January 1999

Financial Services Keep Customers in the Know

Sam Dickey

Looking for ways to track financial discrepancies, share documents on CD or integrate email? Credit card king Capital One Financial and mutual fund titan Oppenheimer Funds lead the way.

Success in the highly competitive financial services industry depends on a simple formula: better, faster, cheaper. Paper intensive, like their sister companies in banking and insurance, most of these organizations have been quick to take advantage of the benefits of document imaging and workflow systems.

By now, however, some industry innovators have gone beyond the basic document capture, workflow, storage and retrieval paradigm. Leveraging technology and building on an existing imaging/workflow infrastructure, these companies have found new ways to increase efficiencies and improve customer service.

Capital One Financial, for example, has extended its imaging system, which was initially developed for processing credit card applications. It now tracks and resolves credit card fraud as well. HomeGold, a mortgage company, reproduces images of its mortgage files on CD-ROM for potential investors to review. Oppenheimer Funds has taken the leap to the Internet. It now captures images of email received at its Web site, adds them to imaged customer files and responds via email. Read on for a closer look at these applications.

Capital One Extends Imaging to Cut Fraud
Based in Falls Church, VA, Capital One is among the largest consumer financial services organizations in the US, with $16.3 billion in assets and 15 million customers. It is also one of the top ten issuers of MasterCard and Visa credit cards.

In 1996, Capital One implemented an imaging and workflow solution within its credit card operations for credit card applications processing and customer correspondence regarding credit card accounts. It was developed with integration and consulting firm American Management Systems (AMS) (Fairfax, VA 703-267-8000 www.amsinc.com).

According to Ken Cirillo, vice president of risk operations, Capital One's goal was to improve customer service response time and to manage a customer base that was increasing at 35% per year. High growth for credit card issuers also means increased risk of fraud, so the company also needs a means to manage and recover fraudulent charges.

Capital One can spot potential instances of fraud with systems that detect unusual account behavior. "If an account does most of its transactions in New York, and a transaction pops up at a Miami jewelry store for a large amount, that would cause a flag to go up," Cirillo explains. "We get back to the customer and try to determine if it was fraudulent. If we believe it was, we trigger an investigation."

A case number is assigned and it is given to a recovery specialist who tracks down the paperwork, works through the case and determines who is liable. The problem for Capital One used to be that the investigation was a manual process, involving file folders and paper documents. Compounding the challenge, this procedure had to be completed within a 60-day time limit set by MasterCard and Visa regulations.

To make matters worse, not all the necessary documents would always be in the possession of Capital One. Credit card drafts are sometimes held by the merchant's bank. They have to be recovered by request through the MasterCard or Visa networks, a time-consuming process.

"We wanted to integrate a fraud recovery system with our existing workflow process in a way that would control the flow of work to the recovery specialists," Cirillo says. "Generally, it's first-in-first-out, but dollar priorities may override that. The workflow software would allow us to control the order that work is done."

The customized solution was BORIS (for Best Online Recovery Information System), which was developed in partnership with AMS. Now, when fraud is indicated, the BORIS system retrieves card member transaction data from the mainframe and credit card applications from the optical library.

Running on a dedicated Compaq server, the system also requests copies of credit card drafts from the merchant banks. These are scanned and sent to Capital One as images. When the file information is complete, it is sent to a recovery specialist's desktop as a virtual folder. It is already prioritized with assigned deadlines.

Cirillo says BORIS has already paid for itself since it went live in mid-1997. "When we figured out what we saved in costs as well as what we saved in charge-offs by getting to these accounts quicker, the entire investment [paid for itself in] less than twelve months," he says.

"Without the paper, we have had a 24% reduction in error rates. We have also seen a 15% productivity improvement, [which] has allowed us to grow our volume by 15% with no increase in staff."

Improved morale among the fraud recovery specialists has been an additional benefit. "The manual environment was so difficult, people shied away from some cases," Cirrillo explains. "It's a painful process to retrieve all that paper and match signatures. Specialists might have decided a case wasn't worth it. It's no longer a situation where people avoid work, deliberately or accidentally."

Mortgage Lender Shares Images
Imaging and workflow helped tame the paper at HomeGold, a Greenville, SC-based mortgage company, but the problem wasn't truly solved until the company found a way to share images with internal and external constituents. HomeGold issues an average of $70 million in new-owner mortgages per month from four operation centers in Easley, SC, Indianapolis, Houston and Phoenix. HomeGold then resells the mortgages to investors.

HomeGold receives 2,000 mortgages per month from the operations centers, each including about 200 pages of documents. Before implementing an imaging system in November 1997, mortgage files were manually assembled and then passed to, successively, the audit department, the underwriting department, the appraisal department and eventually back to the file room for storage.

"There were problems when customers called with questions about their files," says Terry Odom, imaging manager. "We would have to take the file out of the process so a customer service representative could answer the question, then we had to figure out where in the process to put it back. The result was many misplaced files."

There were also problems servicing the investors who purchased the mortgage loans. "After they purchased the file, some of the buyers would call to say that documents were missing," Odom says. "We would then have to call the closing agent and hope he or she might have a copy. A replacement document would cost us thirty or forty dollars."

The solution was the Arcis imaging system from Siemens-Nixdorf (Ontario, CN 905-819-8000). It runs on an integrated NT server in HomeGold's Unisys mainframe. Document scanning, including that of color appraisal photographs, is done at a remote scanning operations center 10 miles from HomeGold's headquarters. The center uses four Fujitsu 3099s, each capable of scanning 80 pages per minute.

The scanned documents are identified by type, assigned an account number and indexed. The images are stored on a local NT server then transferred to the NT server on the Unisys mainframe via a point-to-point T-1 line. The images are archived directly to a six-drive Hewlett Packard 330GB optical library, but they are available from cache for 90 days.

The imaged documents are available to all departments and to customer service representatives simultaneously. The original paper documents are returned to the file room after scanning and are saved for investors, who eventually will want to examine the physical files.

According to Odom, the system has delivered a 25% improvement in efficiency in the resolution of customer service calls. "Questions can be resolved in one call without multiple call-backs," he says. "Throughput has probably increased six times because everybody can look at the image at the same time, rather than waiting two weeks for the file to get through the other departments. And we're saving money by not having to pay closing agents to replace documents that we lost."

Now, when investors visit HomeGold to review the physical files, in 95% of cases the files are right were they should be in the file room. Previously, Odom says, the chances of locating the files immediately, without having to retrieve them from the departments, were closer to 20%.

But beyond eliminating the headaches and costs of the manual process, HomeGold has used the system to satisfy industry regulations and to improve service.

Some states require that mortgage companies keep copies of mortgage documents in that state, even if the company does not have an office there. Now, rather than making paper copies, HomeGold writes the document images to CD-ROM using a Hewlett Packard CD writer. The company then sends the CD-ROM disks to storage locations in the state, an alternative, Odom says, that the state regulators prefer.

For investors who want a preliminary look at files, HomeGold also writes entire files or specified documents to CD-ROM disks (along with viewing capabilities) and sends them to the investors.

"Anyone with a PC and a CD-ROM drive can view documents in minutes," Odom says. "The system has allowed us to sell loans to investors more quickly. Before, we could have only one investor at a time looking at certain types of loans. Now, multiple investors can look at images of the same loans at the same time. The homeowners who have questions and the investors who buy their mortgages benefit from improved customer service."

Oppenheimer Mixes Email With Imaging
Oppenheimer Funds, an investment firm that currently manages $90 billion in assets for mutual fund investors, has added the Web as a channel for incoming documents to its imaging system.

Headquartered in New York, but with its computer operations located in Denver, Oppenheimer implemented document imaging and workflow in 1997. Today, there are 1,200 users on a system that scans and captures about 300,000 pages per week from individual customers, brokers and financial planners. Typically these include new customer applications and payments, requests for transfers and exchanges between funds, and customer maintenance, such as name and address changes.

Incoming documents once were handled several times before being processed, according to Oppenheimer project manager Gary Poffenroth. "We wouldn't have a clue where checks were or where new sale documents were," he says. "Paper got lost. The goal was to eliminate the middle people."

Today, the automated system uses FileNet document capture and indexing software and storage, but the workflow system was developed in-house by Oppenheimer. Documents are scanned in one of four Kodak 923 scanners. Checks are automatically endorsed as they are scanned, made up into bank deposits and picked up by an armored car at the scanning center. Documents are assigned a unique number identified by one of 200 different transaction types. They are then sent to one of about 60 electronic "work baskets" in specific departments.

Oppenheimer's workflow application, written in Powerbuilder and running on a Sybase Unix server, directs the document images to specialists' desktops for processing--oldest first. According to Poffenroth, estimating a hard-dollar return on investment for the system is difficult, but he guesses that without the system, the staff would have to be twice its current size.

"Oppenheimer receives 20,000 to 30,000 calls a day," Poffenroth says. "Prior to imaging, when a customer called with a question, we would take the phone call, hang up and start researching the question. There would be a twenty-four to seventy-two hour turnaround."

All incoming faxes from customers are now received through the imaging system. Faxes are captured as images and entered into workflow, rather than printing and scanning them. Likewise, outgoing return faxes are sent directly from the desktop.

In addition, Oppenheimer has taken an unusual step for a security-conscious financial institution. It has linked the imaging and workflow system to its Web site to record transactions completed over the Internet.

According to Poffenroth, when correspondence from customers is received at its Web site, including requests for general information or questions for portfolio managers, the email text files are converted to TIFF file images, entered into the workflow system and sent to the customer correspondence department's work basket.

Operators there answer the customer's questions, responding with a word processing document, which is also imaged and emailed back to the customer's Internet address. The two images, inbound and outbound, are attached for future reference, indexed and added to the customer's account.

Although Oppenheimer has been able to receive customer mail at its Web site for at least a year, the company implemented an imaging- and workflow integrated email response system in the fall of 1998. Currently, the volume of two-way Web correspondences is about 400 per month, but that volume is expected to increase.

"There are a lot of investors out there -- and the number is growing -- who prefer to do transactions themselves instead of paying a financial advisor to do it for them," Poffenroth says. "The more transaction processing we do via the Internet, the less cost there is to us. It gives our investors greater access to information, and it gives us improved efficiency."