SCOTTSDALE, Ariz.-One analyst is offering a Top 10 for 2010 List of cost savings and efficiency opportunities for credit unions to implement in the new year.
Terence Roche, principal for Cornerstone Advisors, told Credit Union Journal that in developing his list he sought to avoid the "big picture or theoretical advice that is difficult to execute in real life." Instead, said Roche, "It had to be measurable in some specific way. Efficiency has improved over the last 15 years, but damage to capital and the threat of regulatory pressure requires stronger earnings. Asset growth will be slower in the future, and credit losses could remain severe into early 2011. It is also important to note regulatory and technology requirements have increased fixed costs of operation."
To address these and other challenges facing CUs, Roche compiled this list below.
1) Commercial Loans. This item may require an investment in technology, but Roche said there is a good ROI on the technology. He recommends imaging documents from the first point of contact, which makes every step from processing to closing flow more quickly and cost-effectively.
2) Debit, EFT and Bill Payment Contracts. Commodity pricing has made significant reductions in debit charges, Roche observed. For Internet banking, per-account pricing has dropped dramatically. Bill payment has gone to flat fee or per-payment, but not both. As a result, "reductions of 20% or 30% are not uncommon," he said. "A discount on vendor contracts is available for those who negotiate. Even if there is one year left on a contract, 'down and out' extensions are common. Offer to extend for one year in return for a reduction."
3) Use Flex Employees. Swap one full-time teller for a part-timer. Roche said teller transaction analysis systems still show a high degree of peak hours and dead time. "Most financial institutions have 30% of teller staff in part-time or prime time slots."
4) Electronic Statements. E-statements should be going to everyone who has access, said Roche, noting opt-in initiatives have moved more than 50% of customers/ members to e-statements. "Opt-out efforts, tied to a potential fee take that to 80% to 90%."
5) Online Loan Applications. Set a goal to double acceptance of online loan applications. Roche said the average is 10% to 20%, while high-performers approach 40%. "Taking applications online improves productivity of originators, processors and closers."
6) Weed Out Low-Performing Loan Relationships. According to Roche, the top 10% of loan relationships account for 30% of dollars and relationships, while the bottom 10% supplies very little.
7) Check For Inappropriate COLA Increases. Examine every vendor contract to determine if cost-of-living allowances were applied correctly. Roche said some contracts don't allow a Year One increase, and some ancillary systems may not be subject to the same increase as the main component.
8) Automate More Calls. The IVR, or interactive voice response, should be "reinvigorated" to automate more incoming telephone calls. Roche said up to 20% of calls could have been handled by an IVR, but some people find reaching an employee extension too difficult so they choose "operator." Such calls are "not a sales opportunity."
9) Weed Out Low-Profit Bill-Payers. The typical bill pay account for each customer/member of a bank/credit union costs the bank/CU $3 to $5 per month. Roche said if an account holder does not give debit revenue or other relationships in return, that low-profit account is not good for the FI.
10) Examine Employee Capacity. At many branches only one or two people are needed to handle transactions, but four or five are required to cover vacations, lunches, meetings, etc. "This means most can't staff down. But if the phone system allows, have small branches handle overflow calls from the call center. Financial institutions can pick up savings in the back office."
