Reliance Bank can't do without the services of its hired loan auditors. But it is not keen on having them fly in and stick around its Athens, Ala., offices for several days four times a year.
"You have the expense of flying them in, they're there a week, they have hotels, meals, etc. And that adds up," said David Kinchler, chief executive of the $150 million-asset Reliance, which uses an expanding suite of document management software to allow three of its four yearly audits to be done remotely, via a mailed disc containing images of thousands of internal loan documents. Shifting the work off-site saves days of time and thousands of dollars for each audit (the bank still prefers to keep one of its yearly audits on-site).
Until recently Reliance was one of a handful of community banks to embrace automated document management. That's likely to change as compliance, credit risk, security, customer retention and software price reductions align in 2010 to boost adoption among smaller banks, and financial companies from all segments could use the technology to improve financial reporting and access controls.
Reliance Bank is also expanding its deployment of document management technology from Cabinet NG Inc., adding several enhancements, such as a feature that allows quicker filing of outside documents; bulk filing and the creation of a "frequently used" filing cabinet; a "super search" desktop application for that allows people to locate information in the flagship CNG-SAFE document management product by entering a word or number into a search field; and a "mind reader" feature that performs a search using data from the system's clipboard.
Reliance uses CNG-SAFE to make images of loan documents, which can be then downloaded to a disc for easy, centralized access — avoiding the manual labor and mistakes inherent in managing paper.
"The paperwork becomes cumbersome to keep up with," Kinchler said. In the past, "documents would get shredded that didn't need to get shredded. If we have a paperless file, even if a document got shredded, it wouldn't be a problem."
"Electronic document management systems have been around for years. They have been fairly expensive, but price points are coming down and the reason to use the systems has been going up," said Rod Nelsestuen, a research director for TowerGroup Inc.
Document management "as a service" will likely emerge in the near future, bring costs down even more and providing additional enticement for adoption, since banks will be billed as they use the technology, Nelsestuen said.
Despite the benefits, community banks have generally shied away from document automation. "For small banks, it's usually because of the up-front investment, or they can't see the benefits because they're small and feel they already have their arms around the document challenge," said Sheri McLeish, an analyst for Forrester Research Inc., who noted that providers include Hyland Software Inc., EMC Corp., Oracle Corp. and International Business Machines Corp. "But usually the ROI for document management automation is pretty strong," she said.
The reduction in paper use is also significant. "If you have to pull 25 loan files for an audit, you have to pull all of the guarantors and all of the information about them. And that may be stored somewhere else at the bank," said Brian Peckinpaugh, the financial services manager for Hyland Software, which offers document management and enterprise content management tools such as ONBase.
Hyland reports increased activity from its 4,000 financial clients (out of 9,000 total customers) as banks of all sizes seek to leverage document management automation and the use of core platforms to improve loan monitoring and financial performance reporting.
There are other uses pertinent to auditing, such as the ability to create a trail of when documents are used. "You have security and revision control, since there's a time stamp on the documents," said Michelle Huff, a director of product management for Oracle, which offers document management software though its Oracle Universal Content Management platform.
As an innovation, automated document management is not groundbreaking, but the investment burden for banks is shrinking, and the scanners used to make images of documents have become commoditized and downright cheap. Given that, and the increasing importance of audits, reporting and other controls in the current banking environment, the case for document automation is stronger.