By Todd Leonard December 15, 2003 -- In this first of a series, PathForward shares some of the insight it has gained from working with companies in the financial services industry in helping them to identify expensive inefficiencies in document-intensive business processes—and to redesign those processes to take advantage of new operational efficiencies within the framework of an Enterprise Document Management Strategy. In subsequent OnDemandJournal columns, PathForward will explore other key industries and how they have been similarly impacted. The financial services industry has experienced significant change over the last several years. During the economic boom of the late 1990s, the industry was rife with mergers and acquisitions and at the same time faced significant regulatory changes. As the economy cooled down, many financial services organizations, particularly in the banking industry, began to realize that they were losing market share and experiencing declining customer satisfaction levels. Thus, over the last few years, as merger and acquisition activities have slowed down, the industry has turned its attention to optimizing internal operations, reducing costs, and address customer-facing needs to recapture market share and profitability. Another major shift in the industry was the emergence of technology companies offering a full range of online services, including investment, lending services and banking. One of the most notable of these is E*Trade, which started as an online discount brokerage. While the company was formally launched as E*Trade Securities, Incorporated in 1993, the first online trade using the company's technology was actually executed in 1983. The company has added a number of investment options to its menu of services, as well as an online bank and a range of lending services. All of this was born from an idea of Physicist and Inventor Bill Porter, who was frustrated at the brokerage fees he was forced to pay for stock transactions. E*Trade is an example of competitive pressures placed on the banking and financial services industry from a nontraditional competitor that must have seemed to have come out of nowhere. With the economy now beginning to rebound, it appears merger and acquisition activity may begin to heat up once more as evidenced by the recent announcement that Bank of America is acquiring Northeastern banking giant FleetBoston, creating what could be the second-largest banking company in the country. Bank of America, already the third-largest bank in the U.S. as measured by assets (behind Citigroup and J.P. Morgan Chase), also has the country's most extensive branch network, with more than 4,200 locations covering 21 states and the District of Columbia. The FleetBoston acquisition will expand Bank of America's presence in other parts of the world as well, particularly Latin America. Underlying a resurgence of merger and acquisition activity, though, will be a continued focus on operational efficiencies and customer service as banks and other financial services organizations continue to apply the lessons of the past. Financial services is a document-intensive industry that stands to reap significant benefits from optimization of document-related business processes. The document processing needs of the financial services sector include: * Document creation * Data capture, storage, and manipulation * Repeated printing of documents * Document revision and modification based on SEC and other federal and state requirements * Varying levels of customization and personalization Furthermore, customization and personalization are becoming increasingly important as firms strive to develop and nurture one-to-one relationships with their customers, especially with high-potential investors. Deploying a Strategic Approach This document-intensive industry stands to reap significant benefits from the application of document processing expertise. Despite the fact that many business processes have been migrated to digital workflows, the industry still relies heavily on paper and often struggles to bridge the paper-to-digital gap. Additionally, many still operate in organizational silos that make it difficult to easily communicate information from one operational entity to another. As an example, loan processing these days is almost completely digital—witness the ability of organizations such as to process loans via the Web. Yet within a banking environment, information produced during the loan approval process for a specific customer may not be readily accessible to the trust department, who could use it to save time in setting up trusts and managing estate planning activities more efficiently. While there is a wealth of digital information within the confines of the organization, few financial services organizations have implemented an Enterprise Document Management Strategy that allows the capture, storage, retrieval and appropriate sharing of this information across organizational boundaries in a consolidated customer portfolio. For example, in one large banking operation we recently worked with, over 3,700 discrete documents were identified across 11 lines of business, as depicted in the figure below. Line Items Analyzed By deploying a stringent review and analysis process, the number of discrete documents in use in this banking organization was reduced by 25%—and in some lines of business, reductions approaching 50% were achieved, as shown in the table below. Document Count Before and After Analysis But reduction in the total number of documents, while important, just barely begins to scratch the surface in terms of potential savings opportunities we were able to uncover for this institution. In total, over $4.1 million in hard dollar savings potential was identified through elimination, consolidation and digitization of documents, as well as through the optimization of specifications for documents deemed appropriate to remain in printed form. Setting New Standards for Document Workflow In the highly competitive financial services sector, process optimization is key to continued profitability. Migrating document processes from paper-based to electronic workflow and elimination of obsolete documents are clearly important elements in achieving this process optimization, but equally important, as demonstrated by our experience with the large national banking entity referenced earlier, is a thorough analysis of documents and their related business processes across all lines of business. The key here is to develop a clearly defined and well-documented process designed to meet the institution's business objectives. In the case referenced above, not only were we able to deliver over $4 million in hard dollar savings, over $2 million of those savings were achieved within the first six months—an almost unheard-of result. And moving forward, this banking firm will be able to build on this base of success to further reduce costs, streamline processes and drive additional efficiencies. We believe the results demonstrated here set new precedents and standards in developing industry-wide best practices, and have established a new benchmark for operational efficiency within the banking industry. For those of us in the document processing industry, the financial services sector presents tremendous business opportunity. An Enterprise Document Management Strategy developed and implemented using an effective analytic methodology will enable more intelligent and automated workflows for document-driven communications in the financial services industry, and will improve or eliminate problems in document processes by providing one or more of the following: * Lower production and/or distribution costs for creating documents * More clearly targeted and effective information sharing and distribution * Reduction of waste, including a potential reduction in the total amount of print produced * Fewer manual tasks and errors in data transfer/entry * Efficient/automated deployment of new or enhanced capabilities * Improved customer focus through better access to knowledge being generated within the organization Executives in the financial services industry are eager to find new ways to achieve operational efficiencies. As document processing professionals, we have a great story to share.