Are financial services ready for automation?
The financial sector is ripe for automation and to clear away decades of bureaucratic processes, but can it be done when so many legacy systems so well entrenched? The benefits of automation could mean that processes are speeded up, with application forms for bank services taking only hours to process instead of days.
How and why is automation coming to the financial services sector?Automation has
continuously been forced on the finance sector. If we focus on the
retail banking sector, the advent of credit cards meant that they had
to become able to do automated reconciliation; web retailers and
PayPal forced faster settlements. The consumer becoming aware of how
they were being taken for a ride forced through Faster Payments, and
so on. Overall, it is the market that is forcing the banks to
automate - not really the banks themselves.
The next level will
be around traceability. My belief is that banks will be forced to
adopt blockchain technologies to provide the level of traceability
required to recover funds and to prevent the kind of incident we saw
earlier this month at Tesco Bank, where money was taken from 20,000
accounts. Banks also need to be able to demonstrate cleaner hands to
government bodies when it comes to money laundering and hidden funds,
although some governments are, of course, complicit in this.
From the banks' own point
of view, automation can drive down costs - this is where they have
embraced automation, such as encouraging customer self-service.
What are the benefits of automation to the financial sector?Automation would
make life so much easier for finance and would help plug so many bad
holes in bank operations. Moving to a distributed ledger
approach would create a completely traceable transaction chain on
everything. Scams where money is moved from bank A to D, then to L to
C over to P and then to T via E would no longer be a chain that was
too complex to trace. Everything would all be there to see in real
time. The last bank where the money went would be visible, as would
information about who created the account and all the details they
provided to set up that account. If the bank hadn't carried out
the checks that it is mandated to under world finance rules, then the
bank is responsible for the loss of the money.
How can automation improve financial controls and effectiveness as a business?Automation allows for
anomalies to be more easily and quickly identified, making it
possible for money laundering and fraud to be stopped in its tracks.
Claims processing in the
insurance sector would also be far easier if automation was used. The
capability to pull together information from the insured party,
claims adjusters, workmen and so on would make the whole process less
costly and stressful.
Is the financial services
industry still in the early stages of automation? What could speed it
up or derail it?
I remember covering
straight-through processing (STP) in the financial sector when I was
at Meta Group - 20 years ago. The sector has been ripe to be pulled
kicking and screaming from the 18th Century since the 19th Century.
It is inherently conservative, and believes more strongly than any
other sector - possibly apart from defence - that it can do
everything better if it does it itself.
What limits are there to automation in this industry?The only area where
full automation has been put in place is in trading. Strangely
enough, here there has been enough money to throw at the problem and
make it a leader in automation. Trading is done algorithmically with
fully automated trading engines. Deals are struck and settled using
automated means. Money is transferred at the speed of light through
automated exchanges. Yet, somehow, for far too long a time, the use
of such technology in retail banking and insurance was not seen as
being possible. Strange, eh?
Is there a gap in what automation can deliver in the short term and savings it will produce in the long term?The financial sector
could be completely transformed through the adoption of advanced
automation. However, a conservative mentality points towards a
lack of will to truly go for it. Will it change? Only if one of
the challenger banks can make a real go of it and start to take
custom away from the incumbents in a very noticeable manner.