With its wholesale lockbox infrastructure aging, Eastern Bank faced a challenge during the latter half of 2008. "Although we were bringing on new clients, our volumes were declining due to the financial crisis," explains Barbara Heinemann, Eastern's EVP and CIO. "To improve our competitive posture we needed to add new lockbox features and services, but an internal analysis showed the capital investment for updating our infrastructure was cost-prohibitive."
As Eastern ($7 billion in total assets) began considering outsourcing options in early 2009, its long-time payments solutions partner, Mosinee, Wis.-based WAUSAU Financial Systems, made an intriguing offer. "At that time WAUSAU had an outsourced retail lockbox solution but not wholesale," Heinemann recalls.
"They wanted to get into wholesale and were either going to build a new lockbox operation or acquire an existing operation," she continues. "Since our existing lockbox processing was enabled by WAUSAU's solutions, they approached us with a plan to acquire our operation, including our employees, and upgrade the platform. Then they would provide us with outsourced lockbox processing while growing their business in the market."
According to Heinemann, to evaluate WAUSAU's offer, Eastern explored other outsourcing solutions. Ultimately, it decided to negotiate with WAUSAU, and the companies came to an understanding in early August 2009. While a final contract was hammered out, preparations began, including leasing space to WAUSAU on the first floor of Eastern's Boston headquarters for a completely segregated and secure outsourcing operation.
Once the contract was signed at the end of September 2009, the entire transition was completed by late October, with WAUSAU doing the heavy lifting, Heinemann relates. Not surprisingly, employee uncertainty was the biggest challenge, which Eastern "managed with high sensitivity," she says.
Ultimately, the perks of working for WAUSAU won over the 15 transitioning Eastern employees, Heinemann insists. "Unlike their previous bank location, the noisy processing equipment is now separate from workspaces," she notes. "And all new desktop equipment was installed, along with the updated software platform that WAUSAU implemented. So our former employees became part of a modernized, efficient and expanding operation."
Since Eastern's former lockbox employees had provided customer service, the bank enhanced its call center by training existing staff to handle lockbox calls and establishing service metrics, Heinemann adds. WAUSAU was tasked with monitoring overall customer satisfaction.
Locking in the Rewards
Today, Eastern is reaping the rewards. "Operating costs have declined by more than 17 percent and are now predictable from a management standpoint," reports Heinemann. "At the same time, our resiliency is significantly improved by redundant systems for both operational and disaster recovery. Plus, we retained all of our existing lockbox customers throughout the transition as well as attracting 16 new clients during the first year. And we have over a half dozen others in the pipeline."
In addition, Eastern expanded its image lockbox capacity, permitting clients to receive item images the same day rather than the next business day. "As a result, eight of our existing customers have already upgraded to our new image lockbox capabilities," Heinemann says. "And we're expanding our healthcare clientele because the required EOB [explanation of benefits] document is captured and transmitted electronically."
Further, Eastern is leveraging WAUSAU's remote deposit capture lockbox options to attract and service local clients that have offices outside of the bank's regional area. "We're no longer limited geographically," acknowledges Heinemann.
Going forward, Eastern will evaluate additional capabilities, such as options to assist commercial clients with transitioning to electronic invoicing and payments, Heinemann says. "We've identified customers that might be interested in working with us," she notes. "The first one we approached was very excited about the prospect."
Heinemann adds, "Clearly, adopting an outsourced lockbox solution has increased our competitive posture. In fact, our sales team reports that our position is significantly improved over our competitors."
Anne Rawland Gabriel is a technology writer and marketing communications consultant based in the Minneapolis/St. Paul metro area. Among other projects, she's a regular contributor to UBM Tech's Bank Systems & Technology, Insurance & Technology and Wall Street & Technology ... View Full Bio