For financial services firms looking to compete against an ever-growing roster of fintech players, the path to parity is through the back office – particularly when it comes to re-evaluating and modernizing technology and processes. Many banks, credit unions, wealth management firms, and other financial services firms are already feeling the pain of being locked into outdated technologies that cannot evolve or adapt – and do not support new digital products and services.
According to Accenture, the main reason that keeps financial institutions from automating manual tasks and processes is that they don’t know where to start. The large number of IT systems and products to be considered in connection with the challenge of identifying the internal processes to be automated seems to lead to a clear inability to act for many. There is also the pervasive dilemma of retrofitting new technology to legacy core banking systems and related applications.
A practical and straightforward place to start is to identify the internal process points that cause the most friction and pain, which can be quickly automated with readily available technology. Of course, every business is unique, but here are five common pain points that are ripe for digital transformation for almost every bank, credit union, and financial services firm:
1. The Effects of Manual Entry
No modern bank should have to deal with processes that require manual data entry or repetition. But most still do.
Banking processes such as originating loans and opening new accounts have long used tools and techniques such as document capture and optical character recognition (OCR) to transform paper and digital documents into the structured data needed to carry out those processes. But extracting data from its original source is just the beginning.
To create an end-to-end digital process that completely eliminates the need for manual data entry, forward-thinking banks employ a combination of technologies collectively known as intelligent document processing (IDP). IDP platforms combine capture, optical character recognition (OCR), artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), and intelligent workflow automation tools to ingest large volumes of unstructured content (e.g. Word documents). and to digitize, PDFs, etc.)
A September 2021 BAI report cited that more than 90% of decisions to open new accounts can be made without manual intervention. Banks and credit unions using IDP solutions are in a perfect position to achieve this level of intelligent automation.
2. Managing information across multiple silos
Opening a new account or applying for a loan is an information- and document-intensive process. Several documents are required – not only from applicants, but also from external sources such as credit institutions and government agencies.
The term “information sprawl” describes the way documents and data are spread across multiple systems within an organization – a scenario that forces employees to navigate between multiple systems, slowing down processes and creating an environment in which they often have difficulty finding the most current and accurate versions of documents. Employees can even resort to searching for physical files in branch offices.
IDP platforms can connect existing information sources and provide employees with a single interface to search, access and share information across multiple systems. It gives back office staff access to just the right information at the touch of a button. This streamlined workflow can significantly improve employee productivity and increase customer satisfaction, saving banks significant time and money.
3. Slow account opening procedures
We live in a world where vast amounts of information and documents are digital, so opening client accounts should be digital too, right?
Apparently not. Many banks and credit unions still require manual data review and approval during account opening processes, resulting in slow decision-making and a poor customer experience.
Intelligently automating manual back-office processes can significantly reduce the time it takes to onboard new customers. By eliminating manual entry and approval and automating workflows, employees have all the information they need to take action at the right time.
A critical aspect of automation is the use of alerts to eliminate delays. For example, notifying an approver or supporter that their input is required can dramatically reduce request processing time and increase customer satisfaction. A more advanced example is using AI to automate decision making based on set criteria. Depending on risk, banks can automatically approve some types of applications or add complex analysis of patterns, trends and data to further review specific applications before approval.
Efficient onboarding ensures happier customers, quicker access to revenue for the business, and much less stress for everyone involved.
4. Risk Management for New Accounts
Information security and ensuring the protection of each customer’s confidential data is of paramount importance for all financial services companies. All information, digital or paper, is subject to a variety of policies and regulations such as anti-money laundering (AML) and privacy policies. Banks face fines, business disruption and the potential for negative customer perceptions if information governance and security are not maintained.
To improve risk management, banks and credit unions should securely digitize data and documents as soon as they receive them. This approach ensures that only the right people have access to sensitive content and data throughout the process and that the right information is transferred to the appropriate system of record once the process is complete. Actions like locking down shared folders, integrating with existing authentication providers, and providing comprehensive audit trails are just a few ways IDP solutions enable banks to apply extensive (but easy-to-maintain) permissions and security systems to manage compliance and financial risks to manage carefully.
5. The bottleneck of the distributed paper process
The branch model, while popular with retail banks and credit unions, is often fraught with disjointed and time-consuming processes. Unless the organization is digital, paperwork completed at a branch office is often mailed or even faxed to the head office for processing.
This is a governance and processing nightmare. Document transmission is slow, files are at risk of being lost or corrupted, headquarters has no way of quickly absorbing the data contained in these documents, and when information is missing, the turnaround time is often long and frustrating.
The key is to digitize documents, communications and processes as quickly as possible so information can flow seamlessly across the organization.
Intelligent automation connects branch offices with central offices, ensuring that all documents and data are secure and that the right rules for information management are enforced. Automation also makes document retrieval and tracking simple and straightforward for all users.
Now is the time for automation
Choosing an enterprise software platform can be overwhelming. The landscape is vast and the possibilities are numerous. However, according to Accenture, nearly 80% of bank operations leaders believe their company’s existence could be threatened unless they update their existing technology stack to make it more flexible and support rapid innovation.
The good news is that many new automation tools are cloud-based and can connect to legacy systems via RPA or no-code/low-code integration capabilities that remove a major barrier to adoption.
Once financial service providers begin their automation journey, the benefits can quickly become tangible and measurable. Banks and credit unions that can resolve bottlenecks and eliminate manual touchpoints in their most common processes are immediately better positioned to compete against competitors, attract and retain customers, and reduce their risk of information security breaches.
Ron Cameron is President and Co-Founder of KnowledgeLake, a cloud-native document processing solution that enables organizations to capture, process and manage their content on a single platform. Founded in 1999, the company combines intelligent document capture and robotic process automation (RPA) to increase productivity.