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How can banks harness automation to its fullest value?

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Comments can be attributed to Brian Halpin, Senior Vice President at Blue Prism

 

Financial institutions are aggressively deploying automation technologies. This has accelerated during the COVID-19 crisis with digital ecosystems re-shaping how financial services are discovered, assessed, purchased, and delivered. Intelligent automation (IA) has become vital for future competitiveness and differentiation in financial services.

Automation technologies could contribute an additional $US 1 trillion annually in value across the global banking sector – through increased sales, cost reduction and new or unrealised opportunities. However, this value is still being left on the table. Mainly because there are well-documented automation challenges, including lack of clear and strategic intent and senior executive support for automation, plus heavily siloed deployment within organisations, resulting in disconnects within and across digital transformation efforts.

Current operating models, in essence, neither enable nor ask for strategic use of automation technologies. But a previously hidden reason has become increasingly prominent – the failure to grasp the nature and size of the opportunity.

There are two key things to understand: the strategic opportunities offered by intelligent automation; and how automation can drive the twin engines of compound growth and combinatorial innovation. Additionally, they have been anticipating how automation can be deployed to address inescapable competitive pressures driven by rising customer expectations on digital banking.

Let’s look at two examples of banks who put intelligent automation into action and reaped the rewards.

 

Europe – reduced customer wait time from 12 days to 4 hours

One of Europe’s oldest and largest banks, serving more than 10 million customers in multiple countries, realised major gains in service quality, speed to market, and customer experience from its intelligent automation deployments. More than300 acquisitions led to a complicated operating environment with no core banking system. Intelligent automation, however, enabled the bank to manage operations across legacy estates, using APIs to bridge systems and alleviate problems.

The senior automation lead describes its RPA platform as the “arms and legs” that pull data from systems and cognitive tools such as ML and OCR as the “brains” that analyse and interpret it. The bank estimates it has achieved a significant 150% improvement in overall efficiency from its automations and expects additional gains from process improvements in 2021.

The bank also estimates it has captured an additional 30-50% value to date in overall enterprise effectiveness – resulting in higher transaction volumes, better regulatory compliance, and improved service quality, availability, and timeliness. The automation platform has increased enterprise productivity and brought significant growth in both customer and employee satisfaction. On regulatory compliance, the complicated ‘Know Your Customer’ (KYC) remediation process is now supported by digital workers and presented in “dashboard” formats for management decision-making. The result: on time with 100% quality. Additionally, by integrating chatbots with its automation, the bank’s customers can request credit and debit card cancellation and replacement in a single, fully automated transaction.

While the bank had not set out to achieve transformational gains, it is doing just that by progressing an infrastructure platform for innovation. Digital workers take on many roles, for example, chatbots that automate customers’ bank statement requests; accountants that read income statements from customers, saving time for their colleagues on the front line; work scheduling tools that park payments during peak volume time to make maintenance cheaper. The bank has already realised an estimated 30% additional enablement value to date from its more than 500 digital workers. They enabled the bank to rapidly develop and deploy processes giving customers access to government pandemic aid and relief funds. Core banking services such as loan commitments – previously taking 12 days – are now provided to customers within four hours – a huge expansion in customer added value. Service is now available at weekends, increasing volumes by five per cent. Detailed compliance reports for multiple national and European authorities and jurisdictions are also now compiled and formatted by digital workers for human review and approval.

 

North America – human and digital workers blend and multiply outcomes

In 2015, a major Canadian bank adopted a new value-oriented, purpose-driven management philosophy of increasing organisational agility and improving customer experiences. A key focus involved transforming disjointed operating processes on an end-to-end basis but from the customer’s perspective. This went far beyond simply tweaking existing systems and processes for incremental improvement and cost reduction.

Accordingly, the automation business case was based on increasing the value of the bank’s services as measured by customer metrics – retention rates, service expansion, and improved net promoter scores – rather than simply “doing (bad) things faster”. Taking an agile approach, aided by design thinking, the bank realized that a unified customer data structure was a critical requirement for improving the service experience. They integrated front-end artificial intelligence and machine learning tools with their Blue Prism platform to capture, structure, and curate existing customer data in a shared repository supporting multiple service lines.

In addition to efficiency savings estimated at more than 200% from the ability to access and use previously trapped data, the bank also estimated a 400% gain in enterprise effectiveness – measured by increased customer retention and revenues from broader services integration

The technology platform, moreover, enabled a new organisational structure built on a blended human and digital workforce that could better match task times and volumes to appropriate resources. As the bank’s automation lead notes, “it changes how you think about ‘work’.” Taken in aggregate, the bank’s gains in efficiency and effectiveness feed and reinforce each other, changing how employees think about ‘work’. The bank’s intelligent automation platform has also supported greater enablement gains in terms of new products and services, enterprise resilience, and first-mover advantage.

When the Covid-19 pandemic required major government response, for example, the bank was able to develop custom automations in just a few days to support massive government referral and aid programs. The bank was able to complete thousands of aid applications, attracting new customers and generating widespread public goodwill and reputational equity.

 

Conclusions – what are we learning from these leaders?

Adopting a strategic mindset in deploying intelligent automation is critical in capturing maximum value. Without having a transformative view and an enterprise vision suffusing from the top, the strategic uses of automation for greater effectiveness and enablement are foregone by tactical local initiatives, focused narrowly on what can easily be measured such as cost savings and cost avoidance.

Leaders in automation deployment begin with an external focus on customers and competition, using that perspective to design an end-to-end business process architecture that accelerates digital innovation. By ‘seeing the business through the customer’s eyes’, they use automation to improve every aspect of the customer experience rather than automating ineffective processes. Creating value is the primary objective; cost is important but secondary.

Building a robust in-house automation capability creates flexibility and a knowledge base which, with strong governance and disciplined behaviours, forms part of the enablement platform and accelerates strategic use of automation technologies. Longer term strategic effectiveness and enablement value from intelligent automation far outstrips near-term efficiency gains in the leading deployments we have studied – by multiples ranging from 3x to as much as 7x – demonstrating the value of compound thinking.

 

 

Banking

Wealth Managers and the Future of Trust: Insights from CFA Institute’s 2022 Investor Trust Study

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Author: Rhodri Preece, CFA, Senior Head of Research, CFA Institute

 

Corporate responsibility is more important than ever. Today, many investors expect more than just profit from their financial decisions; they want easy access to financial products and to be able to express personal values through their investments. Crucial to meeting these new investor expectations is trust in the financial services providers that enable investors to build wealth and realise personal goals. Trust is the bedrock of client relationships and investor confidence.

The 2022 CFA Institute Investor Trust Study – the fifth in a biennial series – found that trust levels in financial services among retail and institutional investors have reached an all-time high. Reflecting the views of 3,588 retail investors and 976 institutional investors across 15 markets globally, the report is a barometer of sentiment and an encouraging indicator of the trust gains in financial services.

Wealth managers may want to know how this trust can be cultivated, and how they can enhance it within their own organisations. I outline three key trends that will shape the future of client trust.

 

THE RISE OF ESG

ESG metrics have risen to prominence in recent years, as investors increasingly look at environmental, social and governance factors when assessing risks and opportunities. These metrics have an impact on investor confidence and their propensity to invest; we find that among retail investors, 31% expect ESG investing to result in higher risk-adjusted returns, while 44% are primarily motivated to invest in ESG strategies because they want to express personal values or invest in companies that have a positive impact on society or the environment.

The Trust Study shows us that ESG is stimulating confidence more broadly. Of those surveyed, 78% of institutional investors said the growth of ESG strategies had improved their trust in financial services. 100% of this group expressed an interest in ESG investing strategies, as did 77% of retail investors.

There are also different priorities within ESG strategies, and our study found a clear divide between which issues were top of mind for retail investors compared to institutional investors. Retail investors were more focused on investments that tackled climate change and clean energy use, while institutional investors placed a greater focus on data protection and privacy, and sustainable supply chain management.

What is clear is that the rise of ESG investing is building trust and creating opportunities for new products.

TECHNOLOGY MULTIPLIES TRUST

Technology has the power to democratise finance. In financial services, technological developments have lowered costs and increased access to markets, thereby levelling the playing field. Allowing easy monitoring of investments, digital platforms and apps are empowering more people than ever to engage in investing. For wealth managers, these digital advancements mean an opportunity for improved connection and communication with investors, a strategy that also enhances trust.

The study shows us that the benefits of technology are being felt, with 50% of retail investors and 87% of institutional investors expressing that increased use of technology increases trust in their financial advisers and asset managers, respectively. Technology is also leading to enhanced transparency, with the majority of retail and institutional investors believing that their adviser or investment firms are very transparent.

It’s worth acknowledging here that a taste for technology-based investing varies across age groups. More than 70% of millennials expressed a preference for technology tools to help navigate their investment strategy over a human advisor. Of the over-65s surveyed, however, just 30% expressed the same choice.

 

THE PULL OF PERSONALISATION

How does an investor’s personal connection to their investments manifest? There are two primary ways. The first is to have an adviser who understands you personally, the second is to have investments that achieve your personal objectives and resonate with what you value.

Among retail investors surveyed for the study, 78% expressed a desire for personalised products or services to help them meet their investing needs. Of these, 68% said they’d pay higher fees for this service.

So, what does personalisation actually look like? The study identifies the top three products of interest among retail investors. They are: direct indexing (investment indexes that are tailored to specific needs); impact funds (those that allow investors to pursue strategies designed to achieve specific real-world outcomes); and personalised research (customised for each investor).

When it comes to this last product, it’s worth noting that choosing advisors with shared values is also becoming more significant. Three-quarters of respondents to the survey said having an adviser that shares one’s values is at least somewhat important to them. Another way a personal connection with clients can be established is through a strong brand, and the proportion of retail investors favouring a brand they can trust over individuals they can count on continues to grow; it reached 55% in the 2022 survey, up from 51% in 2020 and 33% in 2016.

 

TRUST IN THE FUTURE

As the pressure on corporations to demonstrate their trustworthiness increases, investors will also look to financial services to bolster trust. Wealth managers that embrace ESG issues and preferences, enhanced technology tools, and personalisation, can demonstrate their value and build durable client relationships over market cycles.

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Banking

2022 ESG Investment Trends

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Jay Mukhey, Senior Director, ESG at Finastra

 

Environmental, Social and Governance (ESG) themes have been front and center throughout the pandemic. While the framework has been surging in popularity for several years, COVID-19 served as a period of reflection causing many companies, investors and other individuals to take these factors seriously. It’s something that we can no longer afford to ignore.

Jay Mukhey

We are witnessing drought, adverse weather patterns, hotter climates, and wildfires with more regularity, raising the profile of the climate crisis. Efforts were renewed at COP26 in Glasgow last November to help address the challenge, with the signing of the Glasgow Climate Pact and agreement of the Paris Rulebook. As a result, we are now seeing record net new inflows into ESG investing and impact.

 

Evaluating ESG criteria

Long gone are the days when ESG issues were at the periphery of a company’s operations. In just a few short years, ESG criteria have become a key metric for investors to evaluate businesses they are considering investing in.

Investor money has poured into funds that consider environmental, social and governance issues. Data from the US SIF Forum for Sustainable and Responsible Investment shows that ESG funds under management have now reached more than $16.6 trillion. It’s not just institutional investors who are embracing ESG, with Bloomberg Intelligence predicting that savers across the world will amass £30.2 trillion in ESG funds by the end of the year.

Due to the multitude of divergent factors that contribute to a company’s success on ESG, it can be tricky to pin down exactly what criteria to measure. Depending on the industry a company operates within, environmental criteria could include everything from energy usage, the disposal of waste and even the treatment of animals.

Social criteria are primarily related to how a company conducts itself in business relationships and with stakeholders. For example, does it treat suppliers fairly? Is the local community considered when the business makes decisions that would impact them? Do they have a statement and policy around modern slavery?

While governance criteria have traditionally been an afterthought, this may be changing. Everything from executive pay to shareholder rights and internal controls are relevant to investors within these criteria.

 

Tracking ESG for competitive advantage

Many experts within the financial services industry point to the power of ESG as a major competitive advantage, if used correctly. It has been noted that increasingly corporations, from big Fortune 500 companies down to small scale-ups, will communicate on their sustainability metrics to grow their business and to attract talent. However, it’s no longer enough to just pay lip service to ESG issues, with abstract commitments increasingly being seen as insufficient. Companies must now quickly progress to concrete objectives that can be measured and tracked.

A wide range of data providers now offer detailed information and tools that can measure ESG performance and effectiveness. Yet major challenges remain around bringing together what is often extremely fragmented data and transforming it into actionable insights.

 

Focus areas for 2022

The ESG criteria that investors measure is by no means stagnant. Complex societal challenges regularly emerge that require the attention of companies. Contributors recognize several topics that demand a sophisticated approach, including the COVID pandemic, diversity challenges and powerful social movements.

Companies operating within the financial services sector face several specific challenges related to ESG, with contributors believing that fintech will also continue to play a central role in finding answers to them.
For example, industry experts expect customers to be more demanding of firms in SME lending when it comes to understanding exactly what impact they are having on the climate. For many financial services firms, 2022 will be the year that they will try to reduce the time it takes to bring ESG products and services to market, such as green loans and mortgages, as well as checking accounts with sustainability and carbon tracking capabilities.

When selecting a service provider, customers are increasingly interested in the ESG credentials of their bank or financial institution. Research from PwC finds that 80% of consumers are more likely to buy from a company that stands up for environmental and governance issues. Consumers are one of the main drivers of ESG and many are putting their money where their mouth is. It’s a trend that’s not going away; financial institutions need to start implementing their strategy for ESG now.

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