RPA and Banking: How automation solves unique challenges in a complex industry

RPA and Banking: How automation solves unique challenges in a complex industry

The banking industry is unique in its position within the financial sector. Many banking institutions perform multiple services for their clients, such as financial intermediation, payment processing, lending, and trading.

As financial services move ever steadily to digital platforms, the need for technological solutions in the banking industry continues to grow. Many of their business processes now happen online, and errors in data or processes could lead to hefty compliance fines due to regulatory infractions.

With the industry being so heavily regulated, it’s important to have reliable processes and tools. One such tool is robotic process automation. It can help standardize processes within regulatory compliance policies and achieve 100% accuracy. To broaden your RPA view, we'll look at some unique challenges banks encounter, how RPA technology can solve them, a few areas where RPA is useful, and how to implement RPA in your business.

Unique Challenges in Banking

Banks face some unique challenges with their workflows. These challenges present some hesitation when it comes to fully adopting RPA. However, automation is often required to better manage banking processes, reduce errors, promote efficiency, and tackle other shortcomings of manual processes.

Of the many challenges facing financial service companies, we shall discuss uniquely challenging issues for banking institutions. 

1. Regulatory Compliance – All industries in the market today are subject to certain regulatory policies. But the banking industry has some of the most stringent regulatory guidelines and requirements stipulated in US law. Adhering to these regulatory policies is non-negotiable, and flouting them can raise questions and result in huge fines.

Complying with regulatory standards and expectations requires diligence, attention to detail, and reliable processes that operate within the acceptable framework. With RPA, your systems and banking operations will be lined up according to set standards. RPA tools programmed with certain rules and processes verify every action accordingly. In the process of executing all banking tasks, it flags any action that negates set rules.

2. Security and Fraud The internet is great, but its downside is the increased risk of cybercrimes. A report by Contrast Security reveals that 60% of financial institutions have suffered destructive attacks. This report shows how malicious cybercriminals are toward financial institutions, including banks.

Hackers can compromise a bank's client and account data and even steal money from the institution if its online process is accessible. That's why ensuring processes are secure and fraud detection measures are installed through RPA is paramount.

Some of the digital features banks must establish are authentication (location-based, risk-based, biometrics, out-of-band), end-to-end encryption, and address verification services.

3. Modernizing Legacy Systems – Many banking institutions still operate on systems designed and built years ago. This puts them behind the digital curve and limits their ability to operate in the modern world. Businesses are working on modernizing these systems to take optimum advantage of technological solutions such as automation to make their operations more efficient.

Despite the benefits banking institutions can gain from automation, modernizing their legacy systems poses difficulties. Moving a legacy system into an automated ecosystem takes work. Some challenges of modernizing outdated systems are highly-patched source codes, missing or outdated technical documentation, quality assurance issues, data migration, business impact, and unavailable third-party applications and libraries.

4. Data Management – Banking is a data-heavy industry with multiple sources of information that must be compiled into a single source of truth. These data, which include customer data, loan applications, stock trading information, and interest payments, must be collected and entered into a main database so employees can easily use them.

However, collecting, classifying, and accessing this data is difficult for banks. Moreover, these processes are only partially accurate when handled manually. Data collected in certain cases may be incomplete, lost, mislabeled, and exposed to access control issues. Consequently, the banks will record less efficiency and productivity.

5. Operational Cost Management – It takes significant staff and time to manage a banking business, which runs up administrative and operational costs. Banks are always looking for ways to reduce their overhead costs, save money, and boost their bottom line without sacrificing customer service while also maintaining compliance.

When human teams are worn out from handling numerous repetitive and manual tasks, it can cost banks money and customers.

6. Ineffective Mobile Services The ability of an institution to offer mobile services through apps is crucial in this digital age. Statistics show that 70% of all U.S. digital media time comes from mobile apps.

Many banks have mobile apps from which they render self-service banking. Despite this, these applications are limited in functionalities as their automation capabilities still need to be fully maximized. Despite having built-in chatbots and live chat features, some apps process little to no customer requests. As a result, many customers have to visit the bank and have a human team attend to their needs, negatively affecting customer experience.

7. Differing Customer Expectations – Delivering seamless banking services to customers is difficult because of differing customer banking preferences. The older generations, millennials, and Gen Z’s prefer different banking options. Personalizing bank services for these generations can be challenging.

While the older generation prefers human teams, the millennials and Gen Z’s prefer social media interactions and technology-inclined banking solutions. Customer expectations will not be met when manual and automated solutions aren't integrated. Also, when this integration is absent, these customers can get frustrated and decide to bank with a competitor.

8. Adaptability to Change Despite the countless benefits of RPA across all industries, many banks and their employees are yet to adapt. The inability to adjust brings about zero digital transformation. Many bank leaders aren't investing in employee training, leaving their employees unskilled in controlling digital processes. Furthermore, many banks that have gone digital have no stringent RPA implementation policies that employees must adhere to. 

Watch our interview with Sidney Madison Prescott, a finance automation expert, to learn more about RPA for banking. 

Benefits of RPA in Banking

RPA offers diverse solutions to the banking industry. When applied in different areas of the industry, there is an all-round change. Let’s examine some of the benefits of RPA in banking.

1. Increased Efficiency

RPA increases efficiency by automating repetitive and rule-based tasks. These include bookkeeping, account opening, account closure, and card processing. Automating these processes fosters a faster execution of tasks and boosts productivity.

2. Cost Savings 

Banks have several departments and perform different functions. Running these departments and executing all tasks can require high costs. However, when tasks are automated, banks can drastically cut costs as RPA is cost-effective and streamlines operations.

3. Risk Mitigation 

Reduce the risk of non-compliance by performing tasks with full accuracy. With RPA, you can identify potential risks, possible causes, or reasons for the occurrence. RPA also develops strategies for risk mitigation and audits all banking processes.  

4. Bridging System Gaps

Old-fashioned systems and modern technologies differ in functionalities, benefits, and capacities. Modern technologies make up for the flaws in outdated systems. In bridging existing system gaps, you can adopt the evolutionary method, where you gradually migrate to a modern system. On the contrary, you can follow the revolutionary method. This approach retires your legacy system and adopts RPA fast for improved business operations.

5. Fraud Detection

RPA can detect anomalies and fraud trends by using machine learning algorithms. Automated software can analyze the data collected from various sources to identify patterns that indicate fraud before its occurrence.

In the case of a potential fraud incident, the automated software raises an alarm to spur the bank management to take prompt action. Likewise, with RPA, bank leadership can track fraud investigation processes and generate reports.

6. Employee and Customer Satisfaction

When employees are satisfied at their jobs, customers will be too. Adopting RPA can reduce employees’ heavy workload. This prevents backlogs and less productivity. The more mundane tasks employees can cut, the more eager they’ll be to ensure customer satisfaction.

7. Time Saving

Accomplishing more in a short time is one of the major advantages of RPA. Through automation, your bank can eliminate long hours of treating funds deposit or withdrawal applications, validating customer data, and approving loans.

8. Ease-of-use

RPA software requires no college degree or high technical know-how before use. The software is fully built to be customized according to a bank’s operational needs. It is operable by anyone in the bank, regardless of job roles or responsibilities.

Moreover, your bank can request custom software right before development. With a custom RPA solution, you can address major pain points in your business, free up your team for more important tasks, and rest assured of operating within compliance guidelines.

9. Reduced Human Errors

Human errors in the banking sector can lead to sensitive and proprietary data loss, intellectual property theft, and financial loss. These errors include wrong loan disbursement, incorrect bill counting, bad deposits, data exposure, mishandling data access control, and incorrect interest rate calculations. Employing RPA to handle these repetitive tasks can facilitate proper banking operations. In addition, it can limit the chances of a cyber-attack launch being successful.


RPA Use Cases in Banking

McKinsey estimates that 43% of banking processes can be automated. This only leaves the question: Where do we start? Here are 10 high-impact processes that banking institutions can consider for their first (or next) automation project.

1. Customer Onboarding

Customer onboarding can be a rigorous and time-intensive process that requires aggregating lots of information into a single system. For bank officials, RPA can automate customer data entry and verification during onboarding. 

RPA executes these by extracting information from documents, performing background checks, and accurately populating the necessary forms and systems. This automatic task execution reduces manual processes, improves data accuracy, speeds up the onboarding process, and ensures compliance with regulatory requirements. 

2. Account Opening and Closure

Opening and closing accounts require accurate paperwork, notices for clients, and adherence to regulatory requirements. When mistakes occur, even if due to simple human errors, they can be costly.

To avoid these mistakes and ensure accuracy, RPA can automate the account opening and closure processes. It can validate customer information, perform regulatory checks, generate account documents, update relevant systems, and send notifications to customers. By automating these tasks, banks can streamline the account opening and closure processes, reduce errors, and provide faster service to customers.

3. Loan Processing

Whether a car, business, or mortgage loan, all should be processed accurately at every step. These steps include receiving an application, application processing, underwriting, quality control, loan issuing, and monitoring the loan’s performance. When an irregularity occurs at any of these stages, it could cause serious issues. 

This indicates that processing loans requires using multiple systems and having your team input information from one database to another. Likewise, this opens up the possibility of errors that can cause significant delays in the process.

To maintain process correctness, RPA can help. Rest assured that application data entry, credit scoring, document verification, and compliance checks will be precise. It will also extract data from loan applications, update credit systems, perform risk assessments, and generate loan agreements. Automating these steps improves efficiency, reduces manual errors, and accelerates loan processing times.

4. Detecting Fraud

Cybercriminals are known to target banking institutions because they hold a trove of data. If you can detect fraud early, you can often prevent disaster for your business and clients.

RPA can help banks detect and prevent fraud by automating the monitoring of transactions, flagging suspicious activities, and generating alerts for further investigations. It can analyze patterns, detect anomalies, and identify potential fraud cases accurately at a higher speed than manual methods. This helps you prevent fraud rather than try to cure it, protects your bank’s reputation, delivers great customer service, and generates more revenue. 

5. Compliance and Regulatory Reporting

Compiling compliance and regulatory reports, although mandatory, is time-consuming and requires utmost accuracy. RPA can assist in automating compliance-related processes and generating reports for internal and external auditors or compliance officers. Automating compliance and regulatory reporting reduces the manual effort in performing this role, improves accuracy, and helps banks meet regulatory deadlines.

6. Card Processing 

In many cases, debit and credit card processing still needs the input of a human team. This doesn't override the fact that RPA can streamline the process. Automated tools can receive and approve credit card applications, double-check applicants’ information, and approve or disapprove of the applicants’ identity.

7. General Ledger 

Financial records management, such as income, expenses, and assets, can be taxing. Maintaining these financial records manually is time-consuming and can’t be fully relied on for accuracy. However, adopting an automated general ledger provides real-time financial reporting, tracks transactions, and improves visibility.

8. Know Your Customer (KYC)

The KYC process is a requirement banks must meet to execute standard business operations and avoid regulatory penalties. The obligatory process assists banks in validating a customer's identity before opening an account. Executing KYC requires 500 to over 1,000 full-time equivalent employees (FTEs) and millions of dollars yearly. 

To reduce the volume of human resources and cost needed to ensure KYC, banks need RPA. RPA for KYC empowers banks to conduct risk assessments, anti-money laundering (AML), and fraud caused by false identities.

9. Cash Deposit and Withdrawal 

Automation enables customers to receive cash deposits into their bank accounts without visiting the bank to fill out a form. With the growth of automation in this digital age, customers can also withdraw from their accounts using the ATM. RPA supports card records validations, handles deposits, and updates account balances. This limits the number of physical cash deposits bank employees must process daily.

In the case of processing checks, employees aren’t limited to manually logging their details in the fields of a digital system. Instead, with intelligent automation like artificial intelligence, banks can use optical character recognition (OCR) to scan check details. These details, such as serial number, account number, account name, and amount, are populated automatically into appropriate digital fields. 

10. Accounts Payable

Manual records of accounts payable can be ineffective. Vital information, such as vendors or amounts owed, may be missed or become difficult to track. This situation can cause difficult payment processing. In cases where these pieces of information are intact, employees have to digitize them before processing. When banks use intelligent automation for accounts payable, receiving and reading invoices and processing payments will be much easier.

Implementing RPA in Your Business

Once you’ve decided which processes to automate, it’s time to consider strategies for implementing them in your organization. If you don’t have the in-house IT team to build your custom solution, we recommend choosing a partner like EnterBridge to help you through the process.

We can assist in assessing your problem, suggesting solutions, and building and implementing RPA. By also helping your business, you’ll develop a lean team, motivate your employees to stay dedicated to work, increase productivity, and reach set goals faster. Our company has helped several clients with custom RPA in banking and other industries, and it revolutionized their businesses. Check out our detailed case studies to see for yourself

To help you get started on the right foot, we created 5 Tips for Getting Started with RPA in the Financial Sector. Download your copy now to take the first step toward business process automation.

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