In the quest for greater efficiency, getting rid of paper is low hanging fruit. A typical community bank has done a good job, but they are still generating paper statements for 50% of their accounts or more. The good news is that the percentage of electronic statements has doubled over the past two years so banks are doing a good job at conversion. The bad news is that some banks are approaching e-statements for 70% of their accounts. This places banks that are in the 20% range at a competitive disadvantage. As a bank manager, you may rationalize this that it isn’t a big deal as you believe your customers want paper statements, but in this article, we look at the data and see how some banks have made for happier customers and at cheaper costs.
The Problem with Paper
The biggest problem with paper outside of the environmental issues is its cost. The average community bank pays approximately $0.86 per statement to generate and deliver. If you have 100,000 accounts, that comes out to $526k per year in cost assuming 51% (the average top performing level) of accounts get paper statements. $526k is a large chunk of timber and is money that can be better used to compensate employees, reduce costs to the customer or to drive to the bottom line. If your bank has to spend that money and another bank does not, the bank with more operational leverage has more flexibility in a number of areas to better compete.
“My Customers Need Paper”
You may think your customers want paper, and they may even say that, but we are not so sure. Consider that by our research 17% of bank customers NEVER open their paper statements. 35% of customers really only open their paper statements four or fewer times per year. These customers largely request paper statements as a back-up in case they don’t get their 1099 INT form from your bank so they can file their taxes. The rest just open their paper statements to produce quarterly financial statements. Given the above, if you optimize paper statements to only those customers that actually use paper you could cut down on roughly 40% of your statements. At 100,000 total accounts, that is $212k of savings per year.
The other burden is that producing paper statements, reprints, errors, and various issues fall on quarter ends as can be seen below. When it comes to paper, June is usually the most time intensive month for banks. While this doesn’t seem like a big deal, astute readers will recognize from our article last week on manufacturing credit (HERE) that June is also the peak time for credit processing. In fact, June is the peak time for most bank activities which causes some inefficiency across the platform.
Moving to electronic statements not only reduces costs but also reduces capacity constraints that occur at the end of each quarter. Reducing these constraints not only make statement production more efficient, but also make other operational processes more efficient as it frees up labor to help in other places.
Making This Look Different
Given the industry’s numbers, there is no doubt that your bank has done many of the below items to help convert paper lovers to e-statement users. However, it is likely that your bank does not have an ongoing marketing campaign to continue to support this effort. As a result, many customers that would convert do not. Below are some of the best ideas, in order of effectiveness that we have used and learned from a variety of top performing banks in this area:
New Accounts: Hopefully, your bank only offers e-statements for all new accounts going forward with an option “add on” of $2.00 per month (the most common charge) for those that want paper. In fact, some banks have moved this charge to $5.00 per month. If they really want paper, then charging will help allocate resources efficiently. For certain types of accounts, such as qualifying low-income accounts - by all means, waive the fee in the name of public service, but at least it will be less of a drain.
Don’t Be Stupid: One of the primary reasons why accounts opt for paper is that their bank will not store their electronic statements for a long period of time. In a recent poll, 80% of bank customers that get paper statements said they liked to keep paper for their records. The average customer storage time for banks is 13 months but the average recommended time for retention of bank statements is 72 months. The average cost to generate 72 months of bank statements - $61.92. The average cost for a bank to store 72 months of electronic statements - $0.42. Don’t be pennywise and pound foolish, give away storage to save the cost of paper statement production.
General Marketing: Having an ongoing marketing plan to touch on the cost savings, environmental benefits, productivity gain and the ease of use of electronic statements is often all you need as a gentle reminder to convert customers off paper (see Middleburg Bank’s approach HERE). The most effective message point to include is that, “you can go back to paper anytime you wish.” Do you want to know the number of customers that go back once they are on e-statements – less than 5% by our experience. The next most effective marketing point is that e-statements are safer than paper statements since banking applications have 128-bit encryption, while paper statements are usually not shredded after use and are left lying around.
One common refrain that we hear is that because of a bank’s older demographics, e-statements are not easily adopted. While it is true that the over 60+ crowd adopts e-statements at a slightly slower rate, adoption rates are high for customers between 20 and 59, which is the bulk of a bank’s customers. The same is true for financial demographics. Adoption rates are the highest for those in the $40k to $100k salary range, but other income levels, both higher and lower also exhibit strong adoption.
Other touchpoints include letting the customer know that they will get email notification when the statements are available, that you can get a notification to more than one email address or text and that a friendly banker will always stand by to help. Any social validation message points such as quotes or the percentage of customers that use e-statements will also help speed conversions. Package the message with an easy enrollment path to go paperless, and you will experience wonders.
Training: Next to marketing, consistent staff training is critical to do daily checks to see if customers want information or education in conversion. A well-trained staff can make a huge difference and is usually the root cause when we see a bank still at 30% or below for e-statement levels. At CenterState, we track and publish this number every month as one of our operational metrics. If your bank doesn’t track conversions or at least the overall percentage, it will be hard to affect change.
Duel Statement Users: If you are like a typical bank, 55% of your paper statement users actually utilize e-statements while getting paper. If you are looking for the most sensitive group to market to, start here with a targeted message. This group of households and business owners usually asked for both to test if they can access and utilize e-statements. Chances are, they are fine with e-statements, but you just have not asked again. A simple email opt-in notice that touts the security and benefits of e-statements will go far.
Better Than Paper: One of the most overlooked strategies is to make your e-statements better than your paper statements so there is added benefit to switching. Statementing, in general, has always been a weak point in banking. Work with your vendor or core provider to create a modern looking statement complete with colorful graphs and analytics (below).
QuickBook/Aggregator Users: If you have households or businesses that connect to your bank through the Quickbook OLE Adaptor or other such aggregation engines then they already get a data feed of account information from your bank. The e-statements would serve as a good back-up, and paper is a pure unneeded redundancy. These customers are ripe for conversion.
Promotions: If all else fails, a good item giveaway for converting has proven effective. Giving away apps, water bottles, backpacks, flashlights, plants, iPhone chargers and dozens of other ideas have proven effective for banks. In an informal survey, it seems that a promotional item or prepaid card of $5 worked the best.
Moving customers from paper to electronic statements is an easy cost saving move. It can start with deposit accounts and then move to loans. Banks just need to have an ongoing training, marketing, and conversion plan to increase electronic delivery. More important than cost savings is that e-statements are a gateway tactic that opens up customers to greater usage to online and mobile banking. Any effort in conversion should not only be placed in the context of cost saving paper production, but cost saving future branch development. Marketing e-statements starts a conversion with both customers and staff on how they can become more efficient which is a customer satisfaction building effort as well.
Submitted by Chris Nichols on May 08, 2017