Drive Efficiency With These 9 Back Office Upgrades

“Efficiency” has been a mantra at financial institutions for years now. While using technology to perform repetitive tasks and make cumbersome processes a little less labor-intensive seems like a no-brainer, it’s hard to know exactly how to make the most of available options. 

More than one expert has observed that an “if it ain’t broke, don’t fix it” mentality can stand in the way of changing entrenched practices.

Charles Potts, ICBA’s EVP and chief innovation officer, argues the case that the back office is often the best place for efficiency gains, because activities taking place there are not dispersed among a bank’s various branches but tend to be handled within a single office. 

“Look for what’s repetitive and what the customer doesn’t see,” he says, “and that’s usually the low-hanging fruit.”

For many bankers, the first step toward optimizing the back office began with removing paper from the system. That was true, at least, for $400 million-asset Citizens Bank of Edmond, which CEO and president Jill Castilla says began its mission to “bypass the printer and scanner altogether” roughly 10 years ago.

Greg Ohlendorf, president and CEO of First Community Bank and Trust in Beecher, Ill., also credits improvements in back-office efficiency to rigorous efforts designed to make his $205 million-asset institution as digital as possible.

He advocates tackling back-office efficiency with the same zeal many bankers reserve for identifying and debuting jazzy new products or services. 

“Either I make another dime or I save a dime, but it’s the same dime and it doesn’t make any difference how I’ve done it,” says Ohlendorf. “If I can make the back office more efficient, it’s good for everyone.”

There are plenty of options for banks to elevate their back-office operations. These community banks have done just that, and they’re sharing tips so you can do the same.

1. Automate loan exceptions

Three years ago, New Market Bank in Elko New Market, Minn., began working with lending process automation provider Teslar Software to tackle “the inefficiencies of pushing paper back and forth,” says Anita Drentlaw, CEO, president and CFO of the $185 million-asset community bank.

As a first step, New Market Bank decided to overhaul its loan exceptions process. Implementing Teslar’s exceptions tool ended an era of relying on the core system to track exceptions manually without automatic reminders. 

“Everything got handled faster,” Drentlaw says. “You could put due dates on items and segregate loan exceptions by who would follow up, whether it was the lender or operations.”

Ohlendorf is another firm believer in automating the loan exceptions process as a stage in rethinking the lending function more broadly. 

“The lending area is super paper-driven, and it’s got a lot of steps and processes,” he says. “It’s one of those areas where banks keep doing it how they’ve done it forever. Lending is a prime space to wring out costs and overhead.”  

It may seem counterintuitive, but Colin Savells, chief revenue officer for Teslar Software, is convinced that the best way to make lending processes more efficient is by narrowing their focus. 

“We start with tasks that lenders don’t like, loan officers don’t like, credit administrators don’t like and leaders don’t like,” he says, noting that exception tracking fits that description nicely.

What’s more, Savells notes that the benefits of automating even just the exceptions process can be dramatic. In a case study conducted by Teslar, a $1.2 billion-asset community bank saved about 120 hours per week by using the automated exceptions tool.

“You don’t want to boil the ocean,” he says. “We want to come in, fix one problem and grow from there.” 

2. Use RPA to reduce repetitive tasks

Andrew E. Silsby, president and CEO at $1.76 billion-asset Kennebec Savings Bank in Augusta, Maine, is keen for his employees to focus less on basic, repetitive tasks. 

“I attack efficiency in the back shop for our organization,” he says, “so we can free up our staff to answer the hard questions that customers have and so they have more time for the more complex challenges they face.”  

That’s one key reason why Silsby embraced a robotic process automation (RPA) solution—through workload automation software OpCon by SMA Technologies—that serves as an automated enterprise job scheduler for mainframe job execution. The workflows are configured to monitor for, move and rename files 24/7, running daily processes automatically.  

Silsby explains that inclearing files from the Federal Reserve are no longer manually moved and processed by employees but are handled by OpCon. 

Similarly, Teslar’s Savells anticipates RPA will play an increasingly important role in how banks communicate with customers. Say a bank knows that certain customers are required to submit tax documents mailed out in January. Instead of assigning an employee to communicate that at the right moment, a workflow solution can set up email reminders in October for messages to be sent in January.

To make back-office automation even more efficient, Savells urges community bankers to give customer portals a closer look. “If a bank has a portal, the customer knows what’s needed, and the banker doesn’t have to manually type as many things,” he says. “How you communicate and receive information from your customer can make or break back-office efficiencies. That’s why customer portals are a very hot topic right now.”

3. Establish commonsense practices

As a concierge bank for the Las Vegas businesses community, five-year-old, $300 million-asset Lexicon Bank has always had a well-publicized system for naming electronic files, says SVP and credit manager Cathy LaCour.   

LaCour says that making sure all documents are named in a consistent fashion—title and date of document followed by the precise location where the document can be found—has helped auditors, FDIC examiners and new employees being onboarded.

Lexicon’s newcomer status has created opportunities to build back-office processes from a fresh-sheet-of-paper perspective, thereby saving money and time. “We started as paperless,” says LaCour, “and naming files a certain way is something we’ve always done by force of habit.”

4. Reduce the use of spreadsheets

Until recently, New Market Bank kept vast quantities of vital information, including critical checklists, inside Excel spreadsheets. Drentlaw notes that this not only made operations less efficient but also sometimes posed challenges as different areas of the bank attempted to communicate with one another.

She says getting rid of spreadsheets was a crucial first step in “streamlining our workflows and tracking things in a more centralized way.” Among the advantages are improvements in customer identification in the opening of new accounts and in stop payments placed on transactions. 

5. Get maximum value out of existing solutions

Too often, says Jonathan Baltzell, president of bank solutions at Jack Henry, community bankers fail to fully recognize that “the value of [a core provider’s] solutions—and what we’re capable of—will grow over time.”

He argues that some banks could shrink their tech spend by taking fuller advantage of the range of offerings from their core provider, rather than paying for additional services from outside vendors.

To reduce duplication, Baltzell urges bankers to designate an employee to read the twice-annual release guides from their core provider. By understanding enhancements to a system, bankers find out “what additional value we’re bringing to the table,” he says.

“Banks that lead the pack are looking at our roadmap to see what value we’ll be delivering in the future,” he says, “and they’re planning for that delivery now.”  

6. Have AI help with compliance

While fintechs can be an excellent source of back-office efficiency tools, managing new compliance requirements for these fintech partnerships can be a major headache. In fact, in the 2024 Conference of State Bank Supervisors’ annual survey of community banks, 32.7% of bankers listed “regulatory compliance with fintech partners” as a major challenge of implementing new technology over the next five years.

Another compliance headache is managing a bank’s access and permissions processes and then reporting on the results to regulators. Zach Duke, founder and CEO of information services provider Finosec, notes that reports on how to manage access and permission “run hundreds, if not thousands, of pages long.” He adds, “You almost have to have a master’s in hieroglyphics to understand this stuff.”

Finosec uses AI to tackle this and other compliance efforts. The fintech not only uploaded all of the FFIEC handbooks but also designed an AI assistant, playfully dubbed “Regi Ranger,” to help community banks understand current regulations and prepare for meetings with examiners. 

7. Enable e-signatures

An electronic process loses much of its efficiency magic if even a single step has to be performed manually. Therefore, whether it’s DocuSign or something like Jack Henry’s Synergy eSign, allowing customers to give their John Hancocks electronically speeds processes along.

“Without an electronic-signature software package, electronic processes get bogged down in manual signatures,” says Jack Henry’s Baltzell. He points out that many community banks made the switch to e-signatures during COVID, but for any still on the sidelines, it presents a great opportunity for savings.

8. Prepare for AI-driven opportunities

Community banks are only just beginning to figure out how artificial-intelligence tools can make tedious and labor-intensive processes quicker and more efficient. One new discovery, says Castilla, is that AI can research the best prices for office supplies in a matter of seconds, helping reduce overhead.

Another is that AI makes it easier to advertise the Bank of Edmond’s monthly street festival by optimizing terms used for search-engine retrieval and even by wordsmithing the language chosen for invites, says Castilla. 

“Now that AI is so much more accessible to small institutions, it’s driving down costs,” she says. 

9. Tap into employee insight

 “You have to make it part of your culture to regularly review and refine your processes, making sure they’re as efficient as possible,” says Silsby of Kennebec Savings Bank.

He has found that once employees are on board with creating “a spirit of continuous improvement,” new opportunities for optimizing efficiency emerge with regularity.

However, “culture” shouldn’t just be a buzzword to get colleagues excited. At Lexicon Bank, the spirit of continuous improvement is cemented by encouraging employees to continuously identify and implement enhancements. LaCour notes that the bank’s quarterly Fun Fridays are a way to share meals and a group activity, but they’re also key to “keeping our collaborative culture going.”  

With the right culture, a rush of innovative ideas for improvement tends to come from the back-office employees themselves.

In February, Castilla met with a veteran employee. During that hour-long conversation, she says, the employee suggested at least 15 separate ways that the bank could automate aspects of the back office to drive greater efficiency. 

This type of brainstorming, notes Castilla, is a byproduct of a culture that’s open to new ideas. “The mindset at our bank is that we’re not just accepting change,” she says. “We’re all driving change, too.”