ROYAL BANK OF SCOTLAND INTRODUCES A MORE FLEXIBLE OPERATING MODEL Case Study ”Latest estimates indicate check usage is falling by approximately 10 percent per year. We therefore needed a more flexible operating model as volumes continue to decline over the coming years. A less complex infrastructure will generate cost efficiencies, making the clearing system more cost effective to maintain.” Judy Lenihan, business manager, clearing operations, The Royal Bank of Scotland Group Objective Develop a more flexible operating model to support the check clearing system and generate cost efficiencies despite declining volumes Approach Introduced a business transformation program to assess the clearing system’s cost model and renegotiated the terms of the existing Business Process Outsourcing (BPO) contract IT improvements • Introduces additional image capture technology at smaller sites, reducing courier, voucher storage and The Royal Bank of Scotland Group (RBS), a UK bankingHP customer infrastructure costs and insurance holding company, delivers a wide rangecase study: of services to over 35 million customers through moreRBS Groupawards HP a Business benefits than 40 well-known consumer brands, including Direct • Improves workflows within the check clearing process, Line, Churchill, Coutts and Citizens. Royal Bank ofBusiness Process Scotland plc also controls National Westminster Bank enhancing the service to customersOutsourcing (BPO) (NatWest) and Ireland’s Ulster Bank, with the Groupcontract to manage • Delivers a cost-effective BPO model that prevents operating the UK’s largest bank network comprisingUK check clearing fraud, mitigates risk and aids regulatory compliance over 2,000 branches. Established in 1727 and basedoperations with a in Edinburgh, worldwide services include business andhighly-flexible cost • Supports all industry Service Level Codes (SLCs) and between 1,400 and 1,500 Service Level Agreements private banking, insurance and corporate finance.model that supports (SLAs) defined by the bank, exceeding RBS’sdeclining volumes expectations Declining check usageIndustry: Historically, checks evolved as a payment method toFinancial services avoid carrying large amounts of gold or silver, and later, paper money. Although checks have been around since the ninth century, they only became popular during the twentieth century. By the second half of that century, banks issued billions of checks every year as automated processing became prevalent throughout the industry.
Customer solution at a glance Applications • Check out-clearing • Check in-clearing HP ES Services • Check Clearing Services • Document Processing Services • Inbound Processing Services • Outbound Processing Services “Annual check volumes peaked at four billion During 2010, the sites processed a monthly average in the early 1990s but recently usage has fallen of 71.6 million items for all work streams, which significantly as electronic payment methods, such as included a monthly average of 65.2 million checks credit and debit cards, have become more popular. within the out- and in-clearing processes. In that same Latest estimates indicate check usage is falling by year, the monthly SLA achieved by HP regularly stood approximately 10 percent per year,” explains Judy at between 99.64 and 99.99 percent. With this level Lenihan, business manager, clearing operations, The of service quality in place, it is not surprising that RBS Royal Bank of Scotland Group. attained the longest period at the industry’s highest rating for service standards, as driven by the Cheque “Several alternative payment methods already exist for and Credit Clearing Company. the industry’s various customer segments. These include online banking, debit and credit cards, telephone Business transformation program banking and the Clearing House Automated Payment System (CHAPS),” continues Lenihan. “However, some The check and credit industry researched alternative customer segments such as charities and small-medium payment methods including a truncated method enterprise businesses still feel they cannot manage adopted by the USA that involves check scanning and without checks. The industry, banks and other suppliers mobile technology. However, this option proved cost feel it is important to manage the decline in volumes prohibitive within the UK. “The flexible cost model without disenfranchising any customer segments. we required needed to accommodate a shift from We therefore need innovative solutions and a sound larger sites to smaller and more local image capture education process to deal with this inevitable change.” sites whenever check volumes reach a predefined level,” says Lenihan. “This approach to consolidating RBS therefore decided to introduce a business operations will drive down infrastructure costs.” transformation program that included reassessing its check clearing system and the services delivered by The original contract between HP and RBS was due long-term outsourcing partner HP Enterprise Services. to expire in 2011 but both parties recognized that the existing operating model was not flexible enough. Put Trusted partner simply, as volumes decline, the cost of processing each check increases and eventually the cost of the clearing HP has managed the check clearing process within process would become unsustainable. Consequently, RBS for over 10 years by providing Business Process before building a new cost model, RBS established Outsourcing (BPO) services at 11 locations throughout a business transformation program that involved the UK. The larger sites, some of which run around the mobilizing a joint team to consider the operational clock, are equipped with voucher sorting machines design and the commercial and risk aspects of the while the smaller sites employ image capture clearing process. To support this, RBS extended its BPO technology. Designed to streamline the clearing contract with HP to 2018. process, both types of site must satisfy clearly defined Service Level Agreements (SLAs).2