Further fleshing out the nature of such tasks is Capgemini’s 2016 report ‘Robotic Process Automation Solutions for Financial Services’, which proffers that optimising and improving efficiency means more than just upgrading systems or outsourcing processes – it means harnessing innovation. Repetitive tasks – which the Capgemini report estimates 40 percent of staff spend their time on – are essentially algorithms and therefore can be automated, with robotic process automation (RPA) innovation that combines user interface recognition technologies and workflow execution to follow predetermined computer pathways.
The effects of such innovation, from fighting fraud to improving the customer experience and even predicting the direction the market will head in, are already visible. “Contact tools such as the AI virtual agents introduced at a Japanese bank are a good example of how automation is already benefiting the FS landscape,” says Indivar Khosla, executive vice president and global head of FS business services at Capgemini. “They can respond and solve customer enquiries much faster, resulting in fewer calls to the bank’s main contact centre, therefore freeing up time for staff while improving the customer experience.”
Chatbot technology, which carries out complex calculations instantaneously, allowing customers to check their finances, evaluate their spending habits and monitor their credit score, is also having a big impact. The speed and efficiency of core business processes received a significant boost from the chatbot innovation.
Pros and cons
Like any endeavour poised to be a major disruptive influence on an industry’s status quo, automation in FS comes with a range of pros and cons. According to Mohit Joshi, president and head of banking, financial services & insurance at Infosys, by using automation, banks are distinguishing themselves by being technologically sophisticated and capable of meeting the financial and security needs of digitally savvy customers. “Some of the world’s largest credit card issuers, HSBC and JP Morgan Chase & Co. among them, utilise AI to analyse the buying patterns of their cardholders. Any anomalies are red-flagged and preventive measures taken before a cyber thief can do lasting damage. The 2016 Forter and PYMNTS.com ‘Global Fraud Index’ found that in the first quarter of the year, $4.79 of every $100 in online transactions was considered at risk. That is up from $2.90 year-over-year.”
Automation enables FS firms to create a measurable audit trail of activity, reduce human error, speed up transaction times, reduce costs and improve overall customer experience. But the reality, says Chris Gayner, marketing director at Genfour, is that many firms are still trying to deliver a significant return on investment (ROI) to justify further investment. “In our experience, those FS firms which are seeing ROI from automation, view automation as a journey and not a project – which typically means cross functional working, robust governance and employing the right skills to drive out maximum benefit,” he says.
Further obstacles to automation include budgetary concerns and a lack of technical capability, not to mention redundancies and the associated impact on company brand. Potential job losses is a sensitive issue in the automation debate, with no easy answers. That said, not all processes lend themselves to automation and, for those that do, the result may not be job losses but rather a form of job transfer to more important tasks like deeper, more thorough analytics. “It is important for organisations to have an understanding of what types of skills are needed now and in the future for any evolution toward automation they may consider,” suggests Mr Kimner. “Anticipating the right mix of skills is important as it will influence the types of training and the hiring that organisations may undertake.”
An unavoidable issue when moving to automation is the need to dismantle existing IT architecture, protect underlying systems and, at the same time, keep costs under control. To help minimise costs during this process, IT architecture should be simplified and a service layer added, to allow a company to integrate its IT with other systems and intelligent automation technologies.
“Due to the size of FS organisations’ operations, changing their IT systems and ways of working can be a challenge,” says Mr Khosla. “However, investing in ways to improve the IT infrastructure and processes can help save on future costs which will only increase as systems and processes become increasingly outdated. These savings can then be passed on to other areas of the business, allowing other processes to be updated.”
One option favoured by Mr Gayner is for companies to have recourse to a considered automation roadmap – the first step toward minimising the cost of automation. Yet, given that automation tools can readily be found online and installed onto machines without involving IT, it makes sense for organisations to take a company-wide view of automation – who owns it, how it is managed and where it should be used. “FS sector firms should invest in a robust proof of concept to ensure the technology fits with their wider IT initiatives and complies with corporate policies, but also that the approach to automation is the right one. It is important that automation adds value, and is not just a replacement for bad processes,” explains Mr Gayner.
The transition from legacy systems to newer, more agile technologies and platforms is clearly a difficult and costly enterprise, with many companies mistakenly looking only at the technology costs of replacing various systems and not the total costs, which include, for example, change management, process improvement and resource training. “Organisations often start by acquiring some new technology and then trying to implement pieces of it through a patchwork of small projects that often seem like iterative, trial and error exercises,” attests Mr Kimner. “Thorough planning and an understanding of the impact and downstream effects of technology changes on people, as well as processes, must be part of a sound programme in order to keep overall costs in check.”
Embrace or resist?
With automation in FS continuing to evolve, the extent to which the sector will play ball with this evolution, whatever form it takes, is a matter of debate.“As traditional banks grapple with the challenges posed by FinTechs, legacy constraints and traditional operational models, AI is emerging as the saviour,” claims Mr Joshi. Indeed, according to the Infosys survey, 23 percent of 250 FS sector respondents confirmed that AI technologies have been fully deployed in their organisations. Moreover, 47 percent view AI as being fundamental to the success of their organisation’s strategy. “It is likely this trend will continue to accelerate and transform the financial services landscape. Furthermore, as AI is deployed more regularly and employees become increasingly familiar with it, adoption will be the common sense option,” adds Mr Joshi.
On the flipside, less focused firms could find themselves struggling to keep up with competitors taking advantage of the benefits that automated business processes can bring. “It is too early to say how far automation can go, but the next five to 10 years and beyond will certainly be exciting when it comes to the application of AI to business processes,” suggests Mr Khosla. “For under pressure FS firms, gross operating expense (GoE) reduction, return on equity (RoE) maximisation and transformation of the operating model are all key priorities. Moreover, as the technology behind automation develops, we will see it start to take on more complex tasks and create greater efficiency and potential within the workforce. Although challenges exist, AI has the capability to allow the industry to develop new highly personalised customer propositions and improve their experience.”
A tool for the future
In a landscape where competition, complex processes and regulatory demands are all challenging profits, automation is assisting the FS sector to reduce costs and reconfigure existing practices and business models. Furthermore, by making tasks more predictable and easier to control, automation is also improving performance and process quality, eliminating human error and improving efficiency.
“With the market becoming more competitive, FS companies are recognising the need to differentiate themselves,” says Mr O’Driscoll. “Automation can help with this, enabling FS providers to carry out processes faster so that new products and services can be brought to market quicker than the competition. From the robo-adviser to the automated back office, FS will continue to be a leader in the digital development, and an early adopter of RPA, cognitive technologies and AI. As the combination of high transaction volumes, level of customer service and regulation becomes ever more costly, automation will be increasingly applied.”
Going forward, it is of course difficult to predict the types, uses or limits of automation across the FS sector. However, it stands to reason that there will continue to be cases where the automation of repetitive processes, compliance activities and reporting, will be more cost effective and, in some cases, necessary. According to the 2017 ‘Robotic Process Automation: A Guide for Banks and Financial Institutions’, the global automation market is expected to see a compound annual growth rate of 75 percent, reaching $835m by 2020 – an adoption rate which strongly indicates that the sector will focus on investing for training and ownership of automation technologies.
“There will most likely be cases where automation is used to attract, convert and retain customers through various channels,” says Mr Kimner. “There may even be cases where automation is used in business decision management or perhaps portfolio optimisation. However, what is clear is that FIs need to look for ways to reduce costs and improve margins if they want to remain profitable and competitive – and automation is one of the tools that may well help them achieve this.”