Technology and Cost Control for Banks and Credit Unions

Technology and Cost Control

In my last blog post I discussed the importance of keeping up with technologies. Trent Fleming recently wrote a blog on how to technology can affect cost control in your bank or credit union branch. Particularly interesting is recognizing the opportunity to not just save money, but make money by getting customers to use their debit cards. Here are some excerpts from “Trent’s Comments” in January – February 2013: Leveraging New Technologies to Reduce Costs by Trent Fleming.

As you invest in new technologies, much of the focus is on the “sign-up” phase – getting customers to sign up for mobile banking, e-statements, or Internet Banking. Clearly, it is important to get folks signed up as the first step. This is not the desired result though the intent is to get folks to adopt behaviors that reduce your operating costs, and improve customer satisfaction. Effective employee education and targeted marketing campaigns can help you to achieve your goals.

Four Popular Cost Control Technologies

Mobile Banking

While you certainly need to have mobile banking from a competitive standpoint, it is not until a substantial percentage of your customer base begin to actively use mobile banking that you will see cost benefits from the technology. Measuring unit costs is difficult. However, as customers become more comfortable with using their mobile phones to perform increasingly complex banking functions, visits to your branches and calls to your call center should decline. This will lower the cost of serving customers, and increase customer satisfaction, as they are able to quickly and easily handle many of their banking needs with no outside help. Our society is increasingly reliant on mobile devices, so it is important that you reserve your “place” on these devices. You will then be poised to offer additional mobile-based services.


E-statements offer you a significant cost savings, every month, over paper statements. Thus, getting customers to accept electronic statement delivery is a worthy goal. Think about the number of times companies that you do business with (utilities, delivery companies, etc.) encourage you to accept electronic statement delivery. Your customers are getting this pressure from all sides, and most are willing to go along with it, for everything from cost to privacy reasons. As a bonus, e-statement delivery paves the way for delivering other notices electronically, reducing costs and improving customer service (same day notification of returned items, for example.) In general, you should be able to reduce the costs of statement production by at least 50-75 cents per account, per month. Do the math. You want to save this money, and your customers want electronic statements. In addition to straightforward promotion of e-statements, you should include e-statements as the standard offering for new accounts, and use them as an incentive to customers who may be seeking a free account, by including accepting electronic statement delivery as one of the required terms for a free account.

Internet Banking

Internet Banking, properly deployed, should greatly reduce your costs of customer service by allowing customers to handle more of their banking activities on their own. In particular, the ability to transfer funds, and see images of paid items will mean that, like mobile banking above, your customers require much less call center contact to address their banking needs. This reduces your costs and improves customer satisfaction. Another key part of Internet Banking is bill pay. Many banks have had poor experiences, penetration wise, with bill pay, as their initial offerings were cumbersome, required advanced payment, and may have even cost extra to use. The reality is this… many of your customers have been driven to on-line payments through the biller’s sites, and won’t change their habits unless you find a way to make it easier ( I think aggregation of bills on a hand-held device might have a shot) For now, concentrate on those of your customers who are still checkwriters, and promote the ease of bill pay to them. Each time you convert a check to an electronic form of payment your transaction costs go down significantly.

Debit Cards

Debit cards are immensely popular with customers. Generally, when banks promote debit card utilization, it goes up in response. When promotions cease, it then levels off – it does not go back to prior levels. Thus, we can acquaint usage with adoption. Even the most expensive debit card transaction (customer enters their PIN) is significantly less expensive than processing a check. Signature based debit card transactions actually generate revenue, via interchange fees. Efforts to convert check writers to debit card users will, at a minimum, reduce your transaction processing costs, and may even increase your interchange income. Continuous promotion of debit cards is always productive. Don’t overlook debit cards for your businesses, as well. Most ATM/EFT providers offer you a better interchange fee on such cards, and transactions are usually larger, so there is good revenue to be had.

If you enjoyed this excerpt from Trent’s comments, you will also enjoy his insights on how to get the business and grow your bank.

Still learning,