Harnessing automation for a successful transformation in financial services

John Gaughan, Senior Quality Engineering Manager at Roq

The financial services industry is undergoing a significant period of transformation as it embraces new technologies designed to enhance efficiency, interoperability, and security. Among the tools facilitating this shift, automation stands out as a critical enabler, helping institutions manage the intricacies and demands of modern financial ecosystems. This is particularly evident in the context of the ISO 20022 migration, a global change initiative that must be completed by November 2025.

ISO 20022 is set to revolutionise the way financial institutions handle payment data, offering a unified and rich data framework that improves transaction processing and compliance. However, transitioning to this new standard involves overhauling complex legacy systems and introducing MX messaging sets – all of which require thorough testing to ensure there is no unexpected downtime or negative impact on banking customers. According to a report by Deloitte, financial institutions investing in automation can reduce operational costs by up to 30%, significantly improving their ability to manage the extensive testing required for ISO 20022.

Automation is designed to streamline processes, reduce manual effort, and minimise human error. This is particularly beneficial in data management tasks, where accuracy and consistency are paramount. By automating data mapping, transformation, and validation processes, financial institutions can ensure high data quality and integrity across their systems. For instance, a study by McKinsey highlights that automated data validation can improve accuracy by 50%, reducing the risk of costly errors during the migration process.

Another advantage of utilising automation is its ability to enhance regulatory compliance. The financial industry operates under stringent regulatory environments that require continuous monitoring and updating. Automation can help with the generation of compliance and other reporting requirements, which helps maintain detailed audit trails. This is particularly useful for large institutions operating in multiple regulatory jurisdictions, where the burden of compliance can be overwhelming. A PwC report indicates that automated compliance systems can reduce compliance costs by up to 20%, allowing financial institutions to reallocate resources more effectively.

For smaller banks, which often grapple with limited financial and human resources, automation can be a game-changer. These institutions typically spend a significant portion of their IT budgets on maintaining existing systems, leaving little room for widespread transformative change. By automating routine tasks, small banks can free up valuable resources to focus on more strategic initiatives. This not only helps in managing current operations more efficiently but also prepares them for future technological advancements. According to a study by Accenture, small banks that adopt automation can see a 25% increase in operational efficiency within the first year of implementation.

Large financial institutions, on the other hand, face the challenge of integrating automation into their complex, multi-layered legacy systems. This requires coordinated planning (shift left), significant investments, and extensive change management. However, the benefits of automation make it a worthwhile investment. Automation provides the scalability and flexibility needed to handle large volumes of transactions and adapt to changes quickly, ensuring that all aspects of the institution’s operations are aligned with its strategic goals. A Gartner report suggests that large institutions using automation can improve transaction processing speeds by 40%, enhancing overall operational performance.

To maximise the benefits of automation, financial institutions should adopt a strategic approach. This involves conducting a thorough assessment of existing systems and processes to identify areas where automation can have the most significant impact. Developing tailored automation solutions that align with the specific needs and goals of the institution is also crucial. Additionally, implementing robust monitoring systems to track the performance of automated processes and make continuous improvements helps in identifying any issues early and ensures that the systems remain efficient and effective.

In conclusion, as the financial services industry continues to evolve, automation is an invaluable tool in delivering successful transformation projects, particularly in the context of ISO 20022. By streamlining processes, enhancing data quality, facilitating compliance, optimising resource allocation, and ensuring scalability, automation helps institutions navigate the complexities of modern financial operations efficiently. Financial institutions that embrace automation will be better positioned to achieve seamless transitions, unlock the full potential of new technologies, and drive future innovation in the global financial ecosystem.

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