In the competitive and highly regulated financial and banking industries, companies need to utilize every advantage they can to stay ahead of the competition. Financial institutions face growing volumes of transactions, repetitive work, and compliance risks. This poses significant challenges for companies looking to control risks, offer better customer experience, and reduce costs. In order to meet their business objectives, companies must leverage innovative solutions. Increasingly, this means implementing robotic process automation (RPA) to increase productivity, reduce costs, and improve reliability and accuracy.
HOW RPA HELPS FINANCIAL INSTITUTIONS ACHIEVE THEIR BUSINESS GOALS
RPA is a set of applications and technologies that automates existing software, allowing it to manipulate data, transfer files, and communicate with banking software, spreadsheets, reporting tools, and other critical digital systems – all with minimal human oversight. An increasing number of financial institutions are turning to this technology to overcome some challenges of the industry. A 2017 survey found that 30% of financial organizations had adopted RPA widely across the enterprise or were headed in that direction. To stay innovative and ahead of the curve, financial institutions need to look to this technology to streamline mundane processes and enable their teams to focus on more valuable tasks. This allows them to increase efficiency, improve auditing and reporting, and deliver better customer experience.
POTENTIAL PITFALLS OF RPA IMPLEMENTATION
Although RPA can deliver significant benefits to financial institutions, it can be difficult to implement effectively. Because of the complexity of processes in financial industries, as well as compliance and security concerns, many companies struggle to effectively integrate RPA into their workflow. Companies must work to improve RPA readiness by assessing opportunities for automation, identifying problem areas, establishing ownership of the RPA solution, filling expertise gaps, and setting clear expectations. This will help ensure that the RPA solution delivers expected results, while minimizing risks.
Challenges of the financial industry
Financial institutions face many unique challenges which make it difficult for them to differentiate and stay competitive. Finance is an exceptionally regulated market, with high volumes of transactions, security concerns, and fierce competition. It is also an increasingly customer-service- oriented business, as companies strive to differentiate themselves through better customer training, response times, and processes. This forces companies to adopt innovative approaches to reduce workload, improve communication, control risk, and reduce costs. However, in order to implement new solutions effectively, it is important to understand how they can best be integrated into the framework of the financial institution. This means fitting solutions to the needs of the industry and ensuring that they meet the stringent requirements necessary to control risk.
Each day, new threats and faults in existing technology systems are exposed, presenting a significant and growing risk for companies. Cybersecurity breaches can be incredibly costly for financial institutions. Between lost customers, work disruption, fines, problem resolution, and direct financial losses, the average breach can have a long-term cost of over $7 million. These numbers can grow even larger depending on the number of victims affected and the scope of the damage. The U.S. Consumer Bankers Association reported that re-issuing cards compromised by the Target breach cost an estimated $172 million. These incidents can have a major impact, particularly on smaller organizations, making it more difficult for companies to stay competitive and avoid potentially catastrophic outcomes.
REGULATION AND COMPLIANCE
Financial services face significantly more regulation than most other industries. Financial institutions are charged with protecting sensitive customer information, reporting activity to regulatory bodies, and allowing for regular external and internal audits. Conforming to these regulations generates a substantial amount of work, risk, and cost. Companies that can find ways to reduce these costs while maintaining an acceptable level of risk and minimizing human error through increased visibility and audit trails will be at a significant competitive advantage.
GROWING NUMBER OF PROCESSES
With a high volume of transactions, intense regulatory oversight, and growing cybersecurity threats, financial institutions often have an increasingly technologically and administratively complex network of systems in place. This makes it difficult for companies to integrate new innovations that can help them deliver better, faster service, further reducing efficiency and competitiveness. To overcome this challenge, companies must make innovation a core goal and invest the necessary resources to ensure that their systems and processes are regularly updated, streamlining the number of processes and deploying optimizations whenever possible.
COMPETITION FROM FINANCIAL TECHNOLOGY STARTUPS
New fintech companies are entering the market at an unprecedented rate, offering lower fees, competitive rates, and innovative customer experience. Although these companies have not yet significantly affected larger institutions, they will likely do so in the near future. Morgan Stanley released a report estimating that online small-to-medium business lenders alone could account for $280 billion in U.S. loans and that the industry would grow 47% each year until 2020.
In such a highly regulated industry, it can be difficult for companies to differentiate themselves from the competition. Ultimately, institutions are offering the same or similar products, so they can only compete on costs and service. However, in these areas there is still significant room for improvement. Large financial institutions can learn from smaller fintech startups by integrating new technologies into their processes. This will allow them to deliver lower costs and better service to their customers.
HIGH VOLUME OF TRANSACTIONS
Adding to the difficulty of managing risks and controlling costs, financial institutions must process millions of transactions each day, a number that is rapidly growing with each passing year. Users can now make transactions in more ways and are demanding faster service than ever before. As online payments, eBanking, mobile POS systems, and digital consumer transactions increase in prevalence and variety, financial institutions must scale to meet the growing volume. Many of these activities are still manually overseen by human workers, adding significant expense and distracting focus from higher-value strategic projects.
How RPA helps financial institutions stay competitive
Robotic process automation (RPA) is one of the most important innovations in modern business, allowing companies to reduce costs, more effectively leverage their workforce, improve reliability, and deliver better service. This is particularly important for financial institutions, where high transaction volume and the importance of risk management make these benefits even greater. RPA can help companies deliver better service to their customers while reducing errors, improving reporting, and increasing efficiency. This provides an opportunity for early adopters to get ahead of the competition and gain significant advantages in the crowded financial industry.
1. Increased productivity and efficiency
IT, operations, and other departments are increasingly overworked as the business is asked to do more with the same resources. One of the greatest benefits of RPA is its ability to function as a workforce multiplier. This allows employees to perform significantly more work in less time, reducing costs and freeing resources for higher-value tasks. In a 2017 survey, nearly 85% of respondents said that operations was one of the areas that most clearly demonstrated the benefits of RPA, more than any other area listed.
Because RPA solutions integrate with existing frameworks, they create minimal disruption and can dramatically speed up day-to-day tasks that were previously labor intensive due to either manual tasks or disparate systems and applications. This allows companies to leverage their employees more effectively and spend less time processing transactions. Some areas in which RPA can help companies operate more efficiently include:
Reporting and data visualization
Credit card processing
Credit and identification checks
HR onboarding and offboarding
IT issue resolution
2. Improved reliability and accuracy
Mistakes in the financial services industry can be incredibly costly. Overlooking fraudulent transactions, system downtime, or errors in customer data can cost companies millions, both directly and in long-term damage to the brand. This makes it extremely important that financial institutions take steps to improve the reliability of their systems and processes. RPA can help financial institutions accomplish this in several ways:
RPA performs more accurate data entry and processing – Human workers can easily make typos or miss fields. RPA solutions have a much higher accuracy rate, processing thousands of entries with no mistakes in a fraction of the time.
RPA solutions can reduce downtime – A single IT outage incident costs companies in the financial services sector an average of $773,286 and up to nearly $2 million RPA solutions can automatically fix problems, backup data and resolve tickets. This means that systems will be down less often and for less time, reducing the negative effects of downtime.
Greater availability – Financial services need to function even after normal business hours and during holidays. Although human workers are only available according to set schedules and can only accomplish a certain amount of work in a given period of time, RPA solutions have no such limitations. They can perform work as well at the end of the day as at the beginning. RPA reduces errors due to fatigue and identifies and solves problems at any time.
3. Cost savings
RPA requires upfront investment in infrastructure, training, and management. However, with greater reliability, accuracy, and efficiency, it delivers significant savings. Most deployments show ROI in fewer than 14 months, with some estimates ranging to as little as six. RPA can deliver this rapid return on investment because of how dramatically it improves the efficiency of the organization, allowing companies to do more with less. This allows companies to differentiate themselves by providing more competitive rates and fee structures–effectively passing the savings on to the customer.
4. Better customer experience
RPA also can help financial institutions gain a competitive advantage through improved customer experience. As fintech startups demonstrate, easy-to-use platforms and always-available service are important to customers. More established institutions should attempt to adopt similar practices in their own organizations. RPA is a critical component of this effort, as it can streamline mobile and online banking, allowing transactions to be processed rapidly, and improve customer service. For example, many RPA solutions allow for password resets and simple troubleshooting to be performed by automated bots, allowing customers to get faster responses to their problems, no matter when they happen.
5. Improved compliance and audit reporting
Banks around the world have spent a total of $320 billion on non-compliance fines and lawsuits as of 2017, a cost that many expect to grow substantially in the coming years. Yet, as great as the costs of non-compliance are, the costs necessary to ensure compliance can be equally staggering. Companies must spend significant time and resources developing reports, preparing for audits, managing employees, and consulting with legal counsel to ensure they remain compliant. RPA can help control these costs and reduce risk by simplifying the compliance and reporting process. RPA solutions can simply be trained to do the function in a compliant manner, eliminating the possibility of human error. RPA solutions also can automatically generate reports from data, dramatically reducing the amount of time spent on compliance-related activities.
How to effectively implement RPA
It is clear that RPA can help financial institutions overcome the challenges of their industry, but only if implemented effectively. To ensure the RPA solution is implemented as effectively as possible, it is important to create a clear plan for deployment based on best practices, partner with a seasoned RPA vendor, and monitor and assess the solution regularly.
WORK WITH A TRUSTED VENDOR
Many companies do not have a significant amount of RPA expertise and aren’t aware of how best the technology can be implemented into their operations. By partnering with a trusted vendor that has expertise in security, IT, automation best practices, and the financial services industry, companies gain an experienced advisor that can help guide them down the right path and help them explore their options.
However, selecting an effective partner can be challenging. Vendors should have expertise in the unique challenges of the financial services industry and have a provable history of reliability. It also is important that their capabilities align with the company’s automation goals. Before meeting with vendors, it is a good idea to prepare evaluation criteria that considers the vendor’s references, technological capabilities, pricing, and references.
DECIDE WHAT FUNCTIONS AND APPLICATIONS TO AUTOMATE
One of the most important components of a successful RPA implementation is the assessment of automation opportunities in the enterprise. RPA can be beneficial across many functions and processes in the financial services sector. It is important to establish which ones should be targeted and in what priority.
Common areas to focus on include tasks that have a large amount of manual computer interaction, that must be performed repeatedly, and that use a significant amount of human resources.
It is important to create a roadmap for the solution. This will help set realistic expectations and provide a benchmark upon which to measure success. This roadmap should include how quickly the solution will be deployed, how quickly it will show ROI, and how often it should be assessed. Having a comprehensive roadmap will also help build the business case for RPA. This can be a significant factor in avoiding any funding issues.
ESTABLISH OWNERSHIP AND STANDARDIZATION
One of the most contentious issues of RPA is RPA governance. Companies must decide what unit has control over how the solution is implemented and used, who is responsible for compliance, and how to resolve problems. Nearly 60% of respondents to a 2017 survey said that “gaining agreement on approach across the organization” was a major challenge, indicating that most companies struggle to decide what should be centralized and what should be decided by the individual business units. In most cases, an effective approach is to centralize key components of the program, such as those relating to compliance and risk, while allowing the individual business groups to take ownership of individual solutions. By creating a center of excellence, a centralized body can bring IT and business together, while providing expertise for design, implementation, and compliance without impeding the growth of automation across the enterprise.
GROW NECESSARY TALENT
More respondents cite “finding subject matter expertise” as a major concern in RPA implementation than any other issue. Clearly, many companies are unprepared to implement and manage the solutions themselves. To overcome this expertise gap, it is important that companies source the required experts during the planning stage to help guide the project and ensure a successful deployment. This sourcing should include both those with technical expertise to implement and manage the solution, as well as those with the business expertise to ensure that the solution is being leveraged effectively and delivering the expected results. It also is effective to start with smaller projects, allowing the team to learn how to utilize RPA and enabling organizations to reduce their reliance on outside help.
Even the most advanced RPA solutions still must be used and managed by human employees. To increase adoption and ensure that they are being integrated effectively into the workflow, it is important that end users be fully trained on the solutions and made aware of their benefits. It also is important to reassure employees that the solutions aren’t designed to replace them, but rather to increase their effectiveness. They can stop performing routine manual tasks and focus on more valuable projects that are a better use of their skills.
RPA delivers significant benefits to financial institutions, allowing them to reduce costs, improve productivity, deliver better customer service, and control risk. These benefits can help them overcome the challenges of the financial sector and differentiate themselves from the competition.
However, it is critical that companies take the proper steps to implement RPA solutions effectively. This means working with key stakeholders, establishing ownership, investigating all automation opportunities, developing a comprehensive plan for deployment, and partnering with a trusted vendor. These steps will help make certain that the project is successful and delivers the expected value.
RPA should be a key component of the short and long-term strategy for financial institutions. As the technology progresses and adoption increases, those that acted quickly and decisively will be ahead of the pack and ready for the next innovation. By taking steps to implement RPA right and make it an integrated part of the organization, companies can help ensure their continued success in an increasingly competitive field.