Looking to streamline a prosaic part of their operations, some big banks are thinking of bringing in vendors to operate their mail rooms.

The banking industry is one of the largest sources of mail in the nation, generating just over five billion letters each year at a cost of $1.5 billion, according to the American Bankers Association.

Despite these hefty figures, the mail room has been of little concern to most bankers.

Mailing operations present few revenue opportunities and thus are usually viewed as a regrettable but necessary byproduct of banking.

Way to Reduce Costs?

However, with bankers looking for new cost-cutting and consolidation frontiers, the mail room is garnering more attention from many banks' operations staffs.

And increasingly, financial institutions are discovering that they can save money and effort by calling in a private company to handle some or all of their mailing.

"For year now, we've been hearing that outsourcing can be a solution to cost overruns in data processing and check processing, and now the same rationale is being applied to mail room operations," said Richard M. Nelson, a vice president of Wachovia Operational Services Corp. in Atlanta.

In recent months, a number of institutions, including Bank South Corp., Atlanta, and Shawmut National Corp., Hartford, Conn., have farmed out their mail rooms to companies such as Pitney Bowes Management Services Inc. and others.

Others Likely to Follow

There are now indications that some of the nation's largest institutions are following suit.

For instance, NationsBank, Charlotte, N.C., is in the process of consolidating its mailing operations, and observers expect a large part of the bank's mail services to be turned over to Pitney Bowes or some other provider sometime this summer.

The reasons for farming out mail services are varied, but typically banks are looking first to reduce costs.

In general, mail room operation, including overhead costs, represent about 3% of a bank's operating expenses.

Investment Required

While a host of discounts are offered by the Postal Service for presorting and printing computer bar codes on outgoing mail, few bankers are prepared to lay out new capital for the equipment necessary to achieve these discounts.

By contracting with vendors who already own cutting-edge mailing equipment, bankers can qualify for postage-rate reductions without investing in new systems.

Representatives from the American Bankers Association's postal committee expect an increasing number of banks to use vendors for their mail services in coming months.

In anticipation of this, the ABA committee is assembling a survey of its member institutions' postal management and cost concerns.

The survey's results are not expected to be made known until next year.

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