How To Improve Banking Processes with RPA and BPM

Michael Eisner May 26, 2020 Banking

Treasury-management-services

Both retail and commercial banks are facing increased pressure to boost productivity and profitability in an industry that has become more difficult to navigate than ever. Today, banks must cope with broader regulatory oversight, changing consumer demands, damaging media coverage, and an influx of non-traditional players.

Efforts to reduce costs while providing enjoyable customer experiences has contributed to an industry that has been more willing than most to embrace new technologies. According to a recent McKinsey report, financial services in the United States are among a handful of industries “surging ahead” in automation, in the “form of ‘straight-through processing,’ where transaction workflows are digitized end-to-end, can increase the scalability of transaction throughput by 80%, while reducing errors by half.”

Banks, in their move towards increased digitization and automation, have readily adopted robotic process automation (RPA) technology. RPA offers many benefits for many banking processes. Among the more repetitive and time-consuming banking tasks that RPA can help automate are opening new accounts and treasury services. RPA has the biggest impact when combined with a workflow automation platform so the two work in conjunction with one another.

The benefits of RPA in banking

RPA technologies help to reduce employee workload and the time that it takes to complete manual tasks. This in turn boosts revenue and cash flow, provides for a better customer experience, and improves regulatory compliance. Banks can also implement RPA into their workflows without the need for extensive overhauling of their existing systems or business process management (BPM) platform. Some BPM platforms allow you to incorporate RPA functionality directly in your existing processes.

It is important to note, however, that RPA is not a cure-all. Automating broken banking processes will not correct organizational issues. RPA should only be implemented as part of an organizational level workflow optimization process.

The increasing costs of compliance

Banks spend some $270 billion each year on compliance-related costs. While regulatory requirements are the same for all lenders, smaller banks feel the sting of these costs more than larger institutions. For banks with less than $100 million in assets, compliance-related costs represent 8.7% of their non-interest expenses. For institutions with between $1 billion and $10 billion in assets, however, these costs represent just 2.9% of their non-interest expenses.

This discrepancy is attributable to larger institutions having larger compliance teams. Sure, larger teams cost more, but they can comply with regulatory regulations and actions more efficiently. One way that smaller institutions can reduce their compliance costs is through automation technologies like RPA to complement their existing workflows.

Customer onboarding and new accounts

The enactment of Know Your Customer (KYC) and anti-money laundering regulations following the 2008 financial crisis contributed to the rising costs of compliance. These regulations subjected banks to additional due diligence and record keeping requirements. Processes that were already labor intensive became even more so.

Many banks responded by hiring more staff. This increased onboarding costs and delays, while failing to remove the element of human error. According to Bain & Company, the costs of onboarding following the new regulations increased to between $500 and $5,000 per client. Accompanying delays acquiring new customers spiked to 20 to 90 days time to cash, carrying with it revenue losses of $25,000 per client.

Workflow automation technology eliminates many of the manual processes associated with opening new accounts. It reduces operating costs, delays, and the potential for human error. For instance, consider one of the more time-consuming phases of onboarding, obtaining and reviewing documentation. With workflow automation, customers can simply upload required documents to a portal. Once there, RPA technology can scan the documents, upload them to the correct system, and identify missing information. Moreover, advanced screening processes can be used to verify information.

Consider that traditional manual processes would require a representative to gather the documents from the customer, review them, upload them into the system, communicate with the client to obtain missing documents and information, and cross-reference the information in the documents across various databases for verification. This process could take weeks, but just a few hours with automation. Costs are reduced and a better customer experience is provided.

Advanced bank account opening solutions also offer the benefit of controlled, KPI-based processes that monitor performance using charts and dashboards. These advanced reporting features, combined with the ability to create interconnected account opening workflow across all departments, make implementing RPA technologies as painless and user-friendly as possible.

Automation and treasury services

Much like the customer onboarding process, treasury services involves many mundane and time-consuming tasks. Manual processes include cash management and payments, online and mobile banking, credit card and loan origination, processing statements, and fraud detection. Digitizing these functions frees up precious resources and increases profitability. In fact, according to a Boston Consulting Group (BCG) report, the digital treasury opportunity could deliver average annual profits of $100 million to $350 million in each of the top 20 banks in North America, Europe, and Asia-Pacific.

Yet, the incorporation of RPA technologies in treasury services has been largely overlooked. This is partially attributable to banks being unwilling to move on from archaic treasury management systems that have been in use for decades. Implementing RPA, however, is more cost effective than other alternatives. RPA is a scalable solution that can essentially be used anywhere in the organization. Upgrading an entire treasury management system is an expensive process that carries with it significant productivity delays.

Another reason is that banks have focused more on digitizing front-end services to remain competitive and to survive. As the importance of treasury functions continues to increase, banks that make an effort to digitize their back-end functions stand to gain a significant competitive advantage.

Conclusion

The competitive nature of the banking industry has facilitated the implementation of RPA into banking processes. RPA technologies offer banks countless benefits in both frontend and backend functions. Banks can provide better customer experiences, cut costs, ease regulatory burdens, and boost productivity.

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