Looking for a modern-day messiah to address multiple pain points like extreme dependency on human workforce and prohibitive cost of running Operations Units in Banks? What can be a viable solution to the increasing non-availability of low cost and low skilled labor needed to perform high volume repetitive tasks in the banking sector? After all, it is being indisputably established that success in today’s complex global financial market directly hinges on unprecedented levels of speed, accuracy and cost efficiency.
In such an environment, who is the hero that we see emerging successfully by casting aside the shackles of the traditional past and embracing the innovations of modern technology? Let us break the suspense and introduce you to the disperser of banking woes – ‘Automation’.
Automation is the key to tasks that call for cost efficiency along with a reduction on human dependency. The evolution of digital economies and the demand for single touch processes with quicker turnaround time has catalyzed the demand for automation. Operations processes where the user is expected to log into multiple systems, enter, collect or verify data on the screens or transfer data from one screen or paper to another is the most common NVA (Non- value added activity). Process optimization and automation are critical in these areas.
Robotic process automation
According to Wiki “A software ‘robot’ is a software application that replicates the actions of a human being interacting with the user interface of a computer system. For example, the execution of data entry into a SAP system – or indeed a full end-to-end business process – would be a typical activity for a software robot. The software robot operates on the user interface (UI) in the same way that a human would; this is a significant departure from traditional forms of IT integration which have historically been based on Application Programming Interfaces (or APIs) – that is to say, machine-to-machine forms of communication based on data layers which operate at an architectural layer beneath the UI.”
Robotic Process Automation (RPA) is what lends weight to the concept of automation and enables it to progress beyond basic screen scraping technologies. Automation immensely increases computational capacities and makes it possible to deploy resilient, reliable and scalable programs with minimal coding efforts. Application of bots minimizes manual errors and increases operational efficiency thereby cutting down turnaround time and saving costs significantly. In fact, RPA is ideal for operations that are highly manual, volume intrinsic, rule based and prone to human error. It wouldn’t be an exaggeration to claim that after a decade, more than half of the existing offshore financial service sector jobs will be performed by RPA enabled bots leading to a 30-50% savings in operational costs.
Bots in Digital Banking
How does RPA provide the much needed face-lift to digital banking? In digital banking, Advanced Robotic process automation uses Natural Language Processing (NLP), and Machine Learning (ML) to handle multiple end-to-end processes. This revolutionizes the entire concept of digital banking. Let’s understand this with a few practical examples.
Bots in KYC and due diligence:
Take a look at the way conventional techniques for KYC (which is critical for Client Onboarding) mar the user experience. The customer and analyst are mired in paperwork which dilutes the impression of the bank. The analyst needs to look up the account opening form along with the attached/scanned copies of customer identification documents and enter the customer information into the core banking solution. The entire process is highly manual, time-consuming and vulnerable to human error. According to a recent survey conducted by Thomson Reuters, financial firms spend an average of $60 million on compliance with KYC and Customer Due Diligence (CDD). For some firms, this figure can go as high as $500 million.
With bots, the entire process becomes user-friendly and hassle-free, saving significant time and effort. The visible efficiency itself has a huge impact on the way the bank is perceived by its customers, let alone the cost savings in other back end processes.
Features of bots in KYC and due diligence:
- Identification of the document: The scanned customer identification documents are processed using bots and matched against the repository of documents, resulting in automatic identification.
- Genuineness of document: Several layers of the scanned customer identification documents are created by the bots and analyzed for evidence of tampering. This prevents opening of fraudulent accounts.
- Text extraction: The fields present in customer identification documents such as Passport, PAN, Aadhar, Social Security Number etc., are identified and converted to text. The customer information obtained is auto populated onto the identification fields.
- Signature verification: The bots use Neural network model for signature verification on cheques and other instruments to prevent manipulation or fraud.
- Image verification: Image processing is used for verification of the customer either as part of a two-step verification in the KYC process or for facilitating PIN free ATM transactions. This creates a Digital 360 experience for the user.
Bots in Anti Money Laundering:
Bots also play a very crucial role in preventing anti money-laundering activities. Heightened regulatory scrutiny with respect to anti-money laundering increases a bank’s operational and legal risks and creates a dent in its reputation. According to Capco, about US$300 billion in fines were paid by financial institutions towards violations of the Banks Secrecy Act (BSA) and AML regulations including US sanction requirements. Banks can use bots at multiple levels to minimize these risks:
- Customer Screening: This activity involves screening customers against the government, internal and external sanctions list to identify people who are politically exposed or blacklisted. This needs to be done for both new and existing clients of the bank. This process is being automated by the use of bots.
- Risk Assessment: Risk assessment of customers is more accurate when data is gathered from various resources including the public domain. This often includes data from various regulatory bodies and multiple websites resulting in a large amount of time spent by the analyst. To reduce the time, bots can be deployed to collect and consolidate information and also connect this information to the AML system.
- Alert Investigation: Transaction monitoring systems generate numerous alerts, majority of which are false positives. Given the growing volume and complexity of transactions and the increasing number of false positives, identifying actual suspicious activity becomes even more challenging and time consuming. RPA along with Machine Learning can be employed to learn the behavior of the Compliance Officer as he marks an alert as a possible suspicious transaction or a false positive. This will weed out alerts which are most likely to be false positives while ensuring that no bad transactions are ignored.
Refocus human workforce:
Does this mean that bots have the potential to completely replace humans? Not really. Even though one bot can replace 3 or 5 Full Time Equivalents (FTEs), there are limitations to the usability and impact of robots. Despite bots performing some tasks faster and more reliably than humans, they still need human intelligence for managing common exceptions. By common exceptions, we refer to the management of these processes at down time due to a system upgrade or subjective assessment of customers.
One of the biggest contributions of bots is that it opens up a rich pool of resources in the form of skill and knowledge based jobs for the human workforce that can enjoy value added activities with the secure belief that non value adding activities are being expertly handled by their efficient counterparts, namely the bots.
Bots at Intellect
Finally, how do these bots impact the functionality of Intellect solutions? The good news is that Intellect is applying Robotic Process Automation (RPA) along with Artificial Intelligence across Intellect Digital Core (IDC) and Intellect Anti Money Laundering (AML) solutions to make them future ready. Intellect is looking to apply “bots” in IDC and Intellect AML to address the major pain points of banks. This results in a significant improvement in processes translating to a superior customer experience.
Essentially, Intellect showcases how an ideal merger of the human intellect with bots can lead to higher productivity and efficiency and open the doors to a truly digital banking world.
– Saurav Kumar, Consultant, Intellect Design Arena Ltd.
– Vaibhav Joshi, Consultant, Intellect Design Arena Ltd.