Six Sigma methodology has transformed many industries, helping them achieve new heights. The methodology can help a business continuously strive for excellence in all its endeavors and processes. It does so by providing the tools to identify bottlenecks and the ways to remove those for maximal efficiency. The methodology improves quality and minimizes the variability in processes.
While the tools can be used in a variety of industries, the banking industry lends itself to a particularly easy integration into this paradigm.
Six Sigma and the Banking Industry: Historical Developments
Historically, Citibank was the first financial institution to adopt the Six Sigma strategy. The bank instilled the methodology into its business strategy, which, it said, helped achieve client satisfaction and reliability.
The Bank of America has also been one of the pioneers in the field to adopt this technology. HDFC Bank, ICICI Bank, IDBI Bank, and ABN AMRO utilized the tools.
Six Sigma, Repetitive Processes, and Bank Loan Processing
Six Sigma methodologies are easily applied to processes that are repetitive in nature. Bank loan departments are the perfect candidates, considering the recurring nature of the processes involved.
For instance, loan departments often face problems with timely approval of requested loan applications, bad debt recovery issues, as well as errors in loan processing methods. In this case, Six Sigma tools can help reduce errors while continuously improving quality. These, in particular, lead to a reduction in expenses, greater customer satisfaction, and increase in revenue.
Benefits of Six Sigma in Bank Loan Processing
As pointed out earlier, the Six Sigma tools have a host of advantages for bank loan processing systems.
The use of the Six Sigma DMAIC phases helps:
- Reduce the cycle time taken to process a loan application. This applies to both personal and mortgage loans.
- Improve the processes that are targeted at gathering critical customer information.
- Improve the productivity of the loan processing agents, for the methodology efficiently handles repetitive tasks.
- Improve the credit evaluation processes.
- Reduce waiting times at bank branches.
- Effectively remove errors in loan processing.
- Identify, analyze, and ultimately improve processes.
Overall improvements in the bank branch experiences are also expected through the use of the tools.
Examples of Six Sigma Banking Applications
Six sigma is easily applied to the mortgage banking organizations, since these are dynamic growing companies that operate in highly competitive environments. This dynamic business environment in the sector necessitates the application of Six Sigma to ensure greater levels of customer satisfaction.
The following are some examples of Six Sigma banking applications:
- IndyMac Bank is a nine-year-old internet mortgage bank with some 3,000 employees and $7.2 billion in assets. The organization adopted Six Sigma to achieve execution of processes at a near-perfection level. This also helped the company gain a competitive advantage over its peers while also allowing it to deliver greater levels of customer satisfaction.
- Six Sigma can also help improve customer satisfaction as well as investor confidence in the mortgage banking sector. A well-known mortgage banking firm, whose customers included borrowers who might not have been considered by traditional loan providers, adopted Six Sigma to increase customer satisfaction. This resulted in the improvement of customer response time by 350%, elimination of process redundancies by 66%, and increasing loan retention by as much as 20%.
- The Toronto Dominion Bank, considered one of the world’s leading financial institutions, has been using Lean Six Sigma principles to ensure greater customer satisfaction levels. The bank caters to nearly 14 million customers around the world globally.
- The Bank of America has also been using Six Sigma tools to optimize its sales processes. The bank chose to apply Six Sigma tools to its sales organizations, owing to the observed variations in results which led to improved sales processes.
Six Sigma tools have been applied to a variety of business and industrial environments. These tools, when applied to the banking sector, have shown the potential to transform the workflows and improve process efficiency. As a result, leading banks around the world have been using Six Sigma methodology to achieve efficient operations and to deliver quality processes to customers.