Lean Six Sigma for financial transactions: $4.5MM operational risk reduction in wire transfers

The challenge

A medium-size bank in the middle of a rapid growth cycle had one central concern: could its business processes scale? Management wanted the rigour and controllership to handle rising transaction volume while controlling cost and keeping service consistent.

A pilot program applied Six Sigma, tailored for the financial sector, to several high-volume processes. Wire transfers, considered by many in the bank to be relatively simple, were one of them.

What we found

The perceived process had four steps: receive request, book wire, approve wire, reconcile. Following real wires from initiation to completion told a different story:

• 32 actual process steps, and every representative had their own way of completing them
• 55% of transactions contained errors, leaving 45% of customers dissatisfied
• 31% of steps were non-value-add, costing around $120,000 a year in misapplied labour
• 2% double payments or wrong accounts, putting $4.5 million at risk

Over 85% of steps were manual, and the root causes were clear: the bank's IT infrastructure was under-used, and the data needed to complete a wire wasn't collected before the process started.

Our approach

Rather than reinvent the wheel, we studied a similar process inside the same bank: check issuance, where over 80% of steps were already automated. The same technology could be used for wires. Within four weeks the process was re-engineered to five steps, with critical data inspected up front at the branch.

Results

• Process steps reduced from 32 to 5
• Transaction errors cut from 55% to under 5%
• Non-value-add steps eliminated entirely
• Double payments and wrong-account errors reduced to zero, removing $4.5 million of risk
• $4.69 million in total savings for a $50,000 re-engineering cost

Imagine the savings if every high-volume transaction were examined the same way.