Process Improvement Methodology for Every Bank

    We've talked a lot about process improvement on our blog, and it can sometimes be tricky to work these strategies into a particular industry. In today's article, we'll focus on applying some basic process improvement theories to banks and financial institutions.

    It's crucial to understand the common problems that are facing the banking industry in regards to how their business processes function and effect their potential. These often directly or indirectly include:

    • Staying competitive with aggressive non-bank competitors
    • Restoring public confidence in the industry
    • Staying compliant with current and future government regulations
    • Enterprise-level integration of data and a push to use big-data to provide better service to clients

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    This is obviously quite a selective and narrow list, as the potential problems facing an industry as widespread and varied as banking are innumerable. What we're looking at, though, are problems that are directly affected or caused by a lack of well-defined and enforced business processes.

    One of the things that many non-bank competitors have in their favor is that they are a much smaller organization on the corporate level. This means less red tape to cut through when anything needs to be accomplished.

    Why does that red tape exist? Why is it so characteristic of larger organizations, especially banks?

    With so many customers, roles in large banking institutions have been hyper-specialized to act on only a part of a process. Let's consider mortgage lending. The mortgage banker in the branch working with the client takes the initial pre-qualification or pre-approval. This is likely the only person the customer deals with. That application, however, is going to touch the hands of approval personnel, underwriters, other mortgage bankers, and potentially a number of other specialized control or fraud employees along the way.

    Is the customer aware of this process? It's not likely. If the customer was aware of the process the bank uses (either through traditional communication or through an online portal the customer could access), not only could peace of mind be established but customers could be notified automatically of acceptance/denial of documents. Depending on the sophistication of the automation and notification system, they might even see where an application is being held up and why, giving them the opportunity to remedy the problem without ever involving the mortgage banker.

    Client-portals are interesting to discuss in banking because the shift to online banking isn't new – every major bank has made the ability to access your money through your computer or smart phone a high-priority goal. Why do parts of the banking process like lending, investment, or even new account creation seem so far behind?

    Showing how the bank works and why things take time is important for restoring that faith in the industry. With the U.S. housing collapse not that long into our past, the country as a whole is still unsure of whether banks know quite what they're doing. In reality, banks are still the experts at managing money and the myriad tasks accompanying that endeavor, people just want to see it for themselves and follow along.

    Customers have grown to accept a world of instant information gratification. When we order a pizza, the chain's website can tell me when it goes in the oven, when it leaves the store, if there was a problem, etc. I'm not sure about other consumers, but I care a lot more about my loan application or retirement fund than my pizza.

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