For millennia, banks have proven skills in money laundering, storing, lending and conserving. In exchange, clients adhered to the bank’s restrictions.
This covered the manner in which banks determined lending interest rates, selected creditworthy groups and facilitated banking transactions for a better customer experience.
By 2020, banks were seen in the same light as other customer-facing companies such as movie theatres, restaurants, and hotels. To be fair, that may be an exaggeration. However, the argument is that sophisticated technology, consumer demand, and fintech disruptors have all had a profound effect on what defines banking and how digital clients want it to function.
There are so many things you need to know about FinTech, but one thing you must know is FinTech is not simply traditional banking enhanced with technology, as banking encompasses numerous sub-verticals. Commercial banks, retail banking, global banking, and other financial services are all offered by banks. When finance and technology are combined, they have created disruptive developments around the world.
Numerous financial services industries in the United Kingdom are reaping the benefits of automation. Indeed, according to research conducted by digital intelligence company ABBYY, 64% of UK organisations currently use process mining tools, and even more importantly, 28% have used this technology to automate critical operations. These figures will continue to grow as more sectors see the good impact automation has had on revenues, consumer engagement, and internal processes.
Table of Content:
- How Financial Institutions Are Being Disrupted by Workflow Automation?
The financial services business is one that has benefited substantially from automation. Money moves swiftly, and the financial industry must change at a similar pace in order to deliver the best services. Automation has found a home in every financial industry, from insurance firms to large banks, as a breakthrough technology.
Automation has been at the forefront of efficiency measures throughout history. In the financial sector, critical procedures have a reputation for taking time – owing to ageing legacy technology and human workforces prone to prejudice and conventional methods. Because automation is based on reliable data and industry insights, it may help remove risks associated with administrative duties and reduce the time required to resolve a dispute.
For example, resolving claims consumes a significant portion of an insurance company’s time since it requires collating data from numerous sources and manually analysing it. Entrepreneur explains how Robotic Process Automation (RPA) may help insurers expedite this process by assisting them in delegating duties to claim handlers and consolidating different claim data. This demonstrates automation’s primary benefit: speeding up operations to increase profitability.
As workflow automation is reshaping the banking sector, numerous businesses utilise workflow automation to assist human resources, accounting, and customer service. That is only the tip of the iceberg. Only 7% of businesses today report automating more than a quarter of their internal operations. By 2025, that figure is anticipated to reach 50% in fintech.
By keeping the figures in mind, let us examine how automation is transforming the fintech industry.
How Financial Institutions are Being Disrupted by Workflow Automation?
The following are just a handful of the interesting ways in which automation is transforming fintech:
1. IPaaS Technologies Enable the Cloud to Be More Organised and Integrated
Fintech is frequently portrayed as being on the cutting edge of innovation. Nonetheless, many legacy organisations have fallen behind other sectors in migrating to the cloud. This is partly due to worries about data security and partly due to regulation. In certain countries, data protection regulations prohibit banks from outsourcing their information to a remote service provider.
It is not that the majority of banks are not adopting the cloud; rather, they lack the most efficient cloud strategy. However, if cloud storage costs continue to fall, the cost reductions will become too attractive to resist. Additionally, as more institutions implement AI-based fraud detection technologies, they will need to increase their cloud usage.
With increased data comes an increase in data silos, which may stymie productivity. Inadequate information also complicates delivering the greatest possible client experience. Integration platforms as a service (iPaaS) solutions will be critical for securely and effectively integrating cloud applications. IPaaS solutions enable companies to exchange data between apps and to continuously enhance that data.
2. Intelligent Automation is Introducing New Investors to the Market
According to recent research, intelligent automation may boost the financial services industry’s income by $512 billion. Organizations were already saving between 10% and 25% through robotic process automation. However, the transition from RPA to intelligent automation is generating new income streams as well.
Investment – and not just on Wall Street – is one sector where workflow automation is disrupting fintech and fueling development. For years, major institutions have used artificial intelligence to accelerate market analyses. Numerous fintech businesses are now offering automated investing and Robo-advising to the regular Joe.
Companies such as SoFi and Acorns employ algorithms to tailor portfolios to their client’s objectives and risk tolerance. The AI diversifies and automatically rebalances the client’s portfolio – operations that were previously done by a human financial advisor.
These Robo-advisors have facilitated the emergence of a new breed of armchair investors. Consumers who previously could not afford to hire a human financial counsellor may now invest through automation. They are not subject to account minimums or high broker costs. They can begin immediately from their mobile app, without regard for asset allocation.
3. Automation of Paperwork Saves Time and Minimises Mistakes
Another way that workflow automation is disrupting finance is by automating time-consuming manual processes that delayed transactions and were prone to mistakes. Global commerce, for example, has historically been a logistical headache, resulting in a lengthy paper trail of documents.
These papers must be processed and updated manually, resulting in significant inefficiencies. Banks have stringent compliance requirements, and human stock checks make errors.
Traydstream is a trade processing platform for banks, financial institutions, and exporters that leverages artificial intelligence to automate trade processing. Traydstream automates compliance inspections and document examination by scanning trade papers. Digitizing all of this paper documentation increases productivity and eliminates mistakes.
4. Virtual Assistants Aid Banks in Serving Clients 24 Hours a Day
When the pandemic struck in 2019, queues at bank drive-thrus sometimes snaked around the block. Branches rushed to service clients while adhering to corporate regulations that restricted the number of tellers and shuttered lobbies. Consumers who had never used mobile banking before developed an unexpected dependence on their bank’s digital services, which included virtual assistants.
As natural language processing advances, chatbots and virtual assistants develop as well. These assistants can be utilised to handle a variety of routine banking activities outside of a banker’s normal business hours. They are proven to be a secure, low-cost method of providing round-the-clock client assistance.
Last year, US Bank debuted its Smart Assistant, which enables clients to communicate with the bank via voice or text within the mobile app. Customers can move funds across their accounts and view their transaction history.
Additionally, the virtual assistant interfaces with Zelle to enable consumers to send and receive digital payments. The United States Bank is not the first large organisation that has launched a virtual assistant. Also, Bank of America and Chase offer virtual assistants who may assist with routine activities.
These virtual assistants do not take the role of real bankers. By processing a large number of mundane transactions, they simply free up humans to work on more complex problems.
5. Machine Learning is Automating the Underwriting Process
While most of the underwriting process for many types of loans has been automated in recent years, a significant portion of it is still performed manually. For instance, people have traditionally been responsible for mortgage loan underwriting.
The issue is that human underwriters are susceptible to prejudice and may not always have complete information. Even organisations that utilise automated underwriting still rely on customer information like their FICO score and debt-to-income ratio. These measures are inadequate for determining a borrower’s proclivity to repay a loan.
ZestAI is a machine learning platform that uses hundreds of factors to estimate a person’s creditworthiness. Zest collaborated with Prestige Financial Services, a lender specialising in subprime car loans, to increase consumer approvals without compromising lending criteria.
Consumers may apply for instalment loans with Affirm at the point of sale on retail websites. Traditional underwriting measures, the business claims, are only trustworthy for individuals with a long credit history.
It utilises artificial intelligence to generate a more complete profile for younger clients who may lack credit history. Affirm determines creditworthiness based on bank transactions, utility payments, and the type of purchase.
Automation of workflows will change virtually every industry, but none more so than finance. While financial institutions have generally been late adopters, they are under more pressure to experiment with automation from tiny, agile companies.
Automation enables businesses to cut costs, enhance security, and provide their consumers with the low-cost, personalised services they want. Automation, in general, transcends all trades and has established itself as an essential instrument for the financial business.
Apart from simplifying administrative procedures, supplying critical market information and consumer data to automated systems will also help personalize the financial services sector.