Financial firms leverage automation to improve both their top and bottom lines

Since the global financial crisis ended nearly a decade ago, commercial banks have been transforming to focus on operational risk, enhance compliance, prevent fraudulent transactions, and improve processes and efficiency by streamlining repetitive tasks.

Disruption by FinTech firms and non-financial challengers is driving banking incumbents to innovate and improve agility. They need to find ways to efficiently process and onboard customers, bolster customer satisfaction through quicker response time, and optimize routine and manual processes.

Benefits of automation

Source: Capgemini Financial Services Analysis, 2018, Capgemini Top-10 Technology Trends in Commercial Banking: 2018

With 56% of global annual bank revenue generated by corporations, it was no surprise that of the US$78 billion invested in FinTech firms in 2016 more than half was earmarked for corporate banking innovation.[1] FinTech firms are challenging commercial banking incumbents with novel new solutions around payments, trade finance, and advanced analytics.

Around the globe, banks seek to automate and streamline their existing processes in data and documentation to reduce risk, increase accuracy, lower operating costs, and save time on manual and repetitive tasks.

For example, Bank of America worked with Houston-based FinTech startup HighRadius to develop an artificial intelligence (AI) solution to support corporate clients’ process account receivables. The application was designed mainly for clients who manage a high volume of payments in which remittance information is either missing or comes in separately from the payment. The solution leverages optical character recognition and machine learning to identify payments and match them with associated remittance data – a strategic innovation with the potential to reduce cost and improve cash forecasting.[2]

Commercial banks are using AI on the front-end to secure customer identities, mimic the work of employees, enable seamless interoperability, and engage customers across channels. On the back-end, automated solutions can support staff, power processes, and pre-empt problems.

When thinking automation, think big picture

It is strategically critical for financial firms to view automation as a comprehensive transformation program and not merely a series of opportunistic, ad-hoc, and discrete projects. A smart holistic approach ensures that the bank reengineers processes to remove exceptions and measure benefits at an enterprise level rather than at a use-case or process level.

There was a time not so long ago when, almost exclusively, banks had cost-savings in mind when they considered intelligent automation – loosely defined as a combination of robotic process automation, AI, and business process optimization applied cohesively to achieve strategic business objectives. Today, however attention is shifting to its top-line value. A 2018 report by the Capgemini Digital Transformation Institute found that while many organizations (52%) still focus on cost savings as a critical objective for automation, 55% are focusing on customer satisfaction, and 45% are targeting revenue growth.[3]

Increasingly more banks are considering automation as a strategic priority within the digital space and as an investment in operational optimization. JP Morgan has dedicated the bulk of its US$9.6 billion technology budget to automation and launched its COIN (Contract Intelligence) program to interpret commercial loan agreements and review documents within seconds (versus thousands of hours), to reduce manual loan-servicing mistakes errors.^[4] The bank is exploring future use cases for COIN in other complex legal operations and filings such as interpreting regulations and analyzing corporate communications.

Similarly, Malaysia’s CIMB Bank is leveraging automation to reduce turnaround times for manual back-office tasks and has so far automated 47 processes involving financial, reconciliation, maintenance, e-banking, and audit confirmation.^[5] A few of these automated processes have reduced the turnaround time by up to 90%.

As the industry progressively adopts more automation use cases, process automation, and digital adoption are expected to deliver from $15 billion to $20 billion in cost savings to the wholesale banking sector from 2016–2020.^[6]

On average, more than a third (35%) of financial services players said they had achieved a 2%–5% increase in top-line growth thanks to intelligent automation. The increase spans across sectors, with 37% of capital markets players, 34% of retail and commercial banks, and 33% of insurers witnessing gains, primarily as a result of faster time to market and more effective cross-selling to customers.[7]

Intelligent Automation implementation drives revenue

Source: Capgemini Digital Transformation Institute, Automation in Financial Services survey; February–March 2018, N=750 companies.

In today’s competitive environment operating model, innovation is critical as commercial banks seek a sustainable competitive edge. While organizations have driven significant efficiency through robotic process automation, a new suite of emerging technologies offers an exciting opportunity to rethink how to deliver value, drive efficiency, and unlock aging gates to productivity and customer satisfaction.

As a hedge against automation struggles to scale and to quantify ROI, bank executives are urged to clearly define their strategic rationale for implementation, to drive it as a transformation program, and to tackle critical challenges head-on – from talent to ecosystem. A comprehensive and detailed plan with feedback loops and iterative steps is the smart path to intelligent automation’s considerable potential.

To find out more about how to drive value through Intelligent Automation, email us at financialservices@capgemini.com

[1] Morgan Stanley Research and Oliver Wyman, “The World Turned Upside Down,” March 2017, http://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2017/mar/Oliver%20Wyman%20Morgan%20Stanley%202017.pdf

[2] Capgemini Digital Transformation Institute, “Growth in the Machine,” July 12, 2018, https://www.capgemini.com/resources/the-growth-in-the-machine

[3] Capgemini Digital Transformation Institute, “Growth in the Machine,” July 12, 2018, https://www.capgemini.com/resources/the-growth-in-the-machine

[4] LiveLawIn, “JP Morgan’s Software COIN To Cover 3.6 Lakh Hours Of Lawyer’s Work In Seconds,” Vidushi Sahani, March 2, 2017, http://www.livelaw.in/jp-morgans-software-coin-cover-3-6-lakh-hours-lawyers-work-seconds

[5] Finextra, “CIMB reports 90% improvement in turnaround time from new RPA programme, December 7, 2017, https://www.finextra.com/newsarticle/31427/cimb-reports-90-improvement-in-turnaround-time-from-new-rpa-programme

[6] Finextra, “Bank of America applies AI to streamline client payment processing,” August 23, 2017, https://www.finextra.com/newsarticle/30993/bank-of-america-applies-ai-to-streamline-client-payment-processing

[7] The Global Treasurer, “Will AI in corporate banking result in robo-bankers or cyber-bankers?” Daragh O’Byrne, September 6, 2017, https://www.gtnews.com/articles/will-ai-in-corporate-banking-result-in-robo-bankers-or-cyber-bankers