What is Banking Automation and how do banks use it?

With these six building blocks in place, banks can evaluate the potential value in each business and function, from capital markets and retail banking to finance, HR, and operations. When large enough, these opportunities can quickly become beacons for the full automation program, helping persuade multiple stakeholders and senior management of the value at stake. The finance and banking industries rely on a variety of business processes ideal for automation.

A more likely scenario is that customer data will become the new water—a public utility accessible to all and therefore much lower in value. For instance, it might send an alert that today is the birthday of a friend, along with a gift recommendation. Users could order the gift through MyLifeAssistant and arrange for same-day shipping, or they could shop for alternatives.

It can be difficult to implement uses of gen AI across various business units, and different units can have varying levels of functional development on gen AI. With this archetype, it is easy to get buy-in from the business units and functions, as gen AI strategies bubble from the bottom up. This structure—where a central team is in charge of gen AI solutions, from design to execution, with independence from the rest of the enterprise—can allow for the fastest skill and capability building for the gen AI team.

Automation is the application of technology, programs, robotics or processes to achieve outcomes with minimal human input. The following paragraphs explore some of the changes banks will need to undertake in each layer of this capability stack. Discover smarter self-service customer journeys, and equip contact center agents with data that dramatically lowers average handling times. With UiPath, SMTB built over 500 workflow automations to streamline operations across the enterprise.

This means that global investors are voting with trillions of dollars against the future profitability and sustainability of the existing business model of universal banks. It’s an AI-driven solution that helps you automate more business and IT processes at scale with the ease and speed of traditional RPA. Hyperautomation is an approach that merges multiple technologies and tools to efficiently automate across the broadest set of business and IT processes, environments, and workflows.

Automation Without Integration

Each layer has a unique role to play—under-investment in a single layer creates a weak link that can cripple the entire enterprise. As we analyze what automation means for the future of banking, we must look to draw any lessons from the automated teller machine, or ATM. The ATM is a far cry from the supermachines of tomorrow; however, it can be very instructive in understanding how technology has previously affected branch banking operations and teller jobs.

Kaspi has been especially effective in integrating its different platforms and services via its Super App, which hosts all services. Kaspi has introduced a travel platform for airline tickets, moved into e-grocery, has strong offerings in government services, and is planning to add hotel and vacation packages. Its strategy as a commerce marketplace strategist is paying off, with total 2021 revenue up 46 percent.

What obstacles prevent banks from deploying AI capabilities at scale?

Kaspi charges its partners a 5 to 11 percent fee, and its users pay nothing. For frequent purchases, they get cash bonuses deposited directly into their Kaspi accounts—a strong incentive to make Kaspi their primary bank. The future of banking will be contested in five cross-industry competitive arenas. In the next decade, revenues for all these arenas could grow by as much as three to 30 times. We believe that the skeptics are right about today—and wrong about tomorrow.

Many banks, however, have struggled to move from experimentation around select use cases to scaling AI technologies across the organization. Reasons include the lack of a clear strategy for AI, an inflexible and investment-starved technology core, fragmented data assets, and outmoded operating models that hamper collaboration between business and technology teams. What is more, several trends in digital engagement have accelerated during the COVID-19 pandemic, and big-tech companies are looking to enter financial services as the next adjacency.

Without the right gen AI operating model in place, it is tough to incorporate enough structure and move quickly enough to generate enterprise-wide impact. To choose the operating model that works best, financial institutions need to address some important points, such as setting expectations for the gen AI team’s role and embedding flexibility into the model so it can adapt over time. That flexibility pertains to not only high-level organizational aspects of the operating model but also specific components such as funding.

How banks are using generative AI

According to Deloitte, some emerging banking areas where generative AI will play a key role include fraud simulation & detection and tax and compliance audit & scenario testing. Feel free to check our article on intelligent automation strategy for more. For more, check out our article on the importance of organizational culture for digital transformation. It is easy to get buy-in from the business units and functions, and specialized resources can produce relevant insights quickly, with better integration within the unit or function.

About 30 percent use the centrally led, business unit–executed approach, centralizing decision making but delegating execution. Roughly 30 percent use the business unit–led, centrally supported approach, centralizing only standard setting and allowing each unit to set and execute its strategic priorities. The remaining institutions, approximately 20 percent, fall under the highly decentralized archetype. These are mainly large institutions whose business units can muster sufficient resources for an autonomous gen AI approach.

But with further product innovations and changes to the competitive market structure, human expertise may be required for new and more complex tasks. It’s vital to distinguish “tasks” from “jobs.” Jobs contain a group of tasks needing consistent fulfillment—some of which may be more routine (and can potentially be automated), while some require more abstract skills. There is a balance to be struck between the speed and accuracy of computers and the creativity and personalization of human interaction.

Network performance management solutions optimize IT operations with intelligent insights and contribute to increased network resilience and availability. Workflow automation solutions use rules-based logic and algorithms to perform tasks with limited to no human interaction. Using automation instead of human workers to complete these tasks helps eliminate errors, accelerate the pace of transactional work, and free employees from time-consuming tasks, allowing them to focus on higher value, more meaningful work.

The key to the parent institution’s competitiveness and profitability is constantly upgrading its data analytics to improve convenience, customer care, and hypertargeted offerings—without attempting to overcharge or exploit its customers. The more appealing the app’s personalized recommendations become, the more money its users will save via discounts and loyalty programs—and the more commissions the bank will earn from its vendor partners. Everyone involved benefits from MyLifeAssistant’s constantly improving analytics and its ability to automate customer experiences. The more invisible and embedded its services become, the happier its customers. WeBank’s strategy is built upon “the three As.” Its services are easily “accessible” via 24/7 mobile banking. It uses big data to target “appropriate” products and services for different customers and reduce risks to the bank.

Employees in that area should be eager for the change, or at least open-minded. It also helps avoid customer-facing processes until you’ve thoroughly tested the technology and decided to roll it out or expand its use. Timesheets, vacation requests, training, new employee onboarding, and many HR processes are now commonly automated with banking scripts, algorithms, and applications. The first and most important step is to commit to adapting as soon as possible. Banks and nonbanks that begin to transform themselves now will have a huge advantage over competitors that become paralyzed with indecision and confusion. It’s possible that, over the next decade, customer data will become the new oil—highly regulated, jealously guarded by institutions that capture it, and a key source of business value.

Still more have begun the automation process only to find they lack the capabilities required to move the work forward, much less transform the bank in any comprehensive fashion. This platform-centric approach to banking enables WeBank to offer various types of loans to prospective customers from the Tencent ecosystem, supported by its partner bank network. WeBank evaluates loan risk via its advanced risk model and then sells the vetted loans to partner banks that participate in its platform for a small fee. For investing, customers can also purchase mutual funds, money market funds, or other investment products offered by various financial institutions via WeBank’s marketplace. Because of cross-industrial “platformization,” banks must now compete with any organization that has the capacity and desire to offer any kind of financial services.

Systems powered by artificial intelligence (AI) and robotic process automation (RPA) can help automate repetitive tasks, minimize human error, detect fraud, and more, at scale. You can deploy these technologies across various functions, from customer service to marketing. We have found that across industries, a high degree of centralization works best for gen AI operating models. Without central oversight, pilot use cases can get stuck in silos and scaling becomes much more difficult. Looking at the financial-services industry specifically, we have observed that financial institutions using a centrally led gen AI operating model are reaping the biggest rewards. As the technology matures, the pendulum will likely swing toward a more federated approach, but so far, centralization has brought the best results.

Processes such as funding, staffing, procurement, and risk management get rewired to facilitate speed, scale, and flexibility. These gains in operational performance will flow from broad application of traditional and leading-edge AI technologies, such as machine learning and facial recognition, to analyze large and complex reserves of customer data in (near) real time. You can foun additiona information about ai customer service and artificial intelligence and NLP. Exhibit 3 illustrates automation banking industry how such a bank could engage a retail customer throughout the day. Exhibit 4 shows an example of the banking experience of a small-business owner or the treasurer of a medium-size enterprise. Management teams with early success in scaling gen AI have started with a strategic view of where gen AI, AI, and advanced analytics more broadly could play a role in their business.

In addition, over 40 processes have been automated, enabling staff to focus on higher-value and more rewarding tasks. Leading applications include full automation of the mortgage payments process and of the semi-annual audit report, with data pulled from over a dozen systems. Barclays introduced RPA across a range of processes, such as accounts receivable and fraudulent account closure, reducing its bad-debt provisions by approximately $225 million per annum and saving over 120 FTEs.

Challenges in Banking and Solving Them Using RPA

Working on non-value-adding tasks like preparing a quote can make employees feel disengaged. When you automate these tasks, employees find work more fulfilling and are generally happier since they can focus on what they do best. The next step in enterprise automation is hyperautomation, one of the top technology trends of 2023. The language of the paper have benefited from the academic editing services supplied by Eric Francis to improve the grammar and readability. Business units that do their own thing on gen AI run the risk of lacking the knowledge and best practices that can come from a more centralized approach. They can also have difficulty going deep enough on a single gen AI project to achieve a significant breakthrough.

In the target state, the bank could end up with three archetypes of platform teams. Business platforms are customer- or partner-facing teams dedicated to achieving business outcomes in areas such as consumer lending, corporate lending, and transaction banking. Enterprise platforms deliver specialized capabilities and/or shared services to establish standardization throughout the organization in areas such as collections, payment utilities, human resources, and finance. And enabling platforms enable the enterprise and business platforms to deliver cross-cutting technical functionalities such as cybersecurity and cloud architecture. First, banks will need to move beyond highly standardized products to create integrated propositions that target “jobs to be done.”8Clayton M.

QuantumBlack Labs is our center of technology development and client innovation, which has been driving cutting-edge advancements and developments in AI through locations across the globe. Once you’ve successfully implemented a new automation service, it’s essential to evaluate the entire implementation. Decide what worked well, which ideas didn’t perform as well as you hoped, and look for ways to improve future banking automation implementation strategies. Learn how top performers achieve 8.5x https://chat.openai.com/ ROI on their automation programs and how industry leaders are transforming their businesses to overcome global challenges and thrive with intelligent automation. Investment advisory is the arena to provide investment and insurance products for all kinds of customers, from young people just starting to build wealth to older people who need sophisticated investments and protection to institutions. This includes financial planning, brokerages, trusts, retirement plans, and many kinds of insurance.

The transformative power of automation in banking

But predicting the winners, as well as how long it will take them to get there, in different countries is extremely difficult. That’s because it’s hard to say how digital currencies and data will be regulated in the future, especially in a world where countries and regions have such differing approaches to regulation. It goes far beyond everyday banking services to offer tight integration with e-commerce journeys. It can serve as the hub of an ecosystem that blends banking with shopping and other highly personalized services. WeBank offers preapproved loans to qualifying users of QQ and WeChat, based on proprietary credit scores generated from Tencent data. The bank’s algorithm draws a customer portrait by analyzing many kinds of customer behaviors—what and how much a user buys, what games they play, whom they interact with on QQ and WeChat, and more—up to 200 different variables per customer.

We recently conducted a review of gen AI use by 16 of the largest financial institutions across Europe and the United States, collectively representing nearly $26 trillion in assets. Our review showed that more than 50 percent of the businesses studied have adopted a more centrally led organization for gen AI, even in cases where their usual setup for data and analytics is relatively decentralized. This centralization is likely to be temporary, with the structure becoming more decentralized as use of the new technology matures. Eventually, businesses might find it beneficial to let individual functions prioritize gen AI activities according to their needs.

Process mapping solutions can improve operations by identifying bottlenecks and enabling cross-organizational collaboration and orchestration. Document management solutions capture, track, and store information from digital documents. Basic automation is used to digitize, streamline, and centralize manual tasks such as distributing onboarding materials to new hires, forwarding documents for approvals, or automatically sending invoices to clients.

The CAO works with a wide range of leaders across all business pillars such as IT, operations, and cybersecurity. Artificial intelligence, or AI, is technology that enables computers and machines to simulate human intelligence and problem-solving capabilities. Machine learning, natural language processing, and computer vision are fields of artificial intelligence. Artificial intelligence for IT operations (AIOps) uses AI to improve and automate IT service and operations management.

As a result, companies must monitor and adjust workflows and job descriptions. Employees will inevitably require additional training, and some will need to be redeployed elsewhere. Banks and the financial services industry can now maintain large databases with varying structures, data models, and sources.

• Learn how a leading South Korean pharmaceutical company automates a core process for drug safety monitoring.
• The pressing questions for banking institutions are how and where to use gen AI most effectively, and how to ensure the applications are fully adopted and scaled within their organizations.
• Book a discovery call to learn more about how automation can drive efficiency and gains at your bank.
• Timesheets, vacation requests, training, new employee onboarding, and many HR processes are now commonly automated with banking scripts, algorithms, and applications.
• Still more have begun the automation process only to find they lack the capabilities required to move the work forward, much less transform the bank in any comprehensive fashion.

These organizations will have the advantage of not being tied to the old standards and practices of traditional financial services. But they need to be mindful that this advantage doesn’t guarantee success, even for companies with cutting-edge innovations. Despite billions of dollars spent on change-the-bank technology initiatives each year, few banks have succeeded in diffusing and scaling AI technologies throughout the organization. Among the obstacles hampering banks’ efforts, the most common is the lack of a clear strategy for AI.6Michael Chui, Sankalp Malhotra, “AI adoption advances, but foundational barriers remain,” November 2018, McKinsey.com.

Banking automation helps devise customized, reliable workflows to satisfy regulatory needs. Employees can also use audit trails to track various procedures and requests. This article was edited by David Weidner, a senior editor in the Bay Area office. Observability solutions enhance application performance monitoring capabilities, providing a greater understanding of system performance and the context that is needed to resolve incidents faster.

While these arenas encompass the products and services provided by banks today, they will be redefined and reinvented by different customer needs. In the next decade, revenues for all these arenas could grow dramatically, by as much as three to 30 times. Many traditional banks, on the other hand, face stagnant or decreased revenue and profits. The average global banking ROE was around 9.5 percent in 2021—a significant recovery from 6 percent in 2020, but a sharp decline from 15 percent prior to the 2008 crisis.

To compete successfully and thrive, incumbent banks must become “AI-first” institutions, adopting AI technologies as the foundation for new value propositions and distinctive customer experiences. No one knows what the future of banking automation holds, but we can make some general guesses. For example, AI, natural language processing (NLP), and machine learning have become increasingly popular in the banking and financial industries. In the future, these technologies may offer customers more personalized service without the need for a human. Banks, lenders, and other financial institutions may collaborate with different industries to expand the scope of their products and services. Additionally, banks will need to augment homegrown AI models, with fast-evolving capabilities (e.g., natural-language processing, computer-vision techniques, AI agents and bots, augmented or virtual reality) in their core business processes.

Kinective is the leading provider of connectivity, document workflow, and branch automation software for the banking sector. With the most comprehensive, open, and connected technology ecosystem in banking, Kinective helps financial institutions unlock new services, modernize operations, and elevate client experiences to enhance their competitive edge. Kinective serves more than 2,500 banks and credit unions, giving them the power to accelerate innovation and deliver better banking to the communities they serve. You can make automation solutions even more intelligent by using RPA capabilities with technologies like AI, machine learning (ML), and natural language processing (NLP). According to a McKinsey study, AI offers 50% incremental value over other analytics techniques for the banking industry.

By integrating separate, manual IT operations tools into a single, intelligent, and automated IT operations platform, AIOps provides end-to-end visibility and context. Operations teams use this visibility to respond more quickly—even proactively—to events that if left alone, might lead to slowdowns and outages. Equally important is the design of an execution approach that is tailored to the organization.

The potential for value creation is one of the largest across industries, as AI can potentially unlock $1 trillion of incremental value for banks, annually (Exhibit 1). Gen AI certainly has the potential to create significant value for banks and other financial institutions by improving their productivity. But scaling up is always hard, and it’s still unclear how effectively banks will bring gen AI solutions to market and persuade employees and customers to fully embrace them. Only by following a plan that engages all of the relevant hurdles, complications, and opportunities will banks tap the enormous promise of gen AI long into the future. Generative AI (gen AI) burst onto the scene in early 2023 and is showing clearly positive results—and raising new potential risks—for organizations worldwide.

InfoSec professionals regularly adopt banking automation to manage security issues with minimal manual processing. These time-sensitive applications are greatly enhanced by the speed at which the automated processes occur for heightened detection and responsiveness to threats. IT automation is the creation and implementation of automated systems and software in place of time-consuming manual activities that previously required human intervention. IT automation helps accelerate the deployment and configuration of IT infrastructure and applications and improve processes at every stage of the operational lifecycle. Automation helps banks streamline treasury operations by increasing productivity for front office traders, enabling better risk management, and improving customer experience. A successful gen AI scale-up also requires a comprehensive change management plan.

The simplest banking processes (like opening a new account) require multiple staff members to invest time. Moreover, the process generates paperwork you’ll need to store for compliance. According to the 2021 AML Banking Survey, relying on manual processes hampers a financial organization’s revenue-generating ability and exposes them to unnecessary risk. Automating repetitive tasks enabled Credigy to continue growing its business at a 15%+ compound annual growth rate.

Learn how SMTB is bringing a new perspective and approach to operations with automation at the center. And at CFM, we’re devoted to helping you achieve this better banking experience, together. Ultimately, the banking industry may need to get better at anticipating and proactively shaping how automation will stoke the flame of innovation and demand while shifting competitive dynamics beyond operational transformation. First, ATMs enabled rapid expansion in the branch network through reduced operating costs. Each new branch location meant more tellers, but fewer tellers were required to adequately run a branch.

The 2021 Digital Banking Consumer Survey from PwC found that 20%-25% of consumers prefer to open a new account digitally but can’t. RPA does it more accurately and tirelessly—software robots don’t need eight hours of sleep or coffee breaks. This article was edited by Jana Zabkova, a senior editor in the New York office. Start automating instantly with FREE access to full-featured automation with Cloud Community Edition.

Traditional software programs often include several limitations, making it difficult to scale and adapt as the business grows. For example, professionals once spent hours sourcing and scanning documents necessary to spot market trends. Today, multiple use cases have demonstrated how banking automation and document AI remove these barriers. A thriving CMS Chat GPT will offer more than mere personalization, simplicity, and affordability. CMSs will have more access to their customers and much more data about those customers than traditional banks have ever had. Because they will become primary touchpoints for a wide range of transactions, they can build an unbeatable edge in collecting and analyzing big data.

Banking automation behind the scenes has improved anti-money laundering efforts while freeing staff to spend more time attracting new business. The banking industry has particularly embraced low-code and no-code technologies such as Robotic Process Automation (RPA) and document AI (Artificial Intelligence). These technologies require little investment, are adopted with minimal disruption, require no human intervention once deployed, and are beneficial throughout the organization from the C-suite to customer service. And with technology fundamentally changing the financial and consumer ecosystems, there has never been a better time to take the next step in digital acceleration.

Many banks are rushing to deploy the latest automation technologies in the hope of delivering the next wave of productivity, cost savings, and improvement in customer experiences. While the results have been mixed thus far, McKinsey expects that early growing pains will ultimately give way to a transformation of banking, with outsized gains for the institutions that master the new capabilities. Today, many of these same organizations have leveraged their newfound abilities to offer financial literacy, economic education, and fiscal well-being. These new banking processes often include budgeting applications that assist the public with savings, investment software, and retirement information. Customers want to get more done in less time and benefit from interactions with their financial institutions. Faster front-end consumer applications such as online banking services and AI-assisted budgeting tools have met these needs nicely.

Natural language processing is often used in modern chatbots to help chatbots interpret user questions and automate responses to them. Machine learning (ML) is a branch of artificial intelligence and computer science that focuses on using data and algorithms to enable AI to imitate the way that humans learn, gradually improving its accuracy. Applied to IT automation, machine learning is used to detect anomalies, reroute processes, trigger new processes, and make action recommendations. The chief automation officer (CAO) (link resides outside ibm.com) is a rapidly emerging role that is growing in importance due to the positive impact automation is having on businesses across industries. The CAO is responsible for implementing business process and IT operations decisions across the enterprise to determine what type of automation platform and strategy is best suited for each business initiative.

A financial institution can draw insights from the details explored in this article, decide how much to centralize the various components of its gen AI operating model, and tailor its approach to its own structure and culture. An organization, for instance, could use a centralized approach for risk, technology architecture, and partnership choices, while going with a more federated design for strategic decision making and execution. McKinsey sees a second wave of automation and AI emerging in the next few years, in which machines will do up to 10 to 25 percent of work across bank functions, increasing capacity and freeing employees to focus on higher-value tasks and projects. To capture this opportunity, banks must take a strategic, rather than tactical, approach. In some cases, they will need to design new processes that are optimized for automated/AI work, rather than for people, and couple specialized domain expertise from vendors with in-house capabilities to automate and bolt in a new way of working. A number of financial services institutions are already generating value from automation.

In addition to strong collaboration between business teams and analytics talent, this requires robust tools for model development, efficient processes (e.g., for re-using code across projects), and diffusion of knowledge (e.g., repositories) across teams. Beyond the at-scale development of decision models across domains, the road map should also include plans to embed AI in business-as-usual process. Often underestimated, this effort requires rewiring the business processes in which these AA/AI models will be embedded; making AI decisioning “explainable” to end-users; and a change-management plan that addresses employee mindset shifts and skills gaps. To foster continuous improvement beyond the first deployment, banks also need to establish infrastructure (e.g., data measurement) and processes (e.g., periodic reviews of performance, risk management of AI models) for feedback loops to flourish. Built for stability, banks’ core technology systems have performed well, particularly in supporting traditional payments and lending operations.

• However, dealing with the complexities of having multiple systems access customer information provided new challenges.
• For example, Credigy, a multinational financial organization, has an extensive due diligence process for consumer loans.
• Both individual and organizational customers now seek a long list of attributes from their financial-service providers.
• This number is expected to decrease by 40,000 by 2024 due to multiple drivers, including the proliferation of mobile banking, the rise of “cognitive agents,”, and other innovations like the “humanoid robot,” that all fall under the umbrella of automation.

Robotic process automation, or RPA, is a technology that performs actions generally performed by humans manually or with digital tools. If you are curious about how you can become an AI-first bank, this guide explains how you can use banking automation to transform and prepare your processes for the future. QuantumBlack, McKinsey’s AI arm, helps companies transform using the power of technology, technical expertise, and industry experts. With thousands of practitioners at QuantumBlack (data engineers, data scientists, product managers, designers, and software engineers) and McKinsey (industry and domain experts), we are working to solve the world’s most important AI challenges.

As a result, they’re better able to identify investment opportunities, spot poor investments earlier, and match investments to specific clients much more quickly than ever before. The landscape of currency could fall anywhere on a spectrum between wide open and tightly closed. However, none of the scenarios would stop what’s certain to be the breakup of traditional banking. Rather, they would likely determine the shape of the industry and the winning players. If currency isn’t a factor, data take center stage and create a more even playing field.

However, banks must resolve several weaknesses inherent to legacy systems before they can deploy AI technologies at scale (Exhibit 5). Core systems are also difficult to change, and their maintenance requires significant resources. What is more, many banks’ data reserves are fragmented across multiple silos (separate business and technology teams), and analytics efforts are focused narrowly on stand-alone use cases. Without a centralized data backbone, it is practically impossible to analyze the relevant data and generate an intelligent recommendation or offer at the right moment. Lastly, for various analytics and advanced-AI models to scale, organizations need a robust set of tools and standardized processes to build, test, deploy, and monitor models, in a repeatable and “industrial” way.

But after verification, you also need to store these records in a database and link them with a new customer account. With cloud computing, you can start cybersecurity automation with a few priority accounts and scale over time. Cybersecurity is expensive but is also the #1 risk for global banks according to EY.

Banks need to identify and engage these customers—as their newer competitors are doing. Few would disagree that we’re now in the AI-powered digital age, facilitated by falling costs for data storage and processing, increasing access and connectivity for all, and rapid advances in AI technologies. These technologies can lead to higher automation and, when deployed after controlling for risks, can often improve upon human decision making in terms of both speed and accuracy.