In a mature and paper-intensive business like banking, the prospect of going paperless can be overwhelming. Where to begin? How fast to proceed? And what about all those millions of records that already exist in paper form?
For the past decade industry experts have been loudly proclaiming the death of bank branches and exploring both the benefits and the harmful side effects of the rapidly reducing footprint. Banks are looking to consolidate and close branches faster than ever, but in the interim branches are a fact of today’s landscape.
The paper problem
Maintaining a large branch footprint poses an operational headache, mainly due to paper-based records. Paper records created, used, and stored in the branch footprint pose significant cost and risk to the bank. There are six key pain points that hinder paper-based branch operations:
- Audit and compliance. Sensitive customer and operational files are stored with limited visibility, governance, or access. Banks may face fines for failure to quickly produce documentation during regulator audits, or for failure to demonstrate proper governance and retention of records with customer PII.
- Customer experience. Banks cannot easily access customer files organised in a 360-degree view to provide timely service. Tellers are delayed in their ability to service customers as they must sort through physical files or request new copies from the customer.
- Manual processing. Branch staff are occupied with processing incoming paper files, instead of servicing customers. The average branch teller spends several hours per week scanning and uploading customer files or performing routine maintenance on file rooms. With each teller scanning and manually indexing, this increases risk of data entry error.
- Real estate. These files occupy significant physical footprints in expensive branch locations. As of 2018, the average new bank branch is around 750m2. Banks invest an average of £1.6-£3.2 million to open a new branch, and valuable real estate can be taken up by filing cabinets and paper storage instead of customer service centers.
- M&A delays. As banks consolidate, sell, or close branches, dealing with the transfer of files is a costly procedure. Each time a bank sells, closes, or takes over a branch, it must pay to have the files sorted through and transferred.
- Business resilience/disaster recovery. As natural disasters are becoming more commonplace branches are vulnerable to closures and the records within are at risk. During natural disasters or regional disruptions and conflicts, many bank branches are forced to close, cutting them off from all records located in the branch footprint.
The scope of paper
There are three key categories of paper records that branches must contend with:
- New transactional documents. Customers continue to bank in-person and on paper, especially for transactions requiring signatures. Even if physical documents are digitised by tellers upon receipt, the physical copies might still be retained.
- Operational documents. Branches retain operational records onsite and often have dedicated offsite operational centres for manually processing application documents. Branch staff create printouts, interoffice mail, and unnecessary copies of customer documents.
- Legacy customer records. Branches may contain records spanning a customer’s decades-long relationship with the bank, including commingled files from their family. Banks require branches to periodically purge records for closed accounts, but this is difficult to monitor and enforce.
If it were easy, we would have fixed it already
Why haven’t banks tackled this yet and become 100% paperless? What makes this effort uniquely challenging?
- High uncertainty. Many banks do not maintain a current inventory of the volume or contents of paper records stored in each branch. Many branches have undergone multiple acquisitions. It can be difficult to determine what to do with the files. Disposition can occur at box, file, or document level and clear business rules are needed for the “retain vs. destroy” decisions. Additionally, banks are often required to maintain original paper copies for regulatory purposes. Many banks are not sure about where to start, or how to structure the program in a way that minimises disruptions to banking operations and service to daily customers.
- High volume. Banks might have hundreds of locations, and each branch is different. It might be a new branch, with a digital-first mindset, or it could be an acquired branch with decades of records. The typical bank branch could store over 100 unique document types, each containing unique data points and taxonomies and each with a unique retention period based on regulations. Hybrid environments with digital repositories can exacerbate the challenges; many banks have multiple digital repositories (ECM or CSP). This adds a larger base of digital copies to be reviewed and reconciled against physical copies.
- High complexity. Files are often commingled (e.g., open and closed accounts, multiple customer documents in a single file). This means that most records have to be reviewed at the document-level. What counts as a “customer”? Once the documents are processed, banks don’t often agree internally on how to index and tag the documents so they align to a Unique Customer ID. Many banks have gone through several rounds of acquisitions, divestitures, or consolidation, changing the customer base each time.
Where to begin
Step 1. Start by determining your objectives. What are the biggest pain points that can be resolved or opportunities realised by digitisation? These will vary by bank and branch. For example, if improving customer experience is a priority, then adopting customer-facing technologies such as mobile banking, digital contracts, and self-service money management can have a significant and visible impact. If internal efficiency is a problem, digitising documents and moving to automated and parallel workflows can yield big productivity gains.
Step 2. Assess your current state. How much paper is used, created, or stored in the branches? How many filing cabinets are taking up space in each branch? Are the basements full of legacy customer records (and is there any flooding)? Conduct a rapid analysis of the extent of the problem, and determine if there are any gaps; many banks starting this exercise do not know “what’s in the box” or which customer records are stored where.
Step 3. Look for quick wins. For example, printing and mailing statements is expensive and time-consuming. From cost-reduction to environmental benefits to faster retrieval, there are many reasons why customers should be encouraged to go paperless both for their own convenience and the bank’s.
Avoid the manual trap
Many banks try to tackle this using their tellers, wasting a precious customer-service resource on manual sorting of paper files. Instead, machine learning can spot such elements as names, customer ID numbers, cheque amounts, and addresses. They can automatically index records based on any criteria the bank specifies. This enables legacy paper documents to be merged with online records in a complete digital profile that can be queried, searched, and integrated with automated workflows. To leverage machine learning for automated indexing, many banks scan their legacy documents instead of performing this analysis by sight alone.