Paperless Transformation

Next steps for maximizing benefits across the enterprise

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Banks continue to seek ways to reduce their reliance on paper-driven processes, but with paper still very prevalent and profitability an ongoing challenge, are they moving far or fast enough? Capco sees opportunities for further paper reductions that can lead to greater operational efficiency, reduced costs and increased customer satisfaction.

In recent years, the elimination of labor- intensive, paper-driven processes has been a major priority for the financial services industry. And the industry has made great strides in this direction, from Check 21 to paperless statements and online/mobile banking.

Yet banks remain highly reliant on the physical flow of paper for customer-facing activities, and transporting paper across the enterprise constitutes a major cost. Gaining the benefits of further paper reductions will require banks to think beyond the individual initiatives they may have undertaken, such as check digitization or electronic signatures, and adopt a unified, enterprise-wide view of paper elimination. This Capco white paper discusses the steps banks can take to achieve greater levels of paperless transformation.

Stages of paperless transformation

Figure 1 represents the various stages of paperless transformation. Today, few banks are far enough along this continuum or have taken the necessary steps to achieve significant paperless transformation.

Typically, the journey begins with low-investment initiatives, such as determining whether processes can be redesigned or if paper needs to be generated in the first place. Other steps include changing employee and customer attitudes and behavior— for example, asking customers if they need a receipt or incenting customers to use paperless channels such as online, mobile or phone banking.

Paperless Transformation

Next steps for maximizing benefits across the enterprise

By Marcia Wakeman, Partner, Banking, Capco; Adrian Ungureanu, Principal Consultant, Banking, Capco; and Tony Tummillo, Senior Consultant, Banking, Capco

The journey then progresses into implementing technical solutions aimed at eliminating the generation and routing of paper—for example, e-signature, document imaging and workflow initiatives. This stage involves introducing or adapting new technologies, as well as development efforts required to customize these technologies. It typically requires the greatest amount of effort, but it’s where the most significant benefits can be achieved.

The next stage is where enterprise alignment occurs. Here, banks seek to align various paperless capabilities and communities of practice into a unified strategy aimed at reducing spending, expanding expertise and achieving even greater benefits. It should go without saying that

In recent years, the elimination of labor-intensive, paper-driven processes has been a major priority for the financial services industry.

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Implement solutions

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developing this unified strategy earlier in the process would maximize the solutions investment payoff described above.

When banks achieve a significant degree of transformation, they tend to assume leadership in the industry and become advocates for changes in banking laws and regulations to accelerate the adoption of paperless solutions.

The value of paperless transformation

There are several main categories of benefits that banks can achieve by taking a broader approach to paperless processing:

Operational efficiency, productivity and cost reduction: Reduced reliance on manual processes, fewer errors

and removal of bottlenecks; faster decision making; and less expense for transportation, back-office operations and document storage.

Improved knowledge management: Documents in electronic form can be searched and shared more easily and extensively across all customer-facing channels and back-office support functions.

Greater compliance and accountability: Secure record retention; better access control and data protection; improved audit processes; increased audit frequency by streamlining signoffs and reviews; and a more thorough and accessible audit trail.

Along with these main benefits, a well-executed paperless transformation can also lead to a series of secondary benefits:

Lower real estate requirements and environmental costs: Reduced need for physical storage facilities

and reproduction resources, along with the related reduced costs and environmental footprint.

Enhanced customer service: Cross-channel availability of informa- tion helps improve the overall customer experience by accelerating response time and ability to provide enhanced services.

Improved business continuity and disaster recovery: Enhanced resilience and response to incidents such as floods and fire by eliminating the environmental risks associated with paper.

Organizational flexibility: Expanded options to relocate, consolidate or outsource operations and respond to next-generation banking demands.

Figure 1. Stages of paperless transformation

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Candidates for paperless transformation

Any process that is reliant on the physical routing of paper is a candidate for paperless transformation, including:

• Depositaccountfulfillmentandmaintenance

• Mortgage,consumer,commercialandsmallbusinesslendingoperations

• Treasurymanagementactivities

• Tradefinanceoperations

Barriers to paperless transformation

Several barriers can hinder most banks’ efforts to address the paperless challenge, making what might seem to be a trivial undertaking a significant challenge.

Many times, the lack of an enterprise-wide paperless strategy and approach can result in the failure to gain the necessary support to fund paperless solutions. Perhaps worse, the absence of such a strategy often leads to development of solutions that achieve less than optimal benefits. Taking a broader stance ensures that the shared benefits that exist across the enterprise are realized.

The disparate nature of bank operations makes it difficult to understand the true costs and problems inherent in paper-driven processes. For example, a bank may only elect to image documents in the back office and ignore the benefits that could be achieved by capturing these images at the point of origination.

Legal issues can also create barriers to paperless transformation. Litigation, claims and loan recourse

efforts have historically been reliant on paper documents, making it difficult to achieve greater degrees of paperless transformation. While the industry and applicable laws are supportive of paperless initiatives, banks are sometimes reluctant to eliminate paper.

User adoption presents another barrier. There is something very psychologically reassuring when it comes to paper. This is especially true when it comes to signing or executing documents. Despite the implementation of electronic signature pads that emulate the act of an ink signature, people are still struggling with the transition away from paper. In a typical electronic environment, 20 percent of customers would still prefer paper if given the option.

Another barrier—around information management and taxonomy—emerges as banks achieve greater degrees of paperless transformation and seek to make unstructured data more actionable. Such efforts are extremely complex and require a great deal of collaboration to be successful. Garnering the appropriate resources and executing the appropriate strategy are critical success factors that shouldn’t be ignored.

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The holistic approach to paperless transformation

Paperless transformation requires more than changing processes and implementing enabling technologies. Banks can take additional steps to achieve a greater degree of paperless transformation.

Adopt a holistic or enterprise view: A successful approach to paperless transformation—as illustrated in Figure 2—ensures all aspects related to operations, transportation, and retention or disposition are addressed. The investment required and the broad reach the solution will have throughout the organization make it important that the effort is driven at the enterprise level.

Align paperless capabilities: Significant transformation requires alignment of paperless capabilities and communities of practice into a unified paperless strategy. This alignment allows banks to leverage their investment in paperless solutions and related expertise.

Understand the true cost of paper: Banks typically allocate costs to either

a front-end or back-office function without considering the costs incurred elsewhere in the enterprise. An end-to-end cost-to-serve analysis of critical processes will help reveal the true overall cost of a piece of paper.

Effectively plan and manage the transformation: What are the gaps that must be addressed? How does a bank in the middle of the paperless transformation continuum move up and to the right to the area of maximum benefit? Is it a six-month or two-year effort? What are the have-to-haves and nice-to-haves? What is the timeline? All are critical questions that must be addressed along the multiple dimensions of people, process, culture and technology.

Case studies in transformation

The value of implementing paperless processes can be seen in the experience and benefits achieved by several major banks Capco has worked with:

• Anaverageof$3–5million/yearsavings in courier costs, based on bank size and number of branches

Figure 2. A holistic paperless transformation solution

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• 20–40percentpaperreduction in sales and customer/account setup processes

• 15–20percentreductionin paper generated by maintenance/inquiry tasks

• 10–15percentreductionintransactions-related paper

• 15–20percentlesspaperincustomer communication

• 25–35percentlesspaperrequired to support internal processes (operations, audit, compliance, etc.)

• Minimaltechnologyinvestmentrealized by leveraging other equipment or licenses across the enterprise

• Highadoptionofe-signaturecapabilities (more than 80 percent) across a series of customer-facing sales and service processes

• Significantefficiencyimprovements,resultingin50percentimprovementincross-sellingand25percentimprovement in back-office processing time

• Reducedriskanderrorrates (byupto40percent)throughelectronifying manual paper processes

• Increasedcustomersatisfaction and customer referral rates

• Platformthatcanbeleveraged for increased usage of data typically buried in forms

Despite the barriers highlighted earlier, achieving greater degrees of paperless transformation can offer a wide range of benefits to banks and their customers. The approach requires engagement at the enterprise level, but with a well-executed strategy, banks can lower costs, improve customer satisfaction, become better positioned for “next-gen” products and offerings, and ultimately enhance shareholder value.

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Marcia Wakeman is a partner at Capco in the Banking practice. Her focus is in sales and service processes and the supporting core applications. Marcia has more than 18 years of industry and consulting experience. She is a business architect who has helped clients design multichannel, paperless, end-to-end solutions enabling enhanced customer experience, revenue generation and operational efficiencies. Marcia has led numerous business andtechnologytransformationinitiativesforthetop15financialinstitutions,including implementing branch transformation, business process manage-ment, call center and e-commerce solutions. Prior to joining Capco, Marcia spent nearly 10 years with a global management and technology consulting

firm. She also held various roles at Pega, Fidelity Information Services and Citizens Bank.Marcia.Wakeman@capco.com

Adrian Ungureanu is a principal consultant in Capco’s Banking practice, specializing in businessprocessre-engineeringandtechnologytransformation.Hehasmorethan15years of industry experience, particularly in front- and back-office operations, items processing, and image capture. Adrian has focused primarily on strategy and transformational initiatives, with a keen eye toward improving operational efficiencies, increasing profits and leveraging new technologies, while identifying and mitigating risks. Prior to Capco, he held various positions withinthefinancialservicespracticeataBig4consultingorganizationandWachoviaBank. Adrian.Ungureanu@capco.com

Tony Tummillo is a senior consultant at Capco in the Banking practice. Tony has extensive experience in developing, implementing and managing enterprise content management and document imaging solutions. Additionally, Tony is experienced with records management policy and records retention schedule development. Prior to joining Capco, Tony spent more than 20 years in the financial services industry, where he held a variety of positions in banking operations and project/program management. Anthony.Tummillo@capco.com

About CapcoCapco is a global business and technology consultancy dedicated solely to the financial services industry. We work in this sector only. We recognize and understand the opportunities and the challenges our clients face. We apply focus, insight and determination to consulting, technology and transformation. We overcome complexity. We remove obstacles. We help our clients realize their potential for increasing success. The value we create, the insights we contribute and the skills of our people mean we are more than consultants. We are a true participant in the industry. Together with our clients we are forming the future of finance. We serve our clients from offices in leading financial centers across North America and Europe.

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