After two years of an interest rate environment that led to record profits for financial institutions, 2023 is shaping up to be vastly different. Wage inflation and the war for talent have led to many vacant positions within financial institutions, which has resulted in diminished customer service and a strain on the remaining employees. Large technology companies and recently launched neo-banks are new entrants to banking that have increased competition. Regional financial institutions have also prioritized innovation and begun leveraging enhanced financial technology to provide products faster and improve customer experience.
With the current interest rate environment putting pressure on the net interest margin, as well as the elimination of mortgage banking revenue, financial institutions need to ensure they are effectively utilizing available resources to remain competitive in this dynamic industry. Streamlining back-office processes, while providing the best possible customer experience, are two essential initiatives to accomplish just that. Both can be achieved by automating workflow processes, as it reduces the amount of manual processing time required, improves the speed to which customers can have access to products, and allows for a better customer facing experience.
It’s important to understand that organizations shouldn’t automate a bad process. Automating a poorly designed process would include applying automation techniques to a business cycle that has poorly designed data flow, doesn’t contain necessary integrations, or provides a poor customer experience. These processes should be identified, improved, or retired, and replaced with one of the many new financial technologies recently developed. Some questions to consider before exploring automation include:
- Can the business scale with the process as designed?
- Can we use the system data for decision-making purposes?
- Does this cycle provide a positive customer experience?
- How is the employee experience?
- Is the process completely or partially manual?
If the answer to these questions is no, the likely solution is to improve or recreate the cycle.
To identify opportunities for improvement within a poorly designed cycle, it may be beneficial to utilize a workflow software to see how an existing process works. By creating a workflow diagram of a full business cycle, companies can determine how much time and money is spent on a cycle, identify redundancies or control gaps, and see how their process compares to that of a newly created financial technology platform.
If it is ultimately determined that the process would be better automated through implementing a new technology platform, having the workflow diagram will allow for a better understanding of all your needs and wants as you go through a vendor selection. The workflow diagram may also be used to ensure your organization is utilizing its existing technology vendor to its fullest capabilities. Technology features are frequently overlooked during the implementation process, or a company’s needs change, and previously unnecessary tools now become valuable.
If it is determined that the cycle is designed well, but certain time-intensive tasks remain, robotic process automation (RPA) may be right for your institution. RPAs, or software bots, lend themselves best to repeatable tasks where you can implement rules that require little judgment. Bots are beneficial to companies in two ways. First, bots can prepare these tasks at a quicker rate than humans. They also operate beyond basic human capabilities and can tackle these tasks incessantly. Secondly, people generally don’t like performing these types of functions. They would rather be working on items that require critical thinking and can add value to the institution such as customer experience, innovation, and problem solving. By utilizing RPAs, institutions may be able to reduce the amount of job openings, improve customer experience, and realign human capital resources to pursue growth strategies.
Once your institution determines if automation is the right choice, the next step is prioritizing which processes to convert since all cannot be completed simultaneously. Quantifying the cost of a cycle can help determine which processes should be prioritized. Institutions must consider how many people are involved in a cycle, how many hours each person spends on a cycle, the average compensation of people working on cycles, and how much time can be reduced through the implementation of better RPA software.
While not all automation benefits may be calculable, the organizational benefits will be apparent. If a dollar cost savings calculation isn’t valuable to your organization, understanding the number of hours saved and allocated to work on more important initiatives will be useful to determine the value of the automation efforts.
The banking industry is changing rapidly with introduction of new competitors and improved products and services. For organizations to stay relevant, enabling technology must be utilized to maintain a high level of customer service, while also attracting younger and more tech savvy customers. By automating processes through new financial technology developments or robotics process automation, institutions ensure the best customer experience and resources are being properly deployed.
