Is It Time To Go Paperless? Records Management: The Cost .
Is it time to go paperless?Records management:The cost of warehousingbad habits
Is it time to go paperless? Records management: The cost of warehousing bad habits 2
ContentOverview .3Paying the price in the form of customers and costs .5Removing obstacles to progress .9Is going digital the answer?.13Looking forward.14Taking the journey to a digitally efficient future.17Key contacts.18Is it time to go paperless? Records management: The cost of warehousing bad habits 1
“The chains of habit aregenerally too small to befelt until they are toostrong to be broken.”- Tom BrokawIs it time to go paperless? Records management: The cost of warehousing bad habits 2
OverviewFees for many products in the financial sector remain too high. High costs in savingsproducts undermine the national objective of getting our people to save more. The financialindustry must take more urgent steps to reduce costs and introduce more appropriate andtransparent saving and investment products, including annuities. There is also much to bedone to improve market conduct practices in the financial sector. The “Treating CustomersFairly” initiative will be accelerated to protect customers more vigorously.– Pravin Gordon, Budget speech 2012/2013Financial service providers generally incursignificant costs within the end-to-end valuechain of their records management system. Fromthe point of origination of a record, until thepoint of warehousing and destruction, financialservice providers incur costs. These costs areoften accepted as “business as usual” as recordsare required to maintain customer data andensure effective governance and regulatorycompliance. Reducing the associated costsacross the value chain is often overlooked as anefficiency opportunity.An analysis at a large retail bank has proven thatby streamlining process and adding technologyto eliminate paper from the process, operatingexpenses in the processing divisions can bereduced by as much as 25% (a reduction ofbetween 60% and 70% of records managementassociated costs).Given increased regulations, financial serviceproviders will increasingly need to ensure thattheir record management is run more effectively.They will increasingly need to be moretransparent and be able to provide effectivereporting to regulators and managementregarding their financial stability. They will alsoneed to manage and report on informationregarding customers more often and moreeffectively, in line with Treating Customers Fairly(TCF) compliance standards, the Protectionof Personal Information Bill (POPI) and theConsumer Protection Act (CPA) regulations.Lost or damaged records contribute to a poorbrand image amongst customers. Customersget contacted by financial institutions toprovide their particulars and various documents,generally more than once, in order to ensurecompliance with Financial Intelligence Centre Act(FICA) requirements.Financial service providers, including bothbanks and insurers, often do not realise theamount of unnecessary duplication that takesplace, especially where copies of informationhave already been obtained from clientsduring prior interactions. The cost of this iscompounded by many financial service providersthat take a conservative approach and keeptoo many records for longer than required.Keeping unnecessary documents is costly, timeconsuming and a waste of corporate office andstorage space.Technology has created the opportunity forimproved alternatives to the traditional methodof physical record management. It has thepotential to be applied throughout the full valuechain. This transformation journey (dependingon organisational readiness and investment) canrange from 12 to 36 months.The question then can be asked: “why is digitalrecords management not deployed throughoutall financial service providers?”Is it time to go paperless? Records management: The cost of warehousing bad habits 3
Is it time to go paperless? Records management: The cost of warehousing bad habits 4
Paying the price in the form ofcustomers and costsEven though most financial service providers are well aware of the opportunity presented by paperlessprocessing, comparatively few have made a concerted effort to embark on the transformationjourney. Despite the ever decreasing cost of technology, the daily interaction between a business andits customers is riddled with paper processing.There are certain forces at play which require actual paper to be stored, these forces includelegislation and internal governance. The overarching challenge, however, is that the costs associatedwith transporting, storing, recalling and managing these documents is ultimately transferred to thecustomer.The customer service imperativeHigh paper processing environments are known to re-obtain client information for every touch-pointthroughout the client life-cycle. In a day and age where time is precious, clients differentiate serviceby the time taken, administrative burden and ease of engagement.In a paper focussed environment, especially where records are warehoused off-site, formsare completed and recompleted each time a client touches the process. The purpose for suchrequirements is primarily to (re)validate the client in accordance with embedded governance ruleswhich have simply not been reviewed in light of the technological advances made.In a recent flash survey conducted by Deloitte, clients from various banks indicated the following withregards to customer service:Customers experiencedCustomers wanted97.4% of theclients indicatedthat they are notwilling to queuefor more than 10minutesTo only supply thebank with copies oftheir ID once, unlessthere has been arecent change inthese documents25% of clientsqueued for longerthan 20 minutesat the customerservice desk beforebeing servedTo minimise timespent in the branchTo have efficientand convenientaccount opening,maintenance, queriesand closures thatsaves customers timeand effort57.5% of clientsindicated that they arecurrently not satisfiedwith the service receivedat the branches50% of the clientssurveyed indicated thatin the last 12 months,they had to re-supplythe bank with copiesof their ID and Proof ofResidence documents80% of the sampleindicated that theirperception of services isdirectly related to timespent in the branchTo open new accounts,67.5% indicated that it tookin excess of 10 minutes,with as much as 22% ofthe clients indicating that ittook more than 30 minutes.Account maintenance,queries and closures hadsimilar trendsIs it time to go paperless? Records management: The cost of warehousing bad habits 5
Customers generally viewed that service could be enhanced if time was not wasted queuing; nothaving to re-supply documents at every engagement and through having shorter times in which thebank completed one of their requests. Through improving records management processes, thesethree customer satisfaction drivers can be improved. The “other” category included elements suchas bank charges and how the client is treated during the engagement process, both of which canbenefit from implementing significant improvements in the branch systems and processes.Customer service improvement areas33%28%Shorter queues / time wasted in queuesNot required to re-supply documentsar each engagementShorter time to complete requestOther16%23%Documents obtained at the point of engagement which relate to compliance or legal (such ascontracts and securities) are subject to a 100% quality review. An element such as poor hand-writingor incomplete forms causes financial service providers to go back to clients and re-request documentsand/or information. Not only is this rework a waste of resource and client time, it largely frustratesclients which leads to reputational damage.In a competitive market, any financial service provider that can optimise these processes and reduceprocessing time will strategically place themselves into a competitive position. By enhancing thecustomer experience at each touch point, financial service providers can improve how customers viewthe organisation and its services, as well as comply with new customer regulation andcompliance standards.Is it time to go paperless? Records management: The cost of warehousing bad habits 6
The cost conundrumServices industries such as financial institutions incur high record management costs throughout theclient engagement life-cycle due to the dependence on paper.In a case study done at a market-leading African retail bank, the records management expensesacross the value chain (from record creation at a branch to the point of warehousing the physicaldocuments) were broken down into the following cost drivers with the cumulative spend in thisexample exceeding R350m per annum:% Distribution cost% Cumulative distribution cost Origination Process: In this case study the retail bank had no less than 10 pages generatedfor each new account opened in a branch. This excluded any securities, copies of compliancedocuments and any additional enquiries made (and printed). Transport: In South Africa, the majority of retail banks have centralised processing hubs. In thecase of this retail bank, documents were transported from the point of origin (branch) to the centralprocessing hub where they would be processed. The branch-network consisted of between 600and 800 branches and logistics had been outsourced. Transport and handling therefore remainedone of the highest cost drivers. Back-office processing: Due to quality challenges arising during origination, back office qualitycontrol functions were required to ensure compliance for this retail bank. This validation was donemanually and contributed further costs due to it being labour intensive and therefore costly. Warehousing: Records were delivered daily within the retail bank to either outsourced vendorsfor record storage or they were kept on site (where warehousing was available). Due to the legalimplications of keeping documents on hand for a specific duration after client interactions haveconcluded, the existing storage areas were getting fuller and fuller which resulted in continuouslyrising warehousing costs and reduced availability of space. Retention, retrieval and destruction: The retail bank also accumulated additional costs for thesimple task of destroying all copies and duplicates of confidential documents relating to their clientsand their business operations.Is it time to go paperless? Records management: The cost of warehousing bad habits 7
Is it time to go paperless? Records management: The cost of warehousing bad habits 8
OldInternal BarriersBarriersInternalRemoving obstacles to progressBoundariesExternal BoundariesExternalNewRemoving external boundaries, enabling changeBoundaries of change are defined as external obstacles that one may or may not be able to overcome(see figure above).Legacy archivesMany financial service providers have a well-established record archive in place this is supportedand managed by external vendors (if outsourcing applies). However, due to years of merger andacquisition activity and new product launches, many financial service providers have legacy systemsthat often have different account numbers, different products and disconnected customer recordsacross different pockets of the business. It is important for financial service providers to understandthat the paper process is integral to the business and changes the way records are managed and assuch, requires a full value chain re-design.In addition, the existing archive requires a decision whether to copy all existing documentation intoa digital format (which requires a considerable investment, particularly with the large number ofrecords and the vast quantities of data that most financial service providers have) or to operate withdual processes until most customer data has been transitioned. The method of dual processes bringsabout the opportunity to highlight inefficiencies within the operating model.Is it time to go paperless? Records management: The cost of warehousing bad habits 9
Policy particularsMore than 25 laws of general application require businesses to retain certain records for certainperiods in specific formats. Generally businesses retain records for the following reasons: In order to ensure legal compliance (prescribed retention periods range from 3 months to 30 years) Retain evidence (the use of email and evidence in disciplinary hearings and litigation have increaseddramatically over the last few years) For operational reasons failure to retain records subject to retention requirements may exposebusinesses to criminal fines, civil liability and reputational harmThe Electronic Communications and Transactions (ECT) Act of 2002 makes it legal to perform almostany business activity electronically. This Act reflects the current state of business where everythingfrom board meetings, contracting, communicating, storing and record keeping is done electronically.What is now required is that all such electronic activity comply with the ECT Act to be legally valid.The risk in not being compliant with the ECT Act is that the business activity being conducted may nothave the full effect of law, and can therefore not be enforced or proven in a court of law. Simply put,the ECT Act makes provision for records to be created in electronic format and deemed as the originalif the integrity is maintained, very few companies have amended internal policies to comply with thechange in legislation.Failure to amend policy has a direct influence on the boundaries to which processes, operatingprocedures and technologies may be changed and implemented. The internal policy-makersof the organisation need to amend requirements which will then serve as the catalyst for thestrategic changes required. A relevant example was with the introduction of FICA into the bankingenvironment. FICA in essence requires the organisation to be able to prove that they have identified /verified a customer. Internal policies add a long list of additional records required as well as the needto re-obtain the documents during maintenance transactions. These are not necessarily regulatorrequired and technology can very effectively be used to store the image once and recall it at futureengagements to verify the clients. This enables financial service providers to eliminate the need tospend resources in obtaining transport, processing and storing duplicate compliance documents,where no information was changed.Is it time to go paperless? Records management: The cost of warehousing bad habits 10
Internal barriers, crossing the chasm to changeBarriers to change are defined as internal obstacles which require specific focus in order to facilitatethe change required.Human resistanceImportanceHighLowDesire to changebut needguidance andinformationWilling, readyand able totransformThe benefits doesnot outweighinvestmentrequiredHave theknowledge, butdo not recognisethe benefitsCompetenceHighThe will to change is often undermined by an inherent resistance to change. There are many reasonswhy people resist change. The primary reasons are typically:Trapped by the past: Legacy ways of working have become so entrenched within daily operations,that few financial service providers have the opportunity, or ability, to look beyond existing systemsand processes. Progressing through the “ranks” in the organisation, generally leads managers toapplying “the way we have always done it”- mentality. Even though the business case provides acompelling argument for change, the decision makers remain blind to the importance, and as a resultcannot see the true need as well as the potential benefits that may be unlocked.Overburdened by the present: Decision-makers are often trapped by the responsibilities of dailyoperations and due to the failure of switching from fire fighting activities, to the strategically alignedobjectives of the financial service provider. Strategic change initiatives that influence the way businessis done are either overlooked or deemed to be so insignificant, that little or no competence to effectsuch change effectively is ever allocated. In such instances, the insight into the true importance of thechange or the level of competence required is often misunderstood and lacking.Is it time to go paperless? Records management: The cost of warehousing bad habits 11
Investment limitationsIn order to progress through the journey ofchange to digital records processing, certaininvestment decisions are required.Design: A full operating model / architecturedesign will be required for the organisation tounderstand where it is heading as well as tocreate a common understanding of the timerequired to achieve the desired end-state.Transition: The organisation needs to decidethe applicability and/or need to transfer historicalrecords to a new format, and whether theexisting records should be integrated into digitalprocessing or kept in storage until the time fordestruction.Hardware and software: An initial investmentfor content servers and storage banks as wellas software, index and retrieve records will berequired. This cost is significantly less than paperprocessing, however since this is an expense thatnormally appears on a separate line entry onthe organisational budgets (Rate of Investment(ROI) of between 1 and 2 years); all applicablestakeholders need to understand and supportthe change.Training and information: Since informationrecording, storage and sharing of documentswill change the way that staff used to operate, asignificant investment will be required for changeenablement and facilitation of training.The size of capital investment is dependenton internal resources and competencies,organisation size and technology solutionsselected. These elements will be defined asa part of the detailed business case when theorganisation makes the strategic decision toembark on a transformation journey.Is it time to go paperless? Records management: The cost of warehousing bad habits 12
Is going digital the answer?For the past decade technology has become available that not only creates electronic forms andscans images, but also integrates with workflow solutions allowing documents to be validated andprocessed (in some instances automatically) without the cost of physical transfers being incurred.These records are “warehoused” digitally using software such as enterprise content managers wheredocuments are easily stored and accessed for the re-use of information; they may be easily integratedwith front-end applications.Records in electronic format also possess processing capabilities, with the opportunity to make useof workflow tools and quality assurance throughout the process. The high density of electronicdata means that it takes up very little physical storage space and may be easily statistically analysed,providing an added competitive advantage when compared to opposition. Raw data collected for onepurpose can be electronically reanalysed for another, while a similar operation might be cumbersome,expensive or impossible on paper. The possibility extends to the capability of linking electronic recordswith common data elements from different files, thus making the information more wholesome andmore accurate to the users.Further opportunities of using digital records can include a more sophisticated client engagementexperience by using mobile devices, the use of virtu
Records management: The cost of warehousing bad habits 1 Content . recalling and managing these documents is ultimately transferred to the customer. The customer service imperative High paper processing environments are known to re-obtain
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