How automated direct deposit switching benefits traditional banks
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How automated direct deposit switching benefits traditional banks

May 23, 2022

Today, consumers expect their entire bank in their pocket, with automation at every step. Banks are responding by stepping up when it comes to digital solutions, from offering AI chatbots to launching robo-advisors.

Automated direct deposit switching is another essential feature of mobile banking. It allows customers to log into their payroll or income platform through their banking app and select the amount of money they’ll route to their new bank account on payday.

It’s a simple solution that falls in line with what consumers have become accustomed to: user-friendly fintech. According to McKinsey, 40% use a fintech solution to handle their finances on a daily basis. Customer satisfaction is also high in this group, with more than 90% saying they are “satisfied with their experience.” So how can banks implement automated direct deposit switching and unlock the benefits it brings?

The easiest way to introduce this feature is by integrating a payroll data connectivity API that connects to the customer’s payroll or income platform on the bank’s behalf. This way, banks leverage the power of a financial data aggregator that does the heavy lifting, allowing the bank to focus its resources elsewhere.

Because the customer’s direct deposit holds the key to creating a lifelong relationship and increasing lifetime value, automating this process should be a priority on your product roadmap.

Stay ahead of the digitization curve

Digital banking services have swiftly gone from being a “nice to have” to a “must-have.” Customers now expect frictionless banking on all of their devices, putting pressure on banks to quickly innovate. Automating deposit switching is an essential step to digitizing your services, especially when it comes to onboarding new clients.

When clients can switch their direct deposit without ever leaving the app, it increases their satisfaction with your product. Because easy deposit switching is key to increasing share of wallet and developing deeper relationships with customers, fintechs have been busy implementing this feature(crypto exchange platforms are also using it as a fiat onramp).

However, an Insider Intelligence survey found that the only bank to offer a digitized direct deposit setup was Citi. At the same time, the survey also found that automated deposit switching is the second most requested mobile banking feature. It’s clear that in terms of digitization, banks can greatly benefit from automating this one simple step.

Ready to take a deep dive into automated direct deposit switching? Our ultimate guide to direct deposit switching details how you can become a customer’s primary financial institution, grow wallet share, and boost lifetime value.

Improve your understanding of the customer journey

Payroll APIs that enable an automated direct deposit switch can also allow banks to monitor direct deposit allocations. With this functionality, you’re able to see who else is competing for your customer and when direct deposit allocations change. The feature gives banks more insight into their customers’ journeys, which comes with a host of benefits.

When you can monitor direct deposit data, you're able to understand hidden attrition and proactively respond to changes before losing the customer. As Jim Marous, CEO of the Digital Banking Report, notes, “Because new accounts can be opened digitally – in an instant – without closing an existing account, traditional banks and credit unions often don’t even know relationships are being fractured.”

Retaining customers is essential to upselling and cross-selling, as the longer a customer stays with a financial service provider, the more likely they are to invest in additional services.

Beyond retention, direct deposit allocation data can also help banks better analyze and segment their customers so they can offer them the right products at the right time. As a result, they can anticipate their customers’ needs and become a partner in their financial lives rather than just a service provider.

Grow direct deposits

After acquiring a new customer, the next step is to become their primary financial institution (PFI). Keeping in mind that 43% of consumers consider their PFI to be the bank where they receive their paycheck or Social Security, it’s essential to offer a simple deposit switching process. When customers can make an easy switch, this increases the likelihood that they’ll divert a percentage or even their entire paycheck into their new account.

At Pinwheel, we see first-hand how automation can yield more deposits. One of our clients grew direct deposits by 20% in the first month after implementing our API, and there have been increases as high as 75% for other clients.

The reason? Our API completes the entire process in a few minutes without the customer having to get in touch with their HR or log in to their payroll platform to manually make the switch.

How Pinwheel’s API can automate direct deposit switching

Automating deposit switching in-house means investing considerable time and resources to integrate with major payroll and income platforms. But integrating an API like Pinwheel’s can simplify the process.

The API already has coverage of more than 80% of paid Americans across 1,500 payroll platforms. We designed our flow to guide the end-user through the deposit switch process, which only takes a couple of minutes. The results are conversion rates that are as high as 34% and a user experience that is smooth from start to finish.

Plus, integrating an API significantly decreases the amount of time needed to launch automated deposit switching. For example, our client Envel was able to implement the feature in just a couple of weeks.

By removing friction from your customer’s journey, you’re laying the foundation for improved customer satisfaction and lifelong relationships your competitors can't disrupt.

If you’re ready to join companies like Cash App and Acorns that rely on Pinwheel to power innovative new products, get in touch with us today.

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