Chris Porter, CEO, NexBotix
There is perhaps no better example of the way in which digital technology has transformed an industry than in the financial services sector. The rise of technology-led challenger brands has forced the well-established financial powerhouses to invest heavily to ensure their products and services meet the demands of a world in which the cheque book and bank branch are fast becoming historical relics.
While the speed of digital transformation has been steadily increasing in pace over the last decade, events of the past year have only served to accelerate the process. Financial services firms have, in parallel with many other sectors, quickly adjusted to the realities of the pandemic – lockdown-dominated populations whose only connections to external services have been electronically driven. As companies have adjusted to the ‘new normal’, they have hurriedly explored ways in which to streamline processes, harness data or shape entirely new ways of doing business.
2020 saw an acceleration in the pace of adoption of digital transformation technologies, particularly in response to the growing consumer use of on-line channels. A survey by McKinsey found that globally, about 55% of products and/or services were fully or partially digitised as of July 2020, compared to 35% in December 2019 and 28% in May 2018.
The findings are supported by those of the latest World Retail Banking Report, which emphasised the extent to which the global pandemic has generated more consumer demand for digital. Over half (57%) of consumers now prefer internet banking, up from 49% pre-COVID-19, and 55% preferring banking mobile apps, compared with 47% previously. Investment in digital transformation to enhance customer experience and drive revenue growth has never been more important.
A major asset in the transformation process has been automation. According to a survey by Deloitte, 68% of execs have used automation to directly address COVID-19 related problems. The finding is supported by McKinsey, which found that nearly half of 800 executives surveyed have accelerated the adoption of automation “moderately” during the pandemic, and roughly 20% reported “significantly increasing” automation.
Robotic-process automation (RPA) has enjoyed glowing headlines in recent years. The software is capable of handling high volume requests and repetitive tasks, enabling organisations to improve processes and reduce costs while freeing up employees for high value tasks. RPA’s ability to enhance the workflow for time-consuming, high-volume & repeatable tasks means it has been of particular benefit to sectors such as financial services and healthcare.
One of the most commonly reported problems with RPA is scaling, primarily because RPA can only handle structured, rule-based digital processes. Most modern businesses – especially within the finance sector – are full of unstructured data and judgement-based work. As a result, customers exploring how automation can aid transformation are hitting a wall – RPA is failing to deliver on its promised benefits.
Step forward Intelligent Automation (IA) – a combination of artificial intelligence and automation, which is changing the way organisations function in almost every sector.
What is ‘Intelligent Automation’?
Intelligent Automation is a term used to describe a group of technologies – including RPA, Artificial Intelligence, machine learning and analytics – that are integrated with each other to automate more complex business processes. On their own, these technologies deliver limited value. When combined, they can unlock significant value and transform the way businesses operate.
Once a process is automated, employees are free to work on more valuable tasks such as revenue generating activities or focusing on work where human judgement is required. Using extra capacity to review a larger sample of cases that have been prepared by the robots can drive increased compliance, reduced risk, reduced error rates, faster resolution times and increased CSAT scores as well as a healthier bottom line.
Intelligent Automation can be used to underpin broader transformation in business by extending the value of legacy IT systems and providing an orchestration layer between human operations and IT centric business processes. Once a business is no longer held hostage by legacy systems, true transformation can take place by focusing on business outcomes rather than operating around the constraints of existing systems.
How financial services firms can harness the benefits of Intelligent Automation
Demand for Intelligent Automation within financial services has increased significantly. Understanding which business processes to automate and the type of automation to deploy, or even the extent to which automation can help the organisation, can be challenging without the right expertise. Financial services firms would be wise to consider choosing an external Intelligent Automation specialist which is able to identify the best candidates for automation and provide ongoing Managed Services to make sure the automation solution is efficiently implemented and scaled to meet the demands of the organisation.
The most popular use cases for Intelligent Automation in the financial services sector include:
- Customer Engagement: Consumer demand for efficient and real-time services are driving the need to take an automation-first approach. With increasing volumes of data and emerging channels for accessing such data, market and customer analysis are becoming increasingly important to ensure that the industry is better at driving exceptional customer service. Intelligent Automation and data analytics combined are a powerful way in which organisations can access, analyse and leverage extensive resources (customer databases, social media, etc.) to design financial product tailored to needs and individual requirements.
- Compliance management and productivity: a critical business function within financial services. However, current business processes often result in large compliance backlogs due to the manual effort and archaic approaches for managing organisational compliance requirements. Intelligent Automation provides a smarter way of working by automating these repetitive and mundane processes (such as data entry between spreadsheets and systems, analysis and reporting), and empowers the human workforce to spend their time and effort on more value-added tasks.
- Accounting: a paramount requirement within financial services is for strictly accurate and efficient management of those carrying out critical tasks such as accounts reconciliation or preparation of financial statements and reports. Intelligent Automation is being adopted to support the recognised need for process improvement and optimisation, and to eliminate the time-consuming, repetitive and rule-based tasks from the human workforce.
There is no doubt that financial services firms which have already begun their Intelligent Automation journeys have a clear competitive advantage over their peers. The ability to pivot faster and allocate resources where they are needed the most has been crucial in the current commercial environment, and will be increasingly important as we move into what we all hope is the post-pandemic world.
2021 FINANCE SPEND PREDICTIONS
by Andrew Foster, VP Consulting EMEA, AppZen
As we enter a new year filled with ongoing change and uncertainty, a few things are still clear. Though digital transformation has long been a familiar story told across the finance sector, businesses are recognising the need to adopt new technologies as a matter of urgency. As a result, 2021 will see a huge shift towards embracing technologies that transform finance procedures.
Anant Kale, Co-Founder and CEO, AppZen, shares his finance predictions for 2021:
The year of accelerated digital transformation
The current pandemic forced companies of all sizes, across nearly every industry, to virtualise their workforce, almost overnight. But in the coming year, finance leaders will be turning their attention to wider digitalisation efforts.
Kale explains, “Last year, the focus was on how to quickly keep up with changing business needs, with CIOs focusing on business continuity in a remote work environment—conferencing and collaboration tools, network upgrades, and so on. As we finally caught our breath, this next year will bring even deeper transformation. Rethinking and reimagining business processes in an AI-first world will keep enterprises agile, efficient, compliant and allow them to scale without relying on adding huge headcounts, which will be critical to the bottom line.”
Consequently, more CFOs will be driving the push for AI-powered programmes to be implemented into finance operations to accelerate digital transformation, streamlining operations across the entire enterprise and ensuring business resilience.
Expanding digital transformation – beyond the basics
Over the past year, the drive to enable remote working across the whole organisation has meant the deployment of a wide variety of technologies. Yet, most of these solutions are not in areas that directly increase the finance department’s efficiency. This year, finance leaders will be prioritising two specific functions that are prime for disruption and enhancement – AI-based invoice processing and expense auditing.
“Increasingly, AP invoice processing decisions will be made in the autonomous zone, where intelligent systems can independently make decisions that don’t require human second guessing or manual review,” said Kale. “With autonomous AP, systems that are capable of evaluating all aspects of invoice entry, matching, accounting approvals and even risk and compliance, AP teams will be able to move from operations to more strategic AP concerns.”
AppZen’s recent survey of top CFOs and finance executives confirms the need for deeper transformation in 2021. Currently, 59 per cent respondents report they still haven’t automated ingestion and extraction of data from invoices. Unsurprisingly then, a notable 43.5 per cent of organisations still take seven or more days on average to process an invoice. Organisations with more proficient automated processes only take 2.9 days to process an invoice on average — a considerable difference that supports the need for increased automation and AI uptake among modern finance teams.
Adapting for expenses in the 2021 work-world
CFOs will need to budget for different types of business expenses in light of the new environment. With an evolving workforce that includes remote, on-site and hybrid workers, they need to rethink their strategies and plan scenarios in ways they’ve never had to do before.
To this point, Kale comments, “Business travel will come back in some form later this year, but more importantly, the nature of expenses that have traditionally been associated with travel and entertainment (T&E) will change. Instituting routine audits and implementing clear expense policies will be critical to avoid fraud and abuse or unreliable financial data, which cost businesses nearly $3B dollars a year—and that was before the pandemic.”
As the spend environment becomes more complex, spend visibility is more vital now than ever. Finance leaders need to have the right tools in place to identify these new types of expenses – such as the number of video conferencing licences acquired, home office equipment, and productivity software – and properly assess spend priorities.
Flexibility is also crucial. In a rapidly-evolving environment, a one-size-fits-all policy isn’t up to standard. “How enterprises create and allocate budgets has been completely disrupted and what worked in the past won’t work in 2021,” declares Kale. “We’ve gone from a relatively certain, predictable way of carrying out business operations to a time where only the unpredictable seems certain, which requires agility, speed, and scale to ensure longevity and continuity.”
Despite challenging times, finance leaders are showing optimism for 2021. This year will require adaptability in the face of evolving global economic conditions in order to meet not only wider company needs, but those of employees as well. Embracing new technologies will continue to transform operations across every level of an organisation and enable business leaders to drive both productivity and profitability despite the uncertainty ahead.
THE LOYALTY-TRUST PARADOX AT THE HEART OF FINANCIAL SERVICES AND HOW TO OVERCOME IT
By Andrew Warren, Head of Banking & Financial Services, UK&I at Cognizant
There has long been a paradox at the heart of the financial sector – customer loyalty remains high despite overall trust in the banking system being very low. In any other sector, low trust would lead customers looking for services elsewhere. Generally, however, the major banks have been able to retain their clients despite, rather than because of, trust.
This customer loyalty does not always pay, with research suggesting consumers could be overpaying by £2.9bn in areas such as mobile, broadband, home insurance, as well as, notably, mortgages and savings. Whether the result of customer lethargy, lack of awareness of the possible cost savings or low expectations of the service banks provide, this has encouraged complacency in the banking sector.
This could, however, change as our post-pandemic reality begins to bite. People may have used the extra time from the lack of a commute to do some research and shop around for better alternatives, as well as harbouring frustrations over a perceived lack of support in recent months. Coupled with the possibility of a period of negative interest rates, we could soon be heading towards a perfect storm, where both retail giants and small local businesses start to question the value their banks actually provide.
Digital native challengers are shifting the landscape
One viable reason for the supposed loyalty consumers have towards the major banks has been the lack of real alternatives. With all of the traditional high street institutions offering services that were largely interchangeable, switching services seemed more effort than was really worth it when perceived benefits were so minimal. However, this changed with the arrival in recent years of challenger banks such as Monzo, Starling and Revolut, which continue to grow in popularity due to ease of use and better customer experience from sign-up through to their intuitive apps.
The primary advantage of the big banks is their liquidity, historical reputations and longstanding customer base. However, the agility and user-friendliness of the challengers is shifting the landscape, and the continued reliance on legacy systems leaves the traditional players struggling to surpass, or in most cases match, the innovative services and products fintechs are able to bring to the market.
Customer expectations setting a new standard
As personalisation and smooth technological integration in other sectors, such as retail, raises expectations of similar offerings across all service industries, this could soon become a key battleground for banks.
With the challengers currently looking better equipped to respond to these consumer needs, here are some of the steps banks can take to modernise their offerings and retain customers’ loyalty:
- Embracing human science – the financial sector has long favoured data science in its behavioural analysis. Almost anyone can understand basic data; it is how semiotic algorithms can be used alongside this that will reveal real insights that can be used simply to help understand people better, their fears, their hopes and their aspirations.
- Adapting to modern trends – the lockdown has, by necessity, modified and in some cases accelerated, many of the established habits of both individuals and businesses. These range from an increased adoption of cashless payments, to remote working, the propensity for saving vs investing, attitudes towards fraud and risk appetite, and loyalty. As a result, some customer journeys, which had become the cornerstone of banks’ or lenders’ strategies, will now need to be adapted. For example, products, pricing and customer treatment strategies will need to be updated, and the entire value-chain of customer touchpoints should be digitally enabled. Financial institutions will now need to ensure speed and quality of their response to this change.
- Using innovation to level the playing field – the systemic advantage the big banks have over more agile challengers is in liquidity access. It is an advantage that potentially will be scrutinised in the COVID-19 enquiries we can expect to see in the near future, particularly around the provision of the various governmental support schemes and loans for which these big banks initially had responsibility. As that advantage then reduces, the need for real innovation grows. This means building business models and deploying technology that can deliver value and differentiation. For example, the major banks have more channels than their digital-only counterparts and, therefore, more data to draw on. The result is a better focus on customer journeys, with modern cloud-based data management platforms central to this. The quantity and detail of data can play in banks’ favour, allowing constant ongoing improvements to customer communications and simplifying self-service options in an increasingly remote world. It is important that banks continue to ensure they are thinking outside the box and keeping pace with other industries that are innovating in their response to the pandemic.
- Personalising the process – technology is already helping to speed up processes and improve self-service banking operations, particularly with predictive and smart decision-making through AI and ML. The advanced use of chatbots is an example, along with increasing tailored content and interfaces in apps and on digital platforms. However, the end goal is personalisation across the whole customer journey, not only through technology but also call centre operatives who still form a critical role in trouble shooting and need an up to date view of the customer in order to be able to do their job. Technology can also help analyse how these human interactions can then become more personalised.
The major banks retain a crucial position in UK society for the support and confidence they offer their customers. However, as in so many other sectors, the coronavirus pandemic could come to be seen as a watershed moment in their evolution. With the challengers continuing to gain momentum, banks certainly cannot afford to stand still. It is the ability to have a data- and technology-driven approach, as outlined here, that can help them retain their dominance and justify customer loyalty now lockdown is beginning to lift. Should they fail to do so, we may find ourselves in a very different landscape than we do today. By focusing on the steps above, banks will start to level out the playing field.
2021 FINANCE SPEND PREDICTIONS
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