How Operations Cost Banks Time, Money and Customers

When it comes to improving operational efficiency, financial institutions’ own operations may be holding them back.

Banks of all sizes have improved their operational efficiency, but their transformation has been slowed by weak technologies, embedded behaviors and a lack of management attention. The most meaningful opportunities for banks to boost their operational efficiency can be achieved by streamlining routines that cross multiple departments, particularly branches, call centers, deposit operations and loan servicing departments. By examining cross-functional opportunities, management can achieve meaningful cost savings and higher productivity while strengthening customer service.

Retail branch operations
Management can take several steps to drive efficiency and lower operating costs in the retail distribution channel. One way is by evaluating and closing low-performing offices with limited upside market potential or locations that are too close to other offices.

Management also can reconfigure roles, duties and staff within physical branches by combining teller and platform roles to increase operating flexibility. Teller transactions have fallen substantially over the past decade as digital transactions increased, but customers still expect access to fast and effective human services when they need it.

Inbound calls is another task that can contribute to inefficiencies and poor service. Sending general inbound calls to a call center allows branch personnel to focus on walk-ins, existing customers who have direct dial numbers and outbound call programs. However, weak contact management systems can contribute to an inability to track and monitor inbound call resolution between call centers and support departments.

A growing number of banks are fully automating new deposit account opening, taking advantage of electronic forms and signature features now available with most core and retail platforms. Another area ripe for adaptation is automating wire transfer processing, direct from the retail banking system to the wire processing system.

Executives should especially consider automating services that enhance staff productivity, freeing up branch staff to make outbound calls and improve the face-to-face experience with walk-in customers.

Deposit operations
Banks can make similar changes in the deposit operations department, like routing inbound calls to a call center to lessen interruptions for back-office operational routines. Additionally, banks can use an automated overdraft system with a pre-established criteria to pay or return specific items, rather relying on staff for case-by-case review and decision making.

Some institutions give branch personnel greater autonomy over deposit account processing. For example, management could authorize retail or call center staff to perform transactions and maintenance without filling out forms to send to operations for review. They can also automate internal controls over such activities. Larger banks may find that automating the matching of general ledger activity to activity in the core can be a significant time saver in account reconciliations.

Loan operations
Loan operations must take advantage of technology, such as automating the booking of new loans to the core system. While many banks have adopted such technology, the fields that are required to service a loan are not always fully transferred over from the origination platform. This happens because either the lending unit does not set up all required fields, or the bank did not adequately manage or maintain the interface.

New loan documentation should be fully electronic during origination, eliminating the need for handling paper loan documentation upon transfer of the closed loan to servicing.

Similar to the deposit operations department, the loan department should have its inbound calls routed to a call center to save loan operations staff from disruptions. Financial institutions should seriously consider separating commercial loan operations from mortgage and consumer loan operations, and align commercial loan operations with the commercial loan administration resources if the units are large enough.

Loan operations can also benefit tremendously from outsourcing real estate mortgage tax determinations and payment processing, as well as real estate property and casualty insurance tracking and payment processing.

Entitywide advice
On a broader level, financial institutions should track workloads monthly, by full-time employee or department, and continuously monitor employee productivity trends. Increases in workloads and productivity levels might indicate potentially excessive workloads that would be well served by additional resources.

A bank’s operational efficiency can be adversely affected when the organization takes on too many projects and – more importantly – fails to properly manage its internal projects. When employees are pulled into multiple projects, their daily functions may suffer. Strong project governance can lead to reduced negative impact on productivity organization-wide.

The financial services industry can expect change to continue. Organizations that can streamline their operations are more likely to have the agility needed to adjust and maintain profitability and invest in new operating requirements as necessary.


BIll McNamara


Tom Grottke