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Robotic Process Automation (RPA) in Financial Services

Robotic Process Automation

Although earth’s beginning could be traced around 4.5 billion years ago, we can trace the existence of human life when man started to make stone tools, same time as we could say technology was introduced. Ever since we try to come up with solutions for our problems or we try to make our tasks easier. Stone Age or now we need solutions, just like Bob needs one. Bob, is an employee in a company, one of his jobs is to extract some information from certain files that he receives. When he started his job, he was highly productive with good outcomes, but as time passed he found the job to be tedious, time-consuming, and repetitive, and his output reduced. For humans, it is difficult to perform a task with the same energy and mindset to have the same output daily. But the robots don't have these challenges and can help in automating these mundane repetitive tasks using Robotic Process Automation (RPA).

Robotic Process Automation or RPA can be described as the use of software robots to perform repeatable tasks or processes typically business processes. The RPA robots are designed in a way that they interact with the system with the defined set of human interactions to execute the process. RPA is can be applied in any repetitive tasks with functions like finance and accounting, procurement, administration, human resources, contact centers, etc. Although RPA can be used in sectors ranging from Finance to Health Care, it is used for different outcomes in each sector.

How RPA work?

RPA evolved broadly use of three technologies Screen Scraping, Workflow automation, and Artificial Intelligence.

Screen Scraping is the process of reading or copying information shown on a digital display. When the RPA robot has to access or read certain information or users input it used Screen scraping, the scraped information is further processed.

Workflow is a set of rules to be executed or a repeatable pattern of activity to complete a certain task. Workflow automation is designing, executing, and automating business processes based on defined workflows. In a workflow, there could be certain repeatable processes that are automated using Workflow automation, to reduce human effort and save time. Similarly, RPA automates the business processes using software robots. The key difference between Workflow Automation and RPA is that Workflow Automation focuses automation of flow processes in work, whereas RPA focuses on individual activity.

Artificial Intelligence technology focuses on simulating human intelligence in a machine to perform a specific or set of tasks. RPA robots are simulated with the intelligence required in the execution of the process.

RPA in Financial Services

The Financial Services industry that includes banking, investing & insurance has been growing exponentially over the years. With the growth, it has become important for Financial Services businesses to provide faster, reliable, and secure service. The use of RPA in this sector not only reduces labor cost and maximizes operational efficiency but also provides better consumer satisfaction by automating tedious and repetitive office processes. Manual execution of such office processes is prone to human errors and is time-consuming.

Benefits of RPA to the Financial Services industry:

  • Increases Operational Efficiency: With RPA, chances of errors and time decreases therefore increases operational efficiency. By implementing RPA, operation efficiency can increase by 30-35%.

  • Cost-Effectiveness: RPA reduces cost by reducing labor and infrastructural cost decreases cost up to 20-25%.

  • Productivity: By freeing the employees, they can invest their time into more important tasks like strategies to grow their business.

  • Risks and Compliance reporting: With the help of auto-generated report, business risks can be reduced and high process compliance can be maintained

Use Cases

There are many interesting use cases of RPA in financial services number of ways, let’s talk about a few.

Regulatory Compliance, Reporting & Customer Onboarding

RPA helps in automating the workflows to improve regulatory compliance, reporting, and client onboarding process. The Know Your Customer (KYC), Anti Money Laundering (AML), and Foreign Account Tax Compliance Act (FATCA) regulations, for instance, impose several requirements that banks and other financial institutions must comply with before they do business or continue doing business with a customer. RPA helps to verify and validate customer details like identity, previous credit scores, or conformity with compliance rules. RPA better, inexpensive, and quicker than human workers while executing conformance to these compliances. Let's take an instance shared by global consulting firm KPMG International in their publication - Rise of the robots (authored by Bill Cline, Michael Henry & Cliff Justice):

A large capital markets firm we work with uses existing workflow processes and offshore cubicle farms to perform business-as-usual functions, such as KYC/AML onboarding. However, when periodic KYC updates are required, instead of hiring temporary staff to supplement its workforce, the firm shifts to using robotics to handle the overflow work. As the result, the firm eliminated backlogs seamlessly, has become comfortable using RPA, and hasn’t had to make a full-scale investment in overhauling its existing system.

Customer Service

RPA robots are designed to answer customer queries which reduce the time required to address such queries manually and helps to maintain a good relationship with customers. Robots could be designed using Artificial Intelligence to understand the context of customer queries and route them to the right resource or agent as the need be. One such example has been highlighted by McKinsey & Company in their report - How bots, algorithms, and artificial intelligence are reshaping the future of corporate support functions (authored by Alexander Edlich, Fanny Ip, and Rob Whiteman):

When one financial services company analyzed incident tickets, for instance, it found that between 25 and 35 percent of them were requests for “password reset” or “access.” To resolve these tickets, it introduced RPA bots that connect with multiple applications via the user interface or application programming interfaces. By adopting automated ticket resolution, the company instantly freed up employee capacity and reduced outsourcing contract costs for helpdesk support, as well as reducing resolution times and improving performance. Alternatively, service desk automation tools exist that support automation of repeatable IT operations workflows such as user provisioning, password resets, and event log monitoring.

Back & Middle Office Automation

Robots and robotic software have proven ideal in automating back and middle office center operations. They execute rules-based workflows at scale processing a high-volume of transactions. KPMG's Rise of the robots also mentions an automation use executed by one of Australia's leading banks:

Australia and New Zealand Banking Group Limited (ANZ), Australia’s fourth-largest bank, uses ‘bots in its finance, human resources, payments, and mortgage processing departments as well. It was noted that in the payments area, the number of human employees has decreased from 40 to 2.

Final Word

In a time where financial services are taking the world by storm, companies must optimize their operations and improve efficiencies to be a part of this competitive world. Upgrading systems and outsourcing processes will help your company to be a step ahead. RPA has the potential to change the sphere of financial services with its number of advantages.

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