In today’s sluggish economy, banks are looking under every rock for cost savings in order to show better earnings growth. One source of expense control, however, has been hiding in plain sight: the cost of courier services.
With Branch Image Capture (BIC) and Remote Deposit Capture (RDC) technology, physical copies of checks are no longer necessary to complete money transfers. This means the collection, transport, and storage processes for paper checks can be greatly streamlined, at substantial cost savings.
In the past, banks needed physical checks transported to validate each day’s transactions. But with BIC/RDC technology, the banking industry now exchanges money via electronic copies of checks. This alters the urgency of physical check shipments as well as the shipping methods banks can now consider.
In the past, every deposited check was shipped to a check clearinghouse each night to allow money to be exchanged between two financial institutions. The bank with the deposited check often used its courier network after hours or early the next business day to transport physical checks. The miles a courier could drive in a single night/morning limited the pickup area. This limitation (along with human endurance) drove the need for regional processing sites, at a bank or as part of the courier network, usually located about 150 miles apart.
Today’s BIC/RDC technology changes make that model obsolete; for the foreseeable future, paper checks can be sent to storage sites using less urgent and less expensive transportation methods. The door is open for a lower-cost, non-courier network with regular pickup times to provide shipping services at a significantly lower cost. Instead of relying on couriers, banks may choose the option of receiving a pickup (or a delivery) from a common carrier either daily or on specified days. Bankers can ship any and all daily retail branch work, including loan documentation, directly to processing sites.
Senior managers in retail bank operations should identify any potential cost-saving opportunities by conducting a thorough analysis of their current branch carrier networks. Here are five areas worth examining:
Courier pickup costs. The costs of daily courier pickups can be high due to the perceived special nature of their services. A move to a common carrier can significantly reduce spending.
Control the number of days with shipments. By shipping every three days instead of every five, and eliminating the movement of empty nylon bags, which are used for secure transport, banks can reduce shipping charges by as much as 25%.
Cut nylon bags and their maintenance altogether. Banks can cut costs associated with repairing and replacing old-fashioned nylon bags.
Eliminate or reduce staff from processing sites. Full-time employee salaries at processing sites average about $36,000 per year. These dollars, and the human resources behind them, can now be reassigned to more strategic activities.
Outsource the bank’s central processing site. Outsourcing the functions of the central processing site, such as sorting, storage, and archiving, can eliminate labor and real estate costs. Also, as further imaging technology comes online, it might be possible to eliminate a branch network entirely.
Banks that fail to evaluate and make the operational changes necessary to keep up with the pace of technology change will continue to incur unnecessary costs and miss opportunities for operational efficiencies.
Mr. McCarthy is a corporate segment marketing manager for Atlanta-based UPS. He can be reached at email@example.com.