Why Community Banks Can’t Ignore Online Account Opening
Despite the ongoing digital transformation that is reshaping financial services, many community banks and credit unions still operate under legacy deposit-gathering models. While some institutions have evolved, a surprising number, particularly those founded over the past 10–15 years, still lack basic online account-opening capabilities. Even some newly chartered (de novo) banks believe traditional, branch-centered deposit strategies suffice. But as the industry shifts and customer expectations evolve, banks that do not modernize their approach risk falling behind.
Digital Convenience Drives Deposits
The ability to open accounts online is no longer a “nice to have.” It’s a competitive necessity. According to a 2020 article by The Kafafian Group (a business management services firm in Bethlehem, Pa.), online account opening has a direct impact on deposit growth. Kafafian analysts note that “…the lack of digital account-opening capabilities can significantly limit a bank’s ability to grow organically,” especially in periods of rising liquidity demand or economic uncertainty.
As of 2024, a growing segment of consumers—especially younger generations and remote workers—expect the convenience of fully digital onboarding. In fact, J.D. Power’s 2024 U.S. Retail Banking Satisfaction Study shows that more than 65 percent of new account openings now occur through digital channels. That number is even higher among Gen Z and millennial customers, who place ease of access above institutional loyalty.
Nonetheless, some community banks continue to view online account opening as a feature reserved for larger institutions, an assumption that is outdated, counterproductive, and a competitive hindrance. Fintechs and direct banks are actively courting the same deposit dollars, often by offering frictionless onboarding and digital-first user experiences.
The Cost of Complacency
Not investing in online account opening is more than a missed opportunity; it’s a strategic liability. In today’s competitive environment, a slow or branch-only onboarding process can drive potential customers to more agile competitors. Even loyal business clients may move their excess liquidity to institutions that offer more convenience or better interest rates—both of which can now be sourced nationally thanks to digital banking.
As noted by Ron Shevlin in Forbes, “Less than a third of the banks who claim to be halfway or more done with their digital transformation strategy have achieved a five percent improvement in any of nine key performance measures:”
- Cloud computing
- Application Programming Interfaces (APIs)
- Chatbots
- Internet of Things (IoT)
- Robotic processing automation
- Machine learning
- Artificial intelligence
- Voice technologies
- Virtual or augmented reality
- Blockchain
Beyond customer expectations, digital account opening solutions can drive operational efficiencies. McKinsey & Company found that fully digital onboarding processes reduce account-opening costs by 80– 90 percent, while also improving fraud detection through enhanced analytics and real-time identity verification tools.
For banks facing pressure on margins and deposit costs, this efficiency is crucial. Adopting digital onboarding is not just about keeping up. It’s about building a competitive advantage in an increasingly mobile-driven market.
De Novo Banks: Don’t Repeat the Past
For de novo banks, the temptation to start lean and delay investment in digital infrastructure can be strong. But history shows that postponing digital readiness often leads to slower initial deposit growth and weaker competitive positioning. The idea that account opening must be tied to physical branches and in-person interactions ignores two critical trends: the rise of non-geographic banking and the accelerating migration of deposits toward tech-savvy institutions.
A McKinsey report from late 2023 notes that banks launched in the last decade that implemented digital onboarding from day one reported 30–50 percent faster deposit growth in their first three years than peers who relied on traditional, branch-centric models. Regulatory scrutiny over BSA/AML compliance may make digital onboarding seem daunting, but most reputable vendors now integrate eKYC, fraud detection, and OFAC screening seamlessly into the onboarding workflow.
Vendor Solutions Are More Accessible Than Ever
A decade ago, implementing online account opening required custom builds, complex integrations, and major capital expenditures. Today, several fintech vendors offer turnkey platforms tailored to community banks and credit unions, often with API connections to popular core providers. Fintechs both domestic and abroad provide solutions that emphasize compliance, customer experience, and speed-to-market, without requiring a total overhaul of a bank’s core system.
Many of these platforms can be white-labeled and deployed in less than six months, making it easier for smaller institutions to compete with national players. They also allow banks to test digital account opening with select customer segments or product types before full-scale rollout.
Balancing Technology with Personal Service
Community institutions should not view digital investments as antithetical to their high-touch relationship models, a recommendation from a Banking Dive analysis of the issue. In fact, modern account opening tools can augment customer service by reducing clerical burden on staff and freeing up relationship managers to focus on consultative roles.
Importantly, online tools can be designed to preserve personal interaction. For example, some platforms enable a “hybrid” experience where a customer initiates an application online but is offered the option to schedule a call or video chat with a banker before final approval. Others allow customers to visit a branch to finalize onboarding, creating a sense of continuity between digital and in-person channels.
Action Steps for Leadership
Bank leaders—especially CEOs, CFOs, and Chief Deposit Officers—should reevaluate their deposit strategy in light of evolving customer behavior and competitive trends. Key steps suggested by Deloitte include:
- Benchmark current deposit growth against digital adoption: If online account opening is unavailable, consider how much opportunity may be lost.
- Engage with peer institutions or banking associations to learn which platforms have yielded the highest ROI.
- Pilot online onboarding for a targeted product like money market accounts, which are attractive to remote or rate-sensitive customers.
- Evaluate staffing and compliance implications of digital onboarding and prepare to integrate eKYC and fraud controls as part of the solution.
Financial Institution Digital Adoption Can’t Wait
Community banks and credit unions have long excelled at personal relationships and trust. But in the current landscape, these strengths must be supported by digital agility. Customers—and regulators—are increasingly expecting institutions to meet them where they are: online.
Failing to offer digital account opening puts institutions at a competitive disadvantage and risks long-term relevance. The good news is that solutions are available, affordable, and scalable. Now is the time to act, not just to retain current customers but also to attract the next generation of depositors.
