#Artificial intelligence

Automation and the future of banking

Oct 28, 2020 - 6 min read
Philippe Serafin, Digital Innovation Manager at Sopra Banking Software

Many banks and financial firms are grappling with the process of digital transformation, and automation is playing a central role in these efforts. According to estimates from Accenture, financial services companies in North America alone stand to gain $140 billion in productivity yields and cost savings by 2025 by adopting automation technologies.

These new technologies, driven by artificial intelligence, machine learning and different forms of robotic process automation (RPA), are getting better by the year. And banks need them for competitive survival and advantage.

A productivity multiplier

To provide a quantitative example of the return on investment (ROI) of automation, Forrester research recently analyzed several companies’ transition projects for paper-based workflows. Their findings showed that automation “increased productivity, lowered costs, and created better customer experiences and more engaged employees.” All told, the organizations analyzed saved $6.8 million over three years.

While this research is not specific to financial services, it underscores the value of automation and makes evident its applicability for banking. Today, most finance personnel are focused on operational activities. This leaves limited time and resources for higher-value activities, such as innovation, relationship-building and analysis. In this sense, automation is an enabler that frees up urgently needed resources.

As a result, robotic process automation, cognitive automation (CA) and business process management (BPM) technologies have become key competencies and objectives for most banks. In fact, many of them already have successful implementations of these technologies in place.

For example, Axis Bank has been able to reduce the turn-around time on savings account opening by about 90 percent using RPA. Citigroup, Capital One and JPMorgan Chase are already using AI-fueled automation to drive efficiency on tasks such as validating customer data for Know Your Customer (KYC) or keeping track of audit trails for compliance. All banks are automating. It isn’t a question of if but rather a variation in the speed and scale.

The impact of automation

Although automation may bring a host of benefits, embracing it means eliminating some human-occupied posts and retraining staff. According to a 2019 report by Wells Fargo, 200,000 jobs could be eliminated over the next ten years in the banking industry due to chatbots and other automated software.

Many financial services activities can be fully automated — tasks such as cash disbursement, revenue management and general operations. Given the rise of chatbots, customer service workers are especially vulnerable to being (at least partially) replaced by machines. The above-cited Accenture report also estimated more than 50 percent of tasks performed by loan officers, financial advisers, bank supervisors, loan clerks and tellers could be automated or augmented by 2025.

However, this evolution may become a source of trouble. Indeed, as banks attempt to put customer needs at the center of their strategies while simultaneously doing away with human jobs, they create a paradox inside their own ecosystem. What to do about this paradox is a complicated question, but what is certain is that whatever action is taken will have a significant impact on future society — one that will belong to Generation Z.

Social implications aside, the imperative to automate is here like never before. Covid-19 has forced many people to go all-digital. Automation not only enables banks to achieve operational agility and capture huge cost efficiencies, it also helps them to deliver the digital experiences that customers increasingly demand.

But in financial services, it’s not enough to identify a clunky process and build an RPA tool for it. This creates a patchwork of solutions. Rather, banks need a unified, organization-wide strategy that accounts for internal and external communication, workflow issues, business strategy, security, design practices and the realities of a world disrupted by Covid-19.

Challenges and opportunities

There are many business processes where AI and RPD are already helping financial institutions become more innovative, and plenty of ground remains to be broken. But banks also face numerous challenges when embarking on an automation project.

There is skepticism, there is fear and there is always cost. There are also structural issues. Many banks are large conglomerates with different lines of business that have their own tools and practices. Not having a unified automation strategy is common, and it creates problems because when you automate something, the workflow often affects the entire firm.

Keeping customers happy throughout a transformation process can also be a tricky maneuver. When building these new systems, it’s critical to have clearly defined metrics and a way to understand outcomes and receive customer feedback. All of this starts with the design process and the recognition that customer expectations are informed by all digital experiences, not only the ones in banking.

Employee engagement is another important piece of the puzzle. Happy employees create a virtuous experience loop that includes happy customers. So, at the start of any large-scale transformation project or effort to deploy automation in a particular vertical, it’s crucial to bring your people with you.

Looking forward

Automation is key to survival in a hyper-competitive market and increasing customer and employee satisfaction levels. However, throwing AI at an individual problem or experimenting with automation on the side is no longer sufficient.

Banking leaders need to think about their digital futures and develop a unified vision—one that looks holistically across all lines of business and IT. They need to wed the redesign of processes and operations to maximize the impact of automation. They need to combine the strengths of RPA, AI and human intelligence, making automation a core part of their business strategy.

This means the careful implementation of multiple automation approaches, from integrating basic robots to the full digitization of processes and systems.

The potential upside of doing so is considerable, while the cost of inaction is equally consequential. Early adopters will hold a strong position while the late adopters, over time, are likely to lose competitiveness, potentially irreversibly.