How Digital Account Opening reduces customer acquisition cost

May 22, 2020
Narmi Staff Contributor

One beautiful aspect of a strong digital account opening strategy is that, if done correctly, the return on investment can be both obvious and large. Critical to this strategy is a granular and holistic understanding of customer acquisition cost (CAC).

Customer acquisition cost is a broad topic and is typically composed of multiple channels. The first thing to understand is that digital account opening is a tool used to acquire customers and therefore its cost should be included in your CAC. 

What is CAC Composed of at a Financial Institution?

Financial institutions define CAC differently and there is no limit to how granular one can get. We advise financial institutions to separate user acquisition cost into two buckets: digital CAC and physical CAC. Naturally, if you operate a digital-only financial institution or have a digital-first strategy, you can de-prioritize physical CAC. We’ll focus on digital CAC in this insight piece.

With respect to digital CAC, there are a number of inputs:

  • Digital Account Opening Platform (mentioned above)
  • Social Media Ad Spend
  • Print Ad Spend (mailers, billboards, etc.)
  • General Ad Spend (commercials, radio, etc.)
  • Retargeting Ad Spend (i.e. Adroll)
  • Creative Costs

Optionally, a financial institution can also include:

  • Salaries and bonuses of employees directly responsible for growth
  • Overhead related to employees directly responsible for growth
  • Physical CAC only if this is less than 20% of overall CAC spend

How Does Digital Account Opening Reduce CAC? 

Digital account opening platforms are intended to drive your CAC down. This might sound counterintuitive – how would installing a digital account platform, which comes at an added cost, reduce CAC?

The answer is scale.

For example, let’s say your financial institution spends $1 million on marketing and gains 10,000 new customers from this spend. This results in a CAC of $100 per customer. 

Let’s say you now spend $1.2 million on marketing which includes digital account opening. You don’t change anything else. Because customers can now open accounts easily through online, mobile and tablet channels, you actually gain 15,000 customers. Your CAC drops to $80. Simply by implementing a fast and easy way for customers to open accounts you’ve reduced your CAC by 20%. You’ve also increased the return on existing marketing spend.

Does the Reduction in CAC Scale with Digital Account Opening?

Once you have a successful marketing machine complemented with strong digital account opening you will want to scale quickly. This means your marketing spend decisions will be driven completely by quantitative metrics. You will be able to confidently say, if we increase marketing spend by $X, we will see a Y increase in new accounts, and a Z increase in new deposits.

Also consider that the only additional costs you pay for account opening as your scale are per application costs, and these tend to be nominal inputs to the overall CAC calculation. 

What is a Good CAC for a Financial Institution?

CAC has so many variables and broad-definitions that it is nearly impossible to tell financial institutions what is “good” and what is “bad.” Below are a few CACs benchmarked by industry. You’ll notice Financial Services is one of the top three most expensive industries to acquire new customers.

Graph showing customer acquisition cost by industry
  1. Technology (Software): $395
  2. Telecom: $315
  3. Banking/Insurance: $303
  4. Real Estate: $213 
  5. Technology (Hardware): $182
  6. Financial: $175
  7. Marketing Agency: $141
  8. Transportation: $98
  9. Manufacturing: $83
  10. Consumer Goods: $22
  11. Retail: $10
  12. Travel: $7


Customer Acquisition Cost and Digital Account Opening go hand-in-hand. As a financial institution, try to focus on the output of any marketing spend as opposed to the input (i.e. cost). Further, different marketing strategies have different levels of scalability. It’s important to invest more in those strategies that can scale exponentially and cost-effectively. By focusing on these principles, your financial institution will quickly realize a path towards industry-leading growth and profit metrics, thus putting you ahead of the competition.

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How Digital Account Opening reduces customer acquisition cost