Electronic Cheque Clearance e-Processing Time Reduction

Electronic Cheque Clearance e-Processing Time Reduction

Wipro Infotech, Bangalore

Key words: Electronic Cheque Clearance, Lean, Value Stream Mapping, Mistake Proofing

Abstract

This paper is based on the project which was aimed at improving the efficiency of Electronic Cheque Clearance e-Processing Time Reduction for one of our clients, a leading private sector Bank in India who is into a full service commercial banking and serves Corporate and Retail Customers in Financial Markets, Corporate Finance, Branch Banking, Investment Banking, Business Transaction Banking and Wealth Management for clients across the country. Cheque processing is one of the critical activities in our client’s day to day business as it has a direct impact on end user satisfaction. Electronic Cheque Processing is one of the most cost effective and hassle free solutions. Security and reliability are the greatest benefits. However, the Electronic Cheque Clearance Processing was inconsistent and was not up to the expectations of our client’s customers. Lean tenets like Value Stream Mapping, 5 Why, Cause and Effect Diagram and Mistake Proofing were used to mitigate the challenges noticed in Electronic Cheque Clearance. Lean approach ensured significant process improvement. Post this improvement initiative, it is noticed that Electronic Cheque Clearance time is significantly reduced. This led to reduction in revenue leakage and improved customer satisfaction. Also the time spent on resolving Electronic Cheque Clearance related queries was completely eliminated.

Introduction This case study delves into the detailed investigation of Electronics Cheque Clearance process and the approach taken towards application of lean tools and techniques to address the business challenges. It explains how the team brainstormed to arrive at key areas where lean principles could be leveraged to optimize efforts, reduce number of transaction delays, maximize process efficiency, compress cycle time and achieve end user satisfaction. What follows is a brief introduction of five steps of creating a lean flow that leads to problem solving and organizational learning, for further details the reader is referred to Liker (2004). The first step of lean flow is to identify who are the customers and what added value they want to be delivered. After this, the repetitive processes from the unique, one- of-a-kind processes are taken apart and knowledge is gained as to how we can apply lean to the repetitive processes. Step two is followed by mapping the flow to determine value added and non-value added activities. Thereafter, creative thinking leads to applying the broad principles of lean to these processes using the future-state value stream map. Finally, we start doing it and learn by doing the same using a PDCA-Plan, Do, Check, Act cycle and then expand it to the less repetitive processes. While implementing the lean flow, the team’s focus was to look at the timeline from the moment the customer is requesting Cheque clearance to the point the when the transaction is executed successfully. The main goal was to enable concurrent multiple Cheque clearance

* Arti Rajesh, Wipro Infotech, Bangalore

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transactions while maintaining overall consistency of data. The team strived to reduce this timeline by eliminating the non-value added process steps. The team fixed Electronic Cheque Clearance transaction delay and redesigned fast and flexible processes that enabled customers to have what they want and when they want it with the highest quality.

Process Background and Identification of Problem Electronic Cheque Clearance is one of the important elements of End Customers’ Banking Experience. Bank is obligated to offer the maximum level of technology and innovation in end-user banking process in order to sustain its customers. Electronic Cheque Clearance is one among such improved end-user banking platform. Electronic Cheque processing is the crucial element of economy. In this the bank runs customers’ paper Cheque through an electronic scanner system. The scanner system captures customer’s banking details and the payment amount. The information is then transferred electronically over the Reserve Bank of India network which takes the fund from customer’s account and deposits the same into the drawee’s account. Cheque Truncation System (CTS) helps stopping the flow of physical Cheque. CTS is based on a Cheque Truncation or Online Image-Based Cheque Clearing System where Cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank and transmitted electronically. In a Cheque Truncation System, the Cheques are scanned through the scanners to capture the image of the Cheque. The application displays the details of Cheque scanned and updates the required information of each Cheque. Bank executive enters the Cheque details of the scanned Cheque in the system. Before Clearing Lodgment time, the teller updates mandatory details of Cheque in an excel sheet for records. Teller gives all Cheques to vendor for creating unloadable flatfile of Cheque details. Vendor creates unloadable files in uploadable format. Vendor gives the uploadable files to branch. The application team enters amount of Cheque and Cheque payee name in the application. The system validates the details. Post validation the batch is processed and confirmation message is displayed on screen. Once the batch is processed, the data goes to main table of database. Post authorization, the authorizer runs late clearing and outward clearing modules. Now unclear funds are reflected in customer account. All Cheque details are updated in CTS application by clearing team in batches. At 2.30 PM CTS application service for sending outward Cheque data is active and the data is automatically sent to NPCI (National Payment Corporation of India). Next day NPCI confirms the status of the Cheques logged on the previous date and Cheque returns are marked by clearing team. VDC (Value Date Clearing) module is run by clearing team authorizer and funds are transferred from unclear bucket to available balance. Value Date in banking is the delivery date of funds traded. There was a delay observed in Cheque processing which is a critical banking business process. The team realized that Electronic Cheque Processing system is far from lean. Based on the success stories across banking sector that had implemented lean, the project team felt that “lean” here was about straightforward waste reduction and it was the way to go to address the business challenges of Electronic Cheque Processing delay.

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Lean Implementation

Problem Solving Approach A lean implementation team was formed to identify with and explore various lean tools and techniques. The team believed in creating superior customer experience which essentially depends on how the team members are involved at each level in the ‘Customer First Way of Life’. Hence, the team ensured the involvement of stakeholders from various functions and levels in the organization to address the challenges and improve the process. The problem solving approach adopted was as follows; the team assessed the process as it is and checked if it was stable. After confirming the stability, time and motion study was conducted to understand time spent on each activity involved in Electronic Cheque Clearance process. Measurement system analysis was performed to validate the data captured. The team then performed value stream mapping to identify value added and non-value added activities. Project goal was set and validated using Statistical techniques. The team performed 5 Why analysis and collected data against the root causes identified to determine the relationship between X values and Y value and then valid X’s were chosen for solution implementation. Post this; the issue was resolved using lean doctrine like Mistake Proofing and Automation.

Objectives The main objectives that were expected out of this project were to: ² ² Eliminate the time delay in Cheque processing ² ² Improve customer satisfaction by delivering clearing Cheque without any delay ² ² Improve process efficiency

Tenet Implementation Details

Tenet 1 – Value Stream Mapping The first tenet taken up for implementation was Value Stream Mapping. Value Stream Mapping helped analyze every step of the process and flow of information in high detail. The team created diagram of the current state that explained the current process. It created visibility on the actions taken place. During multiple brainstorming sessions, team identified the actions that take place during Electronics Cheque Clearance process and the amount of time each action takes. The team figured out how much time was spent in waiting. During this time and motion study, the team used stick notes on white board which enabled them to shuffle boxes around quickly. Visual work flow of various steps involved in Electronic Cheque Clearance transaction process was created with the requisite inputs from the team. This helped in identifying waste and loop backs in the process and prioritizing area of improvements. The team created current state map of how the Electronic Cheque Clearance transaction takes place. It then created the future state map indicating waste reduction and its effect and finally developed and implemented the plan to reach the future state.

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Figure 1: The current state map

There was a significant waste and loop back observed in Electronic Cheque Clearance process. This was due to slow processing of VDC (Value Date Clearing) module. Delay in VDC execution resulted in overall Cheque clearance process suspension leading to end customer dissatisfaction.

Tenet 2 – Cause and Effect Diagram Cause and Effect Analysis was performed in order to identify possible causes for Electronic Cheque Clearance delay. This structured analysis helped to investigate underlying potential causes of the problem. Team defined the problem and drew Cause and Effect right to left by mentioning the problem on the right and updating the potential causes on the left in generic cause categories of People, Method, Machine and Material. Multiple rounds of brainstorming sessions were conducted with domain leads, technical solution group, and client to identify the potential causes. The purpose was to brainstorm all the possibilities that could lead to Electronic Cheque Clearance transaction delay and then drill down to the reason(s) that were causing this issue. This enabled the team to focus on issue. The graphical representation provided the real time snapshot of every team member’s shared inputs. Identifying the causes of Electronic Cheque Clearance transaction delay and preventing the delay from occurring was the purpose of this exercise. Various causes surfaced as a result of this exercise and enabled the team in identifying all the likely causes of Electronics Cheque Clearance transaction delay. It helped in systematic investigation of the causes behind Electronics Cheque Clearance delay and eventually led to robust solution. Now the team was well on its way to prioritize the key causes identified during this exercise.

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Machine Men

Electronic Check Clearance Experience to handle Capture Module Processing System

Query Execution Loading MICR

Cheque Truncation System Authorization Delays

Core Banking ApplicationCheque Alterations

Supervisor Verification and Clearance House Interface Reconciliation Cheque Inward/Outward Processing Delay Cheque Error Processing

Specifications and Standards of data images Batch Data Entry Check Deposit and Data Image friendly colored ink Capture Process

Complying with CTS 2010 CTS 2010 Standard – Size of standards paper, MICR Band, Quality of paper IQA – Image Quality Assessment

MaterialMethod

Figure 2: Cause and effect diagram

Tenet 3 – 5 Why Analysis With the help of Cause and Effect analysis and Value Stream Mapping, the team was able to distinguish as many potential causes as possible for Electronic Cheque Clearance transaction delay. Now was the time to identify gradually more detailed levels of information to know the actual root cause. This was done by asking a series of Why questions. Team started with a problem and ensured that for each Why, the answer was grounded in facts. Questioning process continued until all were confident that they have uncovered the real root cause.

Why # 1 Why there is a delay in VDC module execution?

Why # 2 Why queries run for longer time during VDC execution?

Why # 3 Why queries are taking longer route for statement execution?

Why # 4 Why queries are unable to select optimal path during execution?

Preventive Action Rebuild the query execution path using “SQL Profile” in place of “SQL Plan”

Figure 3: Analysis 5 Whys

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Tenet 4 – Mistake Proofing Concerns in banking processes are not so easily visible; they are hidden in the workflow. The team analyzed these hidden process steps and identified the steps where human error can lead to defects. These process steps were relied on Engineer’s attention and skill. Post this, doing a detailed analysis using appropriate Lean tools like Cause & Effect Diagram, VSM and 5 Whys, it was observed that the root cause of the problem was Inefficient Query Optimization by SQL Query Optimizer in VDC (Value Date Clearance) module. Query optimization is a technique which uses information like Object, System Statistics, Compilation Environment and Bind Values and so on to determine the best path for a SQL statement execution. In some cases, errors in these inputs (Object, System Statistics, and Compilation Environment Bind Values) can lead to a sub-optimal path. Query optimization is a function of many Relational Database Management Systems. The query optimizer attempts to determine the most efficient way to execute a given query by considering the possible query evaluation plans. The team chose Mistake Proofing method to eliminate these errors in order to rebuild the Query Execution Path using “SQL profile” in place of “SQL Plan”. The script regarding VDC module was analyzed. The time taken to complete the operation using the script was tracked. Problem ticket was raised with SQL expert to examine how the script can be optimized. SQL expert designed a new script. A change request was logged to implement the changes in test environment. The changes were tested by technical experts and customer in test environment. Once the test was passed, the same script was released into live production environment. PIR (Post Implementation Review) was performed and effect of change was assessed. The change request was closed. Post solution implementation, the team observed remarkable improvement in VDC (Value Date Clearing) Process time. Time taken in each processing cycle improved by 95%, i.e. an average of 43 minutes in each cycle reduced to 2 minutes per cycle. That was a great achievement.

Benefits Electronic Cheque Clearance Processing delay was eliminated. By this improvement in process, the end customer is now able to complete the Electronic Cheque Payment without any miss. The Electronic Cheque Execution time reduced by 95.55%, ensuring increased end user satisfaction. The improvement in the end customer satisfaction reached all-time high of 99.20% in the quarter. The solution is replicated in 400 hub branches which fetched the savings of over 547 business hours. Post verification cycle, the cheque is now getting cleared within 2 minutes whereas the same used to take 45 minutes earlier. SQL Path Optimizer Solution has been applied across all the Core Banking Applications. Value Stream Mapping, Cause and Effect exercise, 5 Why analysis, and Mistake Proofing were leveraged to execute the project. The summary of benefits derived by the team, customer and organization are mentioned below. Two Sample ‘t’ test was conducted to verify the reduction in mean. Post this test, the team was able to conclude that there was a significant improvement in the mean from 45 minutes to 2 minutes.

70 Electronic Cheque Clearance e-Processing Time Reduction Figure 4: Electronic Cheque Processing Transaction Flow

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Table 1: Metrics Baseline and Planned vs. Actual

Parameter Before After Benefit

Post Verification Cycle Cheque Clearance 45 minutes 2 minutes 95.55% Processing Time Reduction

Capability of Daily Cheque Execution 9532 Cheques 200172 Cheques 20 Times Increase in Capability

Capability to Support Total Branches 600 2000 3 Times Increase in Capability

The project resulted in enhanced customer satisfaction, efficient Electronic Cheque Processing, decrease in transaction delay and increase in employee satisfaction.

Conclusions The simplicity of Lean tools is its greatest strength. Lean tools are driven by logic and it is because of this that involvement of all team members, including the ones who were relatively new to the lean concept was possible. The team was motivated and engaged throughout the project and contributed their best. The team understood the need for flexible processes that gives their customer efficient Cheque processing facility with minimum waiting. It helped achieve 99.55% processing time reduction and increased the capability of cheque processing. The top management continued to focus on how to create customer value and align the entire team for value creation. After the success of this project, the team is confident and is able to continue focusing on getting Deliberate Simplicity in banking environment through lean implementation.

Reference Liker, J.K. (2004): The Toyota Way, New Delhi: Mc Graw Hill Education.

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