The entire banking industry is in a state of tectonic flux, the kind of industry reset that probably hasn’t been seen since the Great Depression. These challenges – including rising interest rates, falling or stagnant net income, and increasing regulatory compliance requirements – combine to create unprecedented challenges for senior management and boards.
Because banking institutions are largely unable to control interest rate-related revenue issues, they must focus on issues they can control: labor costs, facility management, IT and marketing, to name only the most important. This requires a commitment to optimizing processes, which in turn requires collecting and analyzing relevant information.
The main source of this information gathering is, of course, documents. Documents form the very basis of financial transactions and money flows, which is why banking regulators place such emphasis on their order.
The problem is that the task of gathering documents, extracting valuable information and implementing them is an intensive manual effort requiring the attention of a dwindling resource: bank employees. And for organizations with the right resources, generating insights means searching for information buried deep in a sea of unstructured documents scattered throughout the enterprise.
So how do you turn on the tap of a sustained, deep flow of information for data-driven insights? There are two parts to the answer: planning and technology.
Start by setting goals: What is the bank trying to accomplish and what does it need to know to be successful? Does it seek to gain a 360 degree view of the customer and improve cross-selling and up-selling ability? Perhaps the bank wants to facilitate partnerships and integrations to enable faster expansion of service offerings. Or maybe he just wants to make the next audit less stressful. Once the bank knows what it wants to achieve, it can determine the types of information it needs to collect and establish processes and systems to make that information actionable.
Next, put the automation to work: Banks and credit unions will become more data-driven not by collecting more data, but by leveraging the data trapped in the mountains of documents they already have. At the heart of any successful data-driven organization is an intelligent automation service layer. This automation layer performs a consistent and reliable set of actions for all documents: acceptance, classification, extraction of specific data sought, and document and data flow downstream to any process or system that needs it.
For most FIs, simply going this far would bring a source of benefits in terms of more efficient customer service, enabling more direct processing, relieving employees of most mundane tasks, and improving compliance.
However, to go that far would be a missed opportunity. Now that the information is integrated into the institution’s analytical systems, it is available for analysis and can be used to track a variety of metrics such as cost per origination, average time to close loan transactions, loan transaction rates, error configuring new accounts, etc.
Keep in mind that transitioning to a data-driven approach involves more than a one-time investment in technology. The entire organization must adopt a data-driven mindset and commit to collecting what is needed, performing the analysis, and maintaining the discipline to modify models as goals change .
Coming back to compliance, the final revisions to Section 1071 of the Dodd-Frank Act are receiving increasing attention. Most community banks and credit unions are concerned that new requirements that involve document collection and retention will drive up underwriting costs and force even smaller institutions out of the market.
Implementing the intelligent automation services described above can put an institution in a much better position to not only implement policies and procedures that improve compliance, but also provide a much better reporting platform. stronger to prove compliance.
The road ahead presents unprecedented challenges in our industry, and old rules are quickly becoming obsolete. Banks that become data-driven institutions may be able to innovate while doing more with less. This can be accomplished by automating day-to-day document processes and leveraging more information.
Learn how financial services organizations can use data to build strong relationships and improve other business opportunities in the BAI Executive Report, “The Power of Data: How Banks and Credit Unions Can Harness It.”