What manual escrow is really costing your bank

Growing commercial deposits can be attractive for banks, but the value of those relationships depends in part on what it costs to support them. At many banks, opening and maintaining these subaccounts still require paper forms, spreadsheets, manual core entry, and employee handoffs. The cost associated with this can be easily overlooked when the subaccount volume is manageable. As commercial relationships increase, the staff time required to open, maintain and reconcile these accounts increases with them. At some point, a process that may have worked operationally can begin to affect the economics of the relationship..The cost is spread across the bankTechnology and vendor expenses are easy to identify in a bank's budget. Manual labor is harder to isolate because the work is often divided among employees and departments. For a commercial relationship with multiple subaccounts, employees may need to record the transaction associated with each account and verify that it is connected to the correct client. After the accounts are opened, employees must keep those records current, reconcile account activity and research discrepancies.The figures will vary by institution, but the underlying question is the same: How much employee time goes into supporting commercial clients and escrow subaccounting, and how does that cost change as volume increases? A familiar process may appear efficient because employees have learned to manage it well. That does not necessarily mean the process is cost-effective or ready to support the bank's growth goals.Manual work can become a growth constraintAs commercial escrow volume increases, so does the workload for the operations team. When each new relationship adds more manual tasks, the cost of servicing those accounts can begin to offset the value of the deposits.A commercial banker may identify a promising prospect, but the institution must also be able to onboard and serve the relationship efficiently. If the back office lacks capacity for the additional volume, the bank may need to add employees, accept longer processing times or limit the types of business it pursues. Manual processes can therefore make otherwise valuable commercial deposit relationships less attractive.Bank of Colorado shows the growth opportunityBank of Colorado, a Fort Collins, Colo.-based institution with $7.8 billion in assets, wanted to expand its commercial deposit relationships across several industries. The bank's existing processes, however, made it difficult to manage the account structures and compliance requirements associated with that growth at scale.The bank deployed a commercial escrow subaccounting platform that allowed commercial clients to open, fund, manage and close multiple digital subaccounts. Within 12 months, Bank of Colorado grew commercial deposits by $28 million and scaled to 212 subaccounts across 26 client organizations. It also expanded into five commercial verticals, including title companies, property management, health care and nonprofit organizations. During a major 1031 exchange closing cycle, funds peaked at $34.9 million.Those results show why operational capacity matters. The bank was able to support more clients, more subaccounts and time-sensitive transactions without allowing account administration to define the limits of its commercial deposit strategy.“Streamlining our subaccounting processes provides both efficiencies and peace of mind, allowing our team to deliver an even higher level of service to our commercial clients,” said Bank of Colorado’s Director of Treasury Management Alex Austin. Understand the cost before volume exposes it Banks do not need to replace a process simply because parts of it are manual. They do need a clear view of the work required to support commercial clients and deposits. The next step is determining whether the process can scale with the business the institution is pursuing.For community and regional banks, that is important because service and expertise remain central to commercial relationships. Time spent on repetitive account administration is time employees cannot spend supporting customers or helping relationship managers grow their portfolios. Understanding that operational cost can help bank leaders determine whether the current process still serves the bank or needs to change. Jill Feiler is CEO of Zsuite Technologies.