no branch expansion. "It costs a lot less than the $25,000 per month it would cost us to open, provide staff and pay for one new brick and mortar branch," Huggins says.

Smaller banks' outsourcing of electronic account openings to Andera, Metavante, Goldleaf and others on a pay-per-transaction basis has thus far lagged the actual innovation-much of the technology is a couple of years old, and most large banks already offer online account openings.

But there are seeds for growth in the mid market and community bank segment: Economic pressures are making the kind of results enjoyed by Renasant a competitive must-have; open architectures make the technology more affordable for smaller banks; and institutions are evolving their Internet strategies to include a broader product set.

"The push in this segment had traditionally been to increase fee income through online banking," says Todd Shiver, evp of sales and marketing for Goldleaf in Atlanta. "But the banks realize they're getting hits on their Websites, so why not use that presence to let consumers in the door for new accounts and new deposits?"

Consumer adoption will also drive this trend. Javelin Research says 45 percent of all consumers have attempted to open a checking account online, and 30 percent of "Generation Y" consumer have attempted to do so in the past year. Mark Schwanhausser, a research analyst for Javelin, says there have been some innovations in online account opening over the past year, such as a partnership between Andera and Yodlee that provides real time verification, but the larger trigger for smaller banks going forward is an economy-driven need to curry favor with customers by allowing easy access to account openings while avoiding branches and call centers.

Market sources say there have been about 600 implementations among a total market of about 16,000 mid-sized and small financial institutions, including community banks, regional banks and credit unions. So there's a lot of room for future growth, and a lot of room for customer procurement savings.

"A paper-based account opening costs about $65 per account, whereas doing it electronically costs about $0.15 per account," says Charlie Kroll, CEO, Andera, which has about 260 bank customers in the small to mid-tier segment.

There's also a CRM play here. By allowing funds to be easily transferred from other internal or external accounts, banks can provide an additional, accessible financial management tool. "Consumers want to save more in this current economy, and this gives them the opportunity to easily move funds into an account that they want to save," says Matt Kennedy, manager of alternative banking services, for the $2.5 billion Seacoast National Bank, based in Stuart, Fl.

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