According to a study by a leading management consulting firm, human errors cost the financial sector up to 25k person-hours per enterprise and $878k per year.
Customers want quick and easy access to banking and financial services. Financial institutions can achieve this with high precision and at a lower cost using robotic process automation (RPA). Robots or bots mimic repetitive tasks using standard rules, automating manual activities.
Studies show that RPA can automate up to 30% of the day-to-day activities in the financial sector.
What is RPA in finance and banking?
RPA handles the repetitive tasks within the banking and financial sectors so that your employees can focus on other critical tasks. The system follows pre-defined rules to perform tasks with no variation. Some of the basic tasks that RPA can automate are the following.
- Copying and pasting data
- Formatting data
- Filling out the forms
- Reading and writing to a database
- Extracting and merging data
Automated processes run 24×7, enhancing your data processing capabilities even when the staff is offline. Let us look at the benefits of RPA in the banking and financial sectors in detail.
Benefits of RPA in finance and banking sectors
80% of business leaders already use RPA in the banking and financial sectors for various purposes. Some of the most important benefits of RPA are:
- Scalability: Bots can handle many customer service requests at peak hours without human intervention. They can automate tasks such as password resets, card blocking requests, and more.
- Time-saving: Since there is no human intervention, the task execution is almost instant and saves up to 90% of the time on specific tasks.
- Cost reduction: A leading IT consulting firm estimates that RPA reduces up to 80% of the costs in the banking and financial sectors.
- Low infrastructure: RPA layer sits on top of the existing software systems within the institution. You do not require additional hardware or human resource to set it up.
- High efficiency: Robots in the banking and financial sectors are up to 5x faster than humans. You can divert the employees to more meaningful tasks that enhance work satisfaction and well-being.
- Reduce human error: RPA uses a rules-based architecture to minimise errors. Human beings can often lose accuracy in repetitive tasks due to a lack of attention or mundane work overload.
- Autonomy: Employees do not need assistance from the IT department and can manage their own robotic assistants. This enhances autonomy.
Banks and financial institutions in the US have already implemented RPA, automating over 800 operations. The benefits are clearly visible in the net worth of the financial sector, which has grown from $250 mn in 2016 to $2.9 bn in 2023.
RPA applications in finance and banking
Let us understand the applications of RPA in the banking and financial sectors that directly impact efficiency and the bottom line.
Account opening and closing
This is perhaps the most basic of all the tasks that should not require human intervention. RPA makes account opening and closing straightforward, quick, and easy. It automates KYC verification, auto-fills the forms, and sends onboarding emails to the customer.
Mortgage Processing
Closing a mortgage takes banks up to 60 days, which does not provide a very good customer experience. officers collect and verify employment details, credit history, defaults, address details, and much more. Any errors by the verification team can significantly slow down the process.
RPA can cut down the mortgage processing time by up to 80%, bringing a huge relief to the staff and an exceptional customer experience.
Know your customer (KYC) processing
Manual KYC can take up to 1000 FTE hours and up to $384 mn annually. It is time-consuming and often requires rechecking from level-2 officers. RPA can handle KYC with minimal errors and filter out false positives for faster onboarding.
Accounts payable (AP)
Digitising vendor invoices, matching and validating the fields, and processing payments can be tedious. People can easily make errors and take much more time than a robot. RPA uses an optical character reader (OCR) to extract the information from paper invoices in different formats, validate it, and process payments.
Fraud detection
Manual fraud detection can be a disaster in terms of the time and money you invest in the staff. The number of false positives and manual due diligence is simply inefficient. RPA uses ‘if-else’ logic to identify potential fraud, filter false positives, and flag the threats to the relevant department.
Report generation
Financial institutions rely heavily on reporting tasks, including those for monthly closing, management reports, and bank reconciliations. Banks and financial institutions need to produce detailed performance reports for the board of directors as part of mandatory compliance.
These reports have a vast amount of data which RPA can put together in an understandable format without errors.
Combining RPA with AI and ML
While basic chatbots can easily do highly repetitive tasks, you can take the ROI from RPA a notch up with artificial intelligence and machine learning. AI and ML, along with natural language processing (NLP), can handle complex processes, recognise emotions, understand human language, and adapt to real-time data. Robotic Process Automation services in the banking and financial sectors could contribute substantially to an organisation’s operations.
- You can prepare the RPA bots for unexpected situations that do not comply with underlying rules-based architecture.
- Find patterns and make predictions based on historical data for effective decision-making.
- Auto-analyse the vast amount of data and predict future market outcomes.
Automation must be a phased and continuous process. Bottlenecks contributing to the bulk of manual tasks can be a good starting point for your organisation’s RPA journey.