Has it really only been a couple of years since banks were storming new markets, winning new customers and generating record growth and profits? The current environment, already marked by 64 bank failures in 2009, has created a sense of urgency for the survivors to generate efficiencies in their operations and preserve capital. With as many as 1,000 to 1,500 additional banks at risk of failure, the stakes could not be higher.
But the need to pursue real, foundational change is not only about survival. With proper vision and insight, the same steps that financial institutions pursue today to help secure their own survival may be the very same things that lay the groundwork for a more prosperous tomorrow.
Forward-thinking financial institutions will invest — carefully — in products and services that will allow them to retain customers and build market share. In most institutions these goals can be most readily accomplished by studying two legacy functions: payments processing and lending. These two areas are rife with opportunities to improve efficiencies, enhance visibility, mitigate risk and grow revenue. Revolutionizing these functions could be the most effective way for a financial institution to differentiate itself and stay ahead of the competition.
In a recent survey of financial institutions with assets greater than $1 billion, Fiserv found that 77% of banks with a remote deposit capture strategy experienced a higher rate of deposit growth than those without a strategy. The findings also indicate that RDC banks manage almost four times the deposit volumes of non-RDC banks.
This research suggests that proactive financial institutions recognize that depositary cost efficiencies will increase capital and foster retention and growth of their client base.
Therefore, many are taking advantage of Check 21-compliant imaging technologies, such as RDC, that have introduced image capture to nonbank sites.
By offering these technologies, banks can now generate more revenue by cultivating a steady flow of deposit business through the Web from the home, office or ATM. Branches can now process these deposits in-house, resulting in a number of dramatic improvements to operational processes and workflows.
Many financial institutions, especially mortgage lenders, are also still experiencing waves of mortgage resets. Lenders that adopted business processes which focus on home retention are benefiting from restructuring loans to avoid delinquency and foreclosure.
By leveraging analytic tools that project which borrowers are headed toward delinquency, lenders can develop loss-mitigation campaigns to help keep borrowers in their homes.
Additionally, with record-low interest rates, financial institutions are benefiting from new technologies that have generated similar efficiencies for getting more loans on the books. Electronic documents and signatures are phasing out paper documents and ink signatures.
Known as e-lending, this phenomenon is helping financial institutions create value and reduce costs for both themselves and their corporate customers by increasing efficiency and inhibiting risk exposure.
With U.S.-based financial institutions deriving 30% to 40% of their revenue from payments, the demand for greater payment flexibility and choice will continue. But relying on an aging infrastructure to manage the growing quantity and scope of payments can hamper efficiencies.
In order to obtain an enterprise-wide view of data about all payment activity and best determine how to increase efficiencies and reduce costs, financial institutions are better served by combining systems into a single platform.
With a unified payments strategy, banks and their customers experience faster and easier access to consolidated payment information from multiple payment systems, including check and ACH, which offer the most real and immediate opportunities for convergence.
Risk and opportunity can be better managed, since payment trends would be assessed with increased agility and banks could instantaneously address the urgent challenges of improving efficiency, mitigating risk and growing revenue.
Similarly, a unified approach toward lending solutions can also be economical. For example, a common platform for lending including mortgage and auto loans can reduce costs, streamline staffing and training needs and make lenders more versatile in an ever-changing market.
Managing loan modifications and ACH processing are two areas in which financial institutions can benefit from outsourcing. Outsourcing can effectively reduce capital expenditures, manage staff and training costs and more efficiently handle peak-time staffing needs.
Surges in delinquencies have strained the resources of financial institutions already experiencing lower production volumes and tighter operating margins.
If lenders lack the means to contact at-risk borrowers in their portfolios, third-party providers are available for assistance with loan workouts. For lenders that don't have the staffing volumes or expertise to get in front of loans before they go bad, outsourcing may be the answer.
In the rapidly evolving payments landscape, the lack of expert resources and tools results not only in the loss of a competitive edge, but also an inability to fully exploit opportunities. Regulatory pressures continue to grow, with tighter controls anticipated on risk and fraud management.
Because of these complexities, processing ACH and modifying loans now involves a unique skill set in terms of training, staffing, information systems and analytical and reporting tools. Outsourcing such tasks enables banks to focus on job completion without incurring the additional costs of adding staff.
The banks that truly move now to enhance and unify their technology infrastructure and adopt newer, more efficient technologies will be best prepared to survive current turmoil and excel in better economic times.