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Paperless Banking Gains Ground

Sep 12, 2012 / Consumer Banking / Technology

Banks often boast about the positive environmental contribution from eliminating paper documents. And that certainly is true; Wells Fargo & Co. alone estimates it has saved more than 200,000 trees in the eight years it has offered electronic statements. Still, many banks are equally or more impressed by the efficiency gains and improved customer service.

By replacing paper documents with electronic forms, banks can reap significant savings in paper and ink and postage and courier expenses. Additionally, corrections are easier to make in electronic documents and both bankers and customers have faster access to important information.

One of the more common paperless projects is encouraging customers to receive bank statements online. But creative banks can find additional ways to get rid of paper and save even more in related costs, says David Albertazzi, senior analyst with Boston-based Aite Group. “Banks gain the most when they can get rid of the paper sent between the branches and the back offices,” says Albertazzi.

Today, branches print out numerous consumer loan and account documents and send them via courier services to back offices. Electronic documents mean fewer scanning errors and big savings in courier fees, says Albertazzi. With the average courier run costing $17, a large bank could eliminate about 500 courier runs per week at a savings of nearly $500,000 annually, he estimates.

One of the most aggressive banks in reducing paper is Wells Fargo, which calculates it has eliminated 650 million paper statements since 2003. Another is Charlotte-based Bank of America Corp., which delivered 43% of its customer deposit statements electronically last year. And small banks are going green as well. First National Bank of the Gulf Coast in Naples, Fla., is a $465 million institution that has promoted total paperless banking since its inception in 2009. “We were not saddled with a legacy system based on paper,” says Chief Information Officer Peter Setaro.

iPad Meetings

Some banks have targeted specific applications for their paperless movement. New Jersey Community Bank in Freehold has its directors view all their meeting reports via iPads. Previously, the 12 directors received three-ring binders full of reports and loan documents to be reviewed before board meetings, which took a considerable amount of paper and preparation time, says Terry Thompson, chief operating officer.

Additionally, members of the bank’s loan committee can now review documents at a secure website before a loan meeting. Previously, reports had to be faxed overnight. The paper savings was substantial as each loan report typically was five to 25 pages and there were up to ten loans discussed at each meeting, Thompson says.

“Loan documents are where you can save the most money,” says Andy Dubinsky, CEO of Houston-based Encomia LP, a provider of e-lending services, who notes that a typical commercial loan document can run up to 100 pages. Besides the pricey courier charges to move paper around, paper loan documents require a lot of checking for errors and making sure all the blanks are filled. Automated systems that flag blanks or errors can substantially reduce the manpower costs, he says.

Beginning a loan application electronically can also make the process quicker and reduce the chance of losing a prospective borrower, Dubinsky says. “Often you won’t get the loan documents completed for at least two to three days after the application. During that time, you could lose the customer to someone else.”

Despite the benefits of paperless banking, banks often encounter customer resistance to losing the security of paper documentation, which is why Wells Fargo sees the need for some customer outreach. “We try to be clear about the benefits of electronic statements – that customers get the information faster and it is more convenient,” says Martha Smolen, senior vice president of online customer sales management. “We also promote the fraud aspect in that electronic statements reduce the risk that the paper will get lost in the mail.”

Ms. Giesen is a contributing writer for BAI Banking Strategies based in Libertyville, Ill.