Bank consultants Document imaging Document management Enterprise content management 1
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Our purpose is to empower banks to achieve their goals. We ll help you achieve your goals, and we ll even guarantee it with a 1 year, no questions asked, money back guarantee. So our tagline is Goals achieved. Guaranteed. We ll get you to the right decision and it will get implemented to meet your goals in 12 months. Guaranteed. 3
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My objective today is to share best practices and design considerations and give you some idea generators of how to maximize the value of ECM 5
CEO s top priority is a growth priority. Growing commercial loans is their #1 priority. Three of the next four priorities are efficiency related and the other to round out the top 5 is addressing regulatory requirements. So efficiency initiatives will be big this year. We have nearly a bank a day call us about helping with an efficiency initiative. Last year at this time, it was maybe two a week.
Three of the top 5 planned purchases in 2013 are the same as last year. Last year, mobile banking and tablets were also the #1 and 2 planned purchases. But out of nowhere, ERM zoomed up the list from #18 to #3 replacing consumer mobile RDC and moving it to #4. Last year online account opening was #4, this year it fell to #10 and was replaced by Board portal as #5. What s interesting is that four of the top 5 CEO priorities are growing commercial loans and gaining efficiency and none of the top 5 planned purchases will move the needle on the CEOs top priorities.
The fraud concerns extended into IT project priorities. Last year, fraud technologies didn t make the top 10 list. This year, fraud management and security systems zoomed up to #1. Consumer and Commercial Internet banking remained top utilization projects. But question is, what are you actually planning to do to improve penetration? Banks have been saying they want to improve penetration, but penetration is still stuck at about 25% of checking customers. So what s going to be different in 2013? The other big change from 2012 was BSA automation and loan origination jumping up. And finally we see document management/workflow on the list. Seeing as it s the primary enabler of workflow improvements, at least it s on 36% of your radars. I d encourage all of you to look at your doc imaging system s workflow module as an enabler of streamlining your processes. That s what your CEOs want, they just don t know that there s technology to help with that.
When pared down, the CEO s job for 2013 is to choose between two roads: Find the road to improved profitability in the face of challenges Conclude that a road doesn t exist, share that reality with the board, and explore exit strategies With higher capital requirements, increased regulatory expenses, margin pressure due to incredibly low interest rates, a sluggish economic recovery, and growing technology and compliance related costs, the road to success in 2013 will not be paved with small improvement tweaks. The road to success (and profitability) requires that banks change how they do business. That s not meant to discourage CEOs. Instead, we hope to inspire CEOs to take a new look at the business. Challenges bring opportunities. With that in mind, we at Abound Resources humbly submit five strategies for those CEOs looking to start down the road to improved profitability.
This is efficiency, not efficiency ratio. If we were talking about improving ER, we d be talking about pricing, fee income and improving branch sales performance. Streamlining workflow was #5 on CEOs list but workflow technology was #9 on the technology priority list. Workflow technology is the #1 efficiency tool. Lots of banks have document imaging systems but still have lots of paper being passed around, and many don t use the workflow modules which allows you to actually automate the process. Remember the story about the two guys in the 1800s who wanted to speed up transportation. One guy looked at the problems with the horse drawn carriage. Horses averaged about 6 mph and required stops for rest and feeding. So he built a mechanical horse that could go 10 mph and didn t need rest stops. The other guy built a train. Well, a lot of banks add workflow to the new accounts or loan origination processes and end up with a mechanical horse. They see incremental improvement and perhaps get their loan decisioning down from 2 hours to 1 or the new accounts process down from 30 minutes to 15. But to get your loan decisioning down to 7 minutes or your new accounts process down to 10 minutes with two upsells whether in branch, online or over the phone, you have to build a train. Redesigning the workflow coupled with workflow technology is how you get breakthrough efficiency and customer service improvements. Also, good vendor management is more than just gathering due diligence documents once a year. Use business cases to set expectations, negotiate contracts to lower your costs and to hold vendors accountable to achieving the expected benefits.
There are several ways to improve efficiencies. I ll focus on four. Workflow and technology utilization are top of the list for CEOs. I think CEOs recognize they ve tackled the easy stuff (deferring projects, hiring freeze, etc.) and now it s time to turn to the ingrained and hidden inefficiencies by tackling workflow and technology utilization. The other is a program likely driven by the CFO to continually monitor expenses and schedule vendor/contract reviews throughout the year. 10
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The infrastructure tool for process improvement. When coupled with process redesign of New Accounts, Loan Origination and others, it will speed processes, improve efficiency and improve risk management. Think of all the content in your bank. Loan files, account records, signature cards, internal reports, voice mails, email records, customer files such as tax statements, policy manuals, Board reports, expense reports, forms, etc. Now I want you to visualize a world without a single hard copy version of that in your bank. The only pieces of paper you produce is mailed out of the bank or shredded every day. No paper is filed anywhere no file cabinets. Just think about that for a minute..and think about what that could do for efficiency. But what about making notes on my loan files? Electronic sticky notes! What about recording approvals? Do it online! What about retention for IRS or lawsuit? Best records provision covers that. There are banks now that literally have no hard copy files. They are completely paperless. What ECM includes Workflow is really about automating repetitive, manual processes Rules based routing can efficiently distribute loan files to work queues and also prioritize loan ops work in relation to timelines, rate locks and closing dates, also lender can see exactly where their loan is at any time Audit trail Every system and user operation can be audited and you can be alerted to missing documents in files. You can tracking who signed off. Reporting on metrics can report that 87% of all consumer loans were decisioned in less than 10 12
minutes or Sally processed 47 collateral exceptions with an average completion time of 3.6 minutes from in queue to completion. Also with ECM and branch capture, you can eliminate your courier. 12
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Here is a grand goal eliminate all paper in your institution Eliminate data gathering forms key directly into the system. Eliminate GL tickets enter online, record approvals online reduce item processing costs Book entry CD receipts to replace certificates Eliminate CD and IRA checks Provide better rates to automate all payments, cross sell checking account products and deposit the interest into a checking account product, send payments via ACH to another bank Use on line pay/return system; don t circulate reports Autodraftloan payments incent customers to automate Scan all loan files, new account files, paid invoices into your doc mgmt system. Use electronic signature pads, use workflow software with automatic electronic routing 15
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ECM with workflow (and process redesign) is one great solution to address efficiency. Improved efficiency eliminating manual processes, eliminating paper, storage savings, more efficient processes, fewer errors and rework (eg, a client that had a 92% error rate on commercial loan origination process). This is one of those technologies that let you be as efficient as big banks but provide the customization and personalization of a community bank. Faster processes faster turnaround times, quicker responses to customers Hardware includes scanners Goal based process redesign get approvals from 2 days to 10 minutes, reduce post closing exceptions from 40% to 5%, avg customer service response from 15 minutes to 90 seconds 17
Auto routing Multiple people can work on the same document at same time Auto notification of completed tasks, open tasks past a due time Auto re assign Doc tracking Create and manage custom checklists Can send notices when docs are missing or expired Dashboard view of checklist status Uses Loan origination checklists Collateral and financial statement tracking Loan Ops Manager can monitor status and see which processor has the most missing docs Auto distribution Automates scheduling and electronic delivery of one time and recurring communications Delivery can be email, email attachments, pdfs or email notification with link to your website Uses Statements Financial statement requests Employee communication 18
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When we dig in and ask questions about why a certain process is inefficient, the reason will often be because of regulatory or control reasons. The examiner or auditor told me to do it that way. Don t just take that at face value. Ask questions and get to the bottom of what risk they re trying to mitigate. I ve often found that the best solution to their risk concern improves efficiency, improves customer service, and mitigates risk. The auditor or examiner is only focused on risk mitigation, so they aren t the only voice to listen to. A wide range of ways that processes can be improved:
Most common processes we redesign Loan origination, Exception items Set targets Time Non real estate consumer 10 mins, Small, small business loans within 24 hours Quality (Exceptions or errors) How often does an app make it all the way to closing without going back to someone for more info. We worked with a bank that had a 99% error rate on their commercial loans. Meaning only 1 out of 100 made it through the origination process without having to be reworked or sent back for more info. So a 25% error rate was an aggressive target to set for them in the first 18 months. If your error rate is 30%, maybe you can push and shoot for a 5 or 10% rate. Cost Cost per app Simple calculation. Total payroll costs for everyone involved in loan origination. A rough estimate of their time allocation across consumer, commercial and mortgage to come up with total payroll costs for the division. Then divide each of those amounts by the number of applications in each division. That gives you the payroll cost per application. Then add any direct costs such as costs per form or per app from technology or forms vendors. Add all of that up and you have an idea of what your cost per app is. You follow the same process to come up with cost per close to see how expensive all of those apps that don t close are. Risk delinquency rates or charge off rates. Are they appropriate or overly conservative? What s your philosophy? Map out existing process (show sample process maps before and after) Look for opportunities to improve Where are things getting bogged down? Ask lots of why questions why does that doc get sent to two people, streamline and reduce number of steps, speed cycle time, minimize rework and errors, improve controls and compliance with policy without adding inefficiencies, eliminate non value added activities Draw new process a process enabled by technology (example) Policies Automated underwriting Loan authority Define small business vs commercial Role of lending assistants Centralized doc prep?
From all of the workflow projects we do with banks, we ve learned that you can improve every process in your bank. But some have bigger opportunities than others. The top two are your loan origination and new accounts processes. So I d encourage you to start there.
Most of you already have imaged signature cards, but do you have imaged photo IDs New accounts signature pads only paper leaves with the customer. What about electronic signatures after the fact for joint accounts or business accounts? How about opening a new business account at their office or store or work site on an ipad with all forms auto routed back to your bank so debit and credit cards arrive the next day or two Mortgage where workflow really got started auto routes based on urgency (rate locks), notifies borrower or title company or whomever when docs are missing when they re sent in, it auto updates that it s been received and goes into the processor s queue to review ECM can get you a poor man s lockbox imaging solution or positive pay incl web delivery, imaged based positive pay, and auto routing of positive pay suspect items 24
Photos properties from appraisal or videos Videos physical collateral checks (ag?) Collateral and exception tracking automatically pull and checkoff the list Appraisal docs 25
Compliance bake compliance into business processes and workflow and be able to prevent exceptions and/or report on them. did the teller check photo ID or signature card to verify the person is authorized to carry out the transaction. were steps followed, were verifications made, did adverse action letters go out (which letter) Compliance and Audit ECM within compliance owned functions full audit trail of the entire business process rebuild the entire business process incl customer touch points like emails and even voice mails version control email retention
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But it s not just documents Voice mails customer, employees Photos properties from appraisal Videos physical collateral checks Also identify related documents (some systems allow you to tie related documents together). Examples: sig card and drivers license loan app, credit report and TIL disclosure 28
Most banks capture centrally at the end of the process. and there s often a backlog. Defeats the value QC. Especially if you don t have Google like power searching Digitally captures signature and burns it into the document. Could be a form based signature or an actual signature using a signature pad Uses New accounts, including when multiple signatures are required Opening accounts at customer location Onsite cash management agreements Onsite ACH and RDC risk assessments Loan applications HR Insurance enrollments ID scan Captures image and text from drivers licenses, passports, SS cards, green cards, etc. Can auto populate application, CIF, index, etc. Kofax capture Can extract text and data from docs/forms and populate core or other applications Uses Pull the invoice # and populate it into JHA accounts payable Pull insurance carrier info into loan accounting 29
Do you know what your performance measures are now? Do you know what they should be? Process Are your processes streamlined and efficient? Policy Are your policies being enforced consistently? Does your policy provide the proper balance of control, efficiency and speed Technology do you have a series of word docs and excel spreadsheets for credit approval are you entering the same information multiple times a separate loan exception tracking system a bunch of forms for moving files between commercial lenders and the Loan Ops folks Well, it may be time to add workflow to your document management systems to improve efficiency, customer service and risk management. And if you d like to learn more about how Abound helps banks do that, we d be happy to send you information.
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