The answer to COVID-imposed bans, restrictions, and limitations has been a healthy and steady adoption of digital tools and services, from Zoom calls to Peloton workouts. Digital platforms have become the only way many of us work, learn and bank. In fact, banking’s digital adoption has increased 35-50%, while branch traffic has dropped by more than 30%. With the arrival of the pandemic, there have been widespread reports about how it has accelerated digital transformation. Given these factors, why is paperless adoption and transformation not deployed throughout financial services?
Is now the time to accelerate paperless transformation efforts? We believe it is. The value proposition for implementing paperless solutions is irrefutable. Aside from the obvious – yet significant – cost reduction tied to removing physical paper from a bank’s end-to-end processes, there are many associated benefits that drive a compelling business case:
Operational efficiencies, productivity, and cost reduction address the process-related benefits. Automation and digitization help reduce end-to-end timelines and unlock productivity efficiencies. It results in reduced reliance on manual processes, fewer errors, and less rework. Paper truncation also means lower transportation and courier costs, and significant savings with back-office operations and document storage.
An improved user experience – both from a customer and employee perspective – is also a sizable component of a paperless transformation business case. Other industries have raised the bar with seamless, intuitive, and valuable user experiences. Fintechs are applying similar pressures in the banking space. Document digitization removes friction from the process, allows real-time and cross-channel availability of information, speeds up decision making and resolution, and drastically improves a bank’s ability to provide enhanced products and services.
Enhanced security and compliance are critical considerations, given surges in fraud that are an unfortunate by-product of increased digital adoption (a 13% increase according to recent studies).
And, as regulators apply more scrutiny, especially when it comes to consumer protection, digital processing with proper security layers and fraud filters, will only enhance resiliency and enable efficient regulatory reporting and compliance. Furthermore, a solid digital document management framework can provide secure record retention, better access control, and an improved audit trail.
Business continuity, disaster recovery capabilities, and organizational flexibility are also byproducts of paperless transformations. Enhanced resilience against environmental factors, such as fires and floods, or the inability to physically access records are a big plus. Expanded options to relocate, consolidate, or outsource operations provide that flexibility, and ability to respond to next-generation banking demands.
Despite the overwhelming benefits, and the COVID-induced digital adoption “shot in the arm,” most banks still rely on paper across many of their products and services. Why? They have yet to crack the code on major barriers associated with scalability, user adoption, and enterprise governance.
First, the lack of an enterprise-level paperless strategy, a framework that aligns the relevant stakeholders, governance, and tactical approach may hinder even the best intended efforts. These gaps contribute to the inability to properly fund or prioritize efforts before they can be considered. If a product owner presents a business case for document digitization, they may not have enough volume to justify their business case; however, if the bank considers developing the associated capability, which can subsequently be leveraged across multiple products and lines of business, the compounded business case is more feasible.
Second, the absence of a strong framework and alignment between key stakeholders (business, technology, operations, legal, compliance, etc.) often leads to developing solutions that achieve less than optimal benefits. Proper governance ensures paperless transformation success and enables scalability across the organization.
Along the same lines, organizational structure and an associated change management framework must support the paperless strategy. Roles, responsibilities, leadership, and the centralization of functions to drive adoption are critical, as is the synchronization (especially between business and technology) and prioritization of efforts across the bank’s broader initiatives and strategies.
User adoption presents another set of challenges. Psychologically, physical paper may provide reassurance when signing or executing legal-binding documents. In a typical electronic environment, close to 40% of customers still prefer paper, if given the option. However, mass digital adoption is required to achieve full paperless benefits. To that end, banks need to employ a digital-first position when marketing, positioning products, and communicating such benefits. Start by discussing user adoption internally with employees. Training, communication, increased awareness and engagement, and potential incentives aimed at increased paperless adoption are helpful techniques to drive a paperless strategy.
Last, scalability considerations must incorporate multiple factors that gradually drive success. This typically begins with driving increased adoption of existing capabilities, accelerating adoption of software tools already in use (across a broader product set), and ultimately across channels to generate a seamless experience for the user.
Beyond the immediate benefits of going paperless, your financial institution will be continuing its digital transformation journey and ultimately driving business forward.
(The article is authored by Adrian Ungureanu, Managing Principal, CAPCO, Greg Mauro, Senior Consultant, CAPCO and Brandon Schwartz, Management Consultant, CAPCO and the views expressed in this article are their own)