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Nationwide customers can fund new current accounts immediately with new sweep service

The news: UK-based Nationwide Building Society’s new open banking service lets customers sweep money into a new current account from their previous current account provider, per a press release.

More on the service: Open banking provider Moneyhub’s payment initiation service handles this feature. When a customer opens their account, they can connect with their previous current account at another financial institution and immediately sweep the money into the new account at Nationwide.

  • Under the old, pre-open-banking process, it would take several days for the account to be completely active and funded.
  • New customers often forgot to transfer the money to their new accounts, which resulted in 8% of new accounts closing each month due to lack of funding, according to Nationwide.
  • The feature will initially be available for fixed-rate online bonds, but will expand to other savings products in the future.

Nationwide took a minority stake in Moneyhub in November 2018 and the two companies collaborated to develop the payment initiation service.

New account funding: Research for our US Account Opening Benchmark found that funding a new account is top of mind for customers. They’re looking for ease and efficiency in this process.

  • 40% of new account openers said the ability to fund the account via direct deposit is “extremely valuable.”
  • 30% said funding a new account with a payment app is “extremely valuable.”

The lack of US open banking regulations makes the account-switching process difficult, but our research shows that customers crave a digital solution. The clunky existing process often leads to frustration and dissatisfaction.

Account abandonment: Account abandonment due to frustration is a widespread issue in the bank account opening process.

  • 25% of US financial institutions reported that consumers abandoned digital account applications 50% of the time for deposit products in Q3 2020, according to Cornerstone Advisors.
  • Financial institutions with more than $10 billion in assets reported a 75% abandonment rate in the same period.

The big takeaway: Nationwide’s new feature offers a partial solution to the account abandonment issue that so many banks face, and it also satisfies customers’ desire to quickly and digitally complete the account-opening process.

  • While the feature isn’t a direct deposit or payment app, it allows customers with existing bank accounts to move their funds without having to revisit the application process.
  • It showcases the usefulness and convenience of open banking, which might spur greater adoption of the practice at US and Canadian banks that have been slow to join in.

This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.