New regulatory requirements and consumer behavior changes are challenging the traditional profitability model of demand deposit accounts (DDAs). In fact, TowerGroup predicts banks will lose $25 billion annually in overdraft and interchange fees due to new regulations. In response to the changing retail demand deposit landscape, Zoot launched a new solution designed to bring profitability back to DDA opening. zInitiate® account opening solution gives Zoot’s clients an advantage in their DDA opening processes by helping them approve more accounts, reduce fraud losses and decrease data acquisition costs. Let me explain how.
Demand deposit account (DDA) origination has always followed a fairly standard process. Enter the application, check OFAC and closed for cause databases, open the account. The traditional data source du jour for DDA origination is closed for cause data—great at identifying historical account abuse, not so great at identifying other risk populations. Closed for cause data is also very expensive when compared to credit and fraud data. For banks trying to cut costs, reduce fraud losses and regain profitability there needs to be another option.
What banks need is the ability to integrate the necessary data types to efficiently support traditional DDA opening (closed for cause, KYC, and OFAC), in addition to using credit bureaus and alternative data providers to optimize the evaluation of consumers, including those with limited credit history. The value of combining alternative data with traditional data on historical fraud and account abuse is that financial institutions have options to approve more accounts and weed out more of the bad apples at a lower cost. Alternative credit data providers can prove significant results in predicting the likelihood of fraud or account abuse during account opening. By evaluating customers more comprehensively banks can approve more accounts, reduce fraud losses and decrease data acquisition costs by pulling less expensive data options first.
In today’s market, facilitating instant DDA decisioning at a lower cost while also prescreening customers for deposit or credit cross-sell offers is critical. Banks need the ability to give business users control to configure their solutions and product offerings to meet the institution’s specific needs. This enables banks to make optimized product offers that will increase the likelihood of acceptance of prescreen offers, growing wallet share with customers. All of these features lead to a more profitable bottom line for banks.
Zoot’s zInitiate account opening solution allows financial institutions to choose the level of sophistication necessary for their DDA portfolio and enhance capabilities as needed—from efficiently opening DDAs to simultaneously prescreening customers for cross-sell products. The solution gives banks the ability to incorporate a variety of data sources into the account opening process and the control to configure the solution to meet their business requirements. This is crucial when keeping up with regulatory, consumer and general market changes. We’re pleased to respond to this market need with a new option for effective, profitable demand deposit account (DDA) opening.