Improving Efficiency Ratios For Banks

For financial institutions, success often grows from a delicate balance of maintaining efficient business operations while cultivating customer growth and satisfaction. If your goal is to scale your bank, you may think you need to increase your in-house operations by offering more products, investing in more printers, and hiring more back-office staff. This could not only disrupt your balance by placing too much emphasis on operations, but it could also take the focus away from what you do best, relationship banking.

The key to improving your bank’s efficiency ratio is removing unnecessary banking operations that consume your time and budget. Focusing on what your bank or credit union does best will streamline your operations and allow you to scale. Whether you are looking to grow your community bank or lower your operating costs, simplifying bank operations may be the key to long-term success. Here are three ways to work smarter, not harder for success in relationship banking.

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Reduce product offerings

What if you could improve your company’s efficiency while also increasing customer satisfaction? That’s the theory behind reducing your menu of product offerings. In today’s economic environment, consumers have a seemingly endless number of choices when it comes to everyday products and services. From choosing a healthcare plan to shopping online for a dog bed, the multitude of choices is wearing consumers out. Recent studies have shown that some consumers will avoid making a purchase altogether if faced with too many choices. When customers are forced to choose from a large offering of services, they experience unease and dissatisfaction. Decision fatigue is lowering customer satisfaction across all business sectors.

This “paradox of choice” creates an opportunity for bank operations managers across the country to improve their efficiency ratios. If consumers are happier with fewer choices, why not simplify bank operations by scaling back to a select number of core products and services? With fewer offerings, a bank benefits from reduced expenses and more efficient operations. Some ways that reduced product offerings improve efficiency include:

  • Fewer printed materials needed for marketing and operations: By reducing the number of product offerings, banks can cut down on the volume of marketing and operational materials needed, directly improving the efficiency ratio for your bank.
  • Reduced product training costs: Reducing products also means reducing the need for product training, which can significantly diminish costs.
  • Less time managing rates and calculating risk: Having fewer products to manage can reduce the time spent on rate adjustments and risk calculations, simplifying processes.
  • Reduced call volume and email inquiries: Streamlining product offerings can simplify the customer experience, leading to fewer queries and complaints, reducing the customer service workload.
  • Streamlined quarter-end and year-end result calculations: With fewer products, the process of calculating quarter-end and year-end results can be more efficient and less time-consuming.

Often banks add new accounts in order to match a rising rate environment. Rather than “protecting your spread,” you may end up alienating and losing existing customers to another bank. Customers that stay may request to transfer their old account to an enticing new Gold, Platinum, or Plus account. This will damage banking efficiency by increasing the time your branch teams must spend updating and closing accounts. If rates are rising, consider modifying your deposit product design by increasing the APY on existing deposit accounts rather than introducing new choices. Your customers will react positively to your perceived generosity and be more likely to refer colleagues, friends, or family to a specific account at your bank.

Fewer account options benefit your customers and allow your staff to focus on engaging current and prospective clients. Curating a meaningful but limited menu of services could increase efficiency ratios, customer acquisition and satisfaction should grow.

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Digitize Operations

Community banking is built on relationships with neighborhood residents and local businesses. Credit Unions know that these interpersonal relationships are paramount to the success of a small bank. Because so much emphasis is placed on this aspect of community banking, the idea of digitizing banking operations can sound foreign or even disastrous. To improve your efficiency ratio, we are not suggesting you close your branch offices or replace your associates with machines. Digital operations can enhance your business without sacrificing human interaction with your customers.

One specific way to increase efficiency is to switch your marketing tactics. While billboard and newspaper advertising may have served you well in the past, can you accurately calculate the return you received on that investment? The results of outbound marketing are difficult, if not impossible, to track. In today’s digital world, your advertising dollars could be more efficiently spent on CRM, email marketing, Google Ads, and Facebook ads – inbound marketing channels. Digital advertising can target specific individuals and businesses with banking solutions tailored to their needs. Consumers’ responses to the advertisements are tracked, and your institution receives valuable feedback to help guide future ad spending.

If the advertisement includes a special offer, like a $250 new account opening bonus, your bank is tasked with accurately fulfilling the terms of the promotion. Failure to provide your customers with proper documentation and timely fulfillment of promotions leads to Reg DD violations. To ensure efficient banking operations, don’t offer customer bonuses if you can’t automate the fulfillment. Assigning employees the responsibility of accurate promotion tracking increases the chances of human error and draws the attention of your regulators. Paying out bonuses exactly as promised is a job best suited for digital automation. With digital operations monitoring your compliance with Reg DD, a TISA Exam of your financial institution’s procedures should be nothing to worry about.


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Outsource printed bank statements and eStatements

Simplifying your daily operations is another great way to improve your efficiency ratio. As a local bank, your priorities lie in attracting new customers and keeping your current customers satisfied. Investing in state-of-the-art IT infrastructure and physical equipment to handle your eStatements and compliance communications may keep you in regulatory compliance, but it has little effect on customer satisfaction. Rather than committing valuable resources to a behind-the-scenes task, you can hire the top talent and still save 20 percent of what it would cost to produce results internally. Outsourcing your printed bank statements and eStatements allows your bank to grow without building a costly in-house team.

Best of all, your company only invests in outsourcing when you need it. Instead of buying equipment, paying for additional office space, hiring new employees, and training staff year-round, you can outsource the work seasonally. Outsourcing allows you to grow as a company by focusing your time on customer service. Your customers appreciate the helpful bank manager who helped them get a loan, not the high-speed printer that produced their bank statement. By sticking to what matters most and letting someone else handle the rest, your efficiency skyrockets and your operating costs decrease. Outsourcing can provide:

Contact PrintMail to learn how we can help you grow your bank!

PrintMail is a leading outsourcing partner for print and electronic financial correspondence and digital marketing because we prove our value for our customers. We’ve helped a variety of banks through acquisitions and mergers, including the hurdle of achieving $10 billion in assets. Throughout it all, we’ve maintained our record of 98% on-time delivery with an error-free rate of 99.999976%. How can we help you scale your bank? Let’s start a conversation!