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Inlet’s Chuck Cordray: ‘After 20 years, finance is less than 20 percent paperless’

interview with Inlet's Chuck Cordray

One of the things that actually becomes more complicated as the finance industry moves to digital is how customer-facing documents are managed.

Chuck Cordray, CEO of digital document distribution company, Inlet, joins us on this week’s podcast. Inlet is a joint venture between Broadridge Financial and Pitney Bowes. We talk about Cordray’s transition from the media industry into finance, how the joint venture works, and really try to figure, where we are on the adoption curve for companies to go paperless and what needs to happen to make it work.

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Below are highlights, edited for clarity, from the episode.

The adoption curve for going paperless in the finance industry
“Industry stats show that roughly 20 percent of all documents have been turned off to be delivered paperlessly in a digital format. After two decades of being able to say to we can deliver documents digitally, we’re still only at 20 percent. And when you look at the financial industry, like the wealth management industry, in particular, for most firms, it’s less than half that number. Credit cards tend to have a little higher, but not dramatically higher, paperless rate. So as as industry, finance underperforms on paperless delivery compared to across all mailers.”

Why finance underperforms on the move to paperless
“Because of how important financial documents are, consumers tend to want to have a copy and control that copy. Adding to the problem, most consumers sign up to go paperless brand by brand, which means I have a dozen bills coming in each month, and it’s a lot more work and hassle for me to remember the passwords and websites to manage all of them. The nature of financial documents is just like that — people need them for taxes, they need them because they think they need them. If I’m tracking these documents by email and websites, it’s a lot of work. It’s oftentimes easier to just stay in paper to control all the documents. People defensively file paper in case they may need it later.”

The challenges for companies to go paperless
“We often come up against is getting an organization aligned around the idea that now is the time to paperless and this is how you do it. It’s sensitive data, so no one does it instantly. The security vetting process of large banks is rigorous and we’ve passed that with two of the five largest banks in the U.S. who are now clients. We see a lot of inertia. We see our competition as really just helping the large brands understand that the consumer experience at our end destinations is one that they get to control, that their branding is there, and that there are links back to their web properties are there. Going paperless touches many of the different groups within a large organization. You have to get the security team comfortable, the branding and consumer experience team comfortable, and the operations team comfortable. You have to create alignment across an organization.”

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Banks, slow as a paper-based process

One’s hand hurts quite a bit after opening a bank account or applying for a loan. Sometimes dozens of papers need to be signed or initialed, in what seems like an exercise in futility.

This, of course, would not be a big deal if it was only the customer’s hand that hurt. The paper trail in financial institutions is not just costly, slow and painful, it is also unnecessary. Both technology and regulation support better means.

For one bank with over $300 billion in assets, for example, paper-based processes proved to be a waste of money, time and customer trust, said Tommy Petrogiannis, president of eSignLive by VASCO, one of the first esignature companies,founded in 1992.

Since documents were being filled in and signed by hand, he explained, the bank’s centralized processing team often discovered that signatures, data or documents were missing. That meant the team had to notify a bank representative at the branch where the docs were signed, who then had to contact the customer to request that he or she come back into the branch to have the error corrected.

“If an exception or error was not detected, which happened occasionally as the centralized processing team was responsible for verifying and imaging more than 26 million pages per year, the result could lead to downstream legal and compliance risks,” said Petrogiannis.

According to Deloitte, by streamlining process and adding technology to eliminate paper from the process, operating expenses in the processing divisions can be reduced by as much as 25 percent. Records management associated costs can be reduced by 60 percent to 70 percent.

A paperless future is still far off, though. In banks and insurance companies, about 70 percent of processes are paper related, says Rod Hughes, director of product management at Nuance Communications, which offers digitization solutions. The cost of managing paper, he says, is about 85 cents per document for big companies with proper equipment and processes. This can add up very quickly when dealing with millions of pages of paper.

When looking at printing and scanning trends, added Hughes, printing is steadily declining, while scanning is keeping steady. This indicates that people only print what they need to scan and digitize. Paper is regarded as a necessary evil to be minimized.

In most banks, after a form is signed, it is digitized and stored in an Enterprise Content Management Platform, where it is easily retrievable. The physical form is moved to an archive where it is kept for a certain time period.

Perhaps we can do away with paper altogether?

Though some are experimenting with paperless branches, end-to end paperless process is still far off. This is especially peculiar considering that since 2000, when the Uniform Electronic Transactions Act was passed, signing and maintaining documents electronically is considered a compliant way to record transactions. Other countries have similar laws.

According to Petrogiannis, there is some confusion within the banking industry about the compliance of esignatures. Additionally, not many companies have changed internal policies with the change in legislation, according to the Deloitte report. Though the report focuses on the South African banking industry, it is representative of trends in banking elsewhere.

Though paper is known to be costly and burdensome, it is still the assumed default for many banking interactions. It does not have to be that way.

The story of paper is symptomatic to the speed of the banking industry. It has been about 16 years since the UETA was passed and almost 10 years since Steve Jobs introduced the first iPhone and the mobility revolution that followed.

In this case at least, banks are more than a decade behind both technology and regulation.