Progress Towards the Paperless Financial Institution Enterprise Content Management in the Banking Industry

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1 Progress Towards the Paperless Financial Institution Enterprise Content Management in the Banking Industry Russ Drummond FIS Consulting Services White Paper

2 New Horizons for Imaging Document Management System providers have begun to expand capabilities and improve the user friendliness of their suites of products. This allows better organization of the imaged files. It also creates consistency and improved speed and reliability in searching and processing imaged documents. These improvements began opening opportunities to utilize the imaged documents for opening of accounts for deposits and loans. Still, in the financial services industry, there is continued reluctance to rely on the digital image. We are starting to see a change of attitude to move to image from document s first point of contact with an enterprise. Some banks now place up to 98% of paper documents into the shred box as soon as they confirm that they have a successful image. Much processing can be done with the imaged files. Given this momentum, FIS Consulting decided to ask a cross section of mid-tier financial institutions where they stood in their progress towards becoming paperless banks. The FIS Imaging Survey FIS asked bankers to provide input about their plans, use and expectations of current and future investment in Image technology for Enterprise Content Management (ECM). We were also interested in how they envision the available technology influencing traditional banking processes to improve client service opportunities and manage rising costs. Purpose of Survey The industry has made great strides in electronic payment growth. Industry research into the payment transaction volumes by type of payment has shown electronic transactions exceeding paper checks by a wide margin. With all the progress made in electronic payments, financial institutions now collectively swivel their sights at imaging as a comprehensive productivity tool and ecological enabler. Phrases such as Paperless Banking and Enterprise Content Management come up in efficiency conversation relative to banking in the United States today. FIS Consulting Services measured the progress banks are making toward becoming fully paperless entities. In our recent survey we attempted to gauge banks plans and justification for investing in comprehensive imaging solutions. The findings reveal much opportunity yet exists to take a comprehensive approach to paperless banking. The following paper describes survey results and offers observations on imaging best practices based on FIS experience guiding bankers through imaging enabled business transformation projects. Survey Reveals Intentions to Capture Other Documents Attempting to gauge the extent bankers have driven imaging and its supporting technologies into their organizations, we asked respondents to indicate which functional areas of their institution they have implemented imaging. To no surprise the Deposit transaction area led the pack with over 90% penetration. Second is Consumer Loans, also no surprise. What is surprising is the Other Documents category tied for second which seems to imply banks have a wide range of paper that they cannot classify into a functional area, but are capturing electronically. 1

3 Supporting the interest in Other Documents, when asked what plans are being made to utilize capture technology the Other Documents came in as the highest targeted area. These include but are not limited to, non-banking processes such as accounts payable, human resources and supply chain management. 2

4 Point of Capture a Pivotal Decision The key finding from the survey that tended to contradict our experience in working with imaging initiatives, was the answer to the question At what point do you or will you capture images? In our experience, we have found banks that capture an image at first point of entry into a bank realize the greatest savings and efficiencies within their imaging efforts. This means that each part of the loan file, for example, is captured on image as soon as it is received or prepared. The loan approval process is then engineered to utilize the image files instead of paper. Surprising to us, 42%of the respondents suggested they are or plan to image documents centrally. Considering another 31% indicated that they will image the documents or files after they are completed and signed, it appears that 73% plan to capture their images after transporting paper documents instead of attempting to create a paperless workflow. We strongly believe banks should reconsider such a strategy based on our experience gaining workflow efficiencies, decreased process cycle times and improved quality with distributed capture. The rankings from the question are below. Benefits of Paperless Banking Identified There are many benefits that have been identified and realized in the process of going paperless. Some are obvious; some are more subtle. In many cases, the justification comes from comprehensive reporting comparing the cost of the old paper based processes to the new imaged process. In certain cases, banks are finding that they don t know their cost today for many of the process components-- so getting solid benefit numbers is a considerable challenge. Ultimately bankers must see clear benefits and payback from their comprehensive imaging initiatives. Specifically we wanted to understand what types of expenses bankers anticipated reducing and what the range of savings was they expected to generate. Again, based on our experiences we expected transportation expense to lead the responses. Many bankers did select that category, but more also indicated storage and paper reductions. Perhaps even more revealing was the range of savings, as these mid tier banks felt imaging initiatives would generate $500K or less in annual cost reductions. Our experience indicates this can be a much higher range once banks adopt a comprehensive approach to their imaging projects. Also many banks considering imaging initiatives do not yet have supporting data 3

5 to reflect higher savings ranges yet. Many remain unaware of the full range of cost savings potential for imaging projects. That lack of awareness is why we feel respondents rated the potential savings $500K or less. FIS experience with banks exploring Imaging/Paperless initiatives on a comprehensive basis indicates savings far greater than $500,000. Recent work with a $5 billion financial institution indicates financial benefit of their Enterprise Content Management initiative exceeds $6 million in projected annual savings. The highlights from that analysis are below. 4

6 This approach was predicated on imaging technology combined with business process re-engineering. FIS feels this comprehensive approach unlocks the true potential of the paperless institution. Without reengineering business processes to leverage new technologies, banks will not realize significant savings. As an industry we need to continually improve and not just look for faster ways to accomplish the same tasks. The rankings of the barriers to becoming a paperless bank are below. Responding to the Survey Findings Findings from the survey indicate that banks need to address ingrained business processes and (we feel strongly) need to think about image capture at the first point a document enters any part of the bank. 5

7 They also need a thorough approach to making electronic all the other documents flowing through a financial institution. To address those challenges banks must take a holistic, comprehensive approach to all their imaging initiatives. We suggest developing an enterprise-wide strategy to address an enterprise-wide initiative. The most effective Enterprise Content Management Strategies develop with management support and a collaborative approach building consensus among all business lines and servicers within the organization. The Enterprise Content Management Strategy that evolves from this approach lays the foundation for business process improvements coupled with the application of imaging technology the best fits the characteristics of the bank. The Perils of No ECM Strategy In our work with financial institutions, we have had the opportunity to work with organizations that did not address the need for a strategic consensus across the organization before embarking on the imaging trek. In those companies, the development of enterprise content management was inconsistent internally and left many opportunities such as non interest expense savings and improved service levels on the table. They generally dealt with ECM only at the request of business line or operational managers. The resulting ECM effort failed to recognize much of the potential opportunities that were available to them. An example is often seen in the failure to capture the documents (deposits, loans or other documents) at points in the process where the movement of paper could be eliminated. Hence, the results are often, as seen in the survey, that the enterprise content management solution is deployed at the end of the business process. How to Develop an ECM Strategy It appears many banks need an overall ECM Strategy as evidenced in the findings from the survey indicating a majority of banks have much less than 100% of their documents imaged see the results below. 6

8 The more effective way to succeed in ECM is through these few steps that, in the right environment, can be accomplished to create your strategy in a matter of a few weeks. First a bank must establish the executive level sponsorship and charter that creates the vision and expectations for the initiative. They next must define the organization s acceptable standards for ECM. Then the ECM team must join the standards with tactical plans to evaluate the current environment, resources available and a solid cost benefit analysis. An outline for the process to create an ECM strategy is as follows: Define the objectives of Enterprise Content Management for the organization. Agree on the optimal ECM solution Define standards for your organization Develop tactics to accomplish the objectives and standards. Define the current Enterprise Content Management environment Understand and document the gaps between the desired ECM environment and the current environment Perform cost/benefit analysis of addressing the gaps Establish a development and implementation plan for executing the strategy for the future Enterprise Content Management environment The FIS Imaging Survey was conducted in spring of The results are comprised of responses from a cross-section of financial instructions with assets between $1 billion and $50 billion. Executing an ECM Strategy with Process Improvement Key The planning is easy. The execution creates the challenges. Hardware and software acquisition and the related training are major efforts to complete. With all of the planning, acquisition and training, you will have a good start on ECM. You will not, however, have realized the opportunities that should be accomplished in an effort of this magnitude unless you thoroughly examine and re-define the associated work processes that will optimally utilize the technology and its basic functionality. This becomes a new dimension in process improvement re-engineering. Most employees have never been given the opportunity to get outside their process box and radically change their current work processes. They need their leadership to tell them it is alright to do that. Stop the creation, movement and storage of paper in order to maximize the informational value of processing and archival of all relevant data. Summary It is never too late to start with a comprehensive approach to creating a sound strategy for any major profit improvement effort. Even banks that have launched Imaging efforts could benefit from a fresh perspective on their approach to an Enterprise Content Management Strategy. The good news is there is much to be gained today by becoming a truly paperless institution. As banks better utilize their technology, we will see faster thru-put and approval times, the opportunity for more sales from the current workforce resulting in increased revenues.put and approval times, the opportunity for more sales from the current workforce resulting in increased revenues. Contact Us For information about how FIS Consulting can help develop an Enterprise Content Management Strategy at your institution, call , or visit Fidelity National Information Services, Inc. and its subsidiaries