In the context of
financial services, automation is achieved by the deployment of numerous technologies, in various contexts, by all kinds of entities. Whether it's
smart automation by start-ups for artificial intelligence (AI)-powered enterprise resource planning (ERP) tagging systems,
generative AI automation for risk detection by large banks, or
Buy Now, Pay Later (BNPL) services by disruptive market entrants; automation is a runaway wave of digitisation sweeping the finance sector.
What is automation?
Automation encapsulates a range of tools and techniques which have the effect of reducing human intervention in business and IT processes. This is done through subprocess relationships, decision criteria predetermination, and by embodying those predeterminations
in machines.
The benefits of automation, depending on the application, may include cost reductions, efficiency gains, process rationalisation, reductions in human error, and the ability to divert human resources to more complex or client-facing tasks.
What kinds of automation are there?
There are various kinds of automation, each powered by different technologies. Which one is chosen comes down to considerations such as budget and business-wide goals.
Task automation
Also known as basic automation, this process takes simple tasks and digitises them. This could include procedural events, like sending onboarding documents to hires, or distributing invoices to clients. Task automation tends to be cheap and effective at
centralising bureaucracy.
Process automation
This often encapsulates more complex, multi-step processes, through rules-based decisioning. Process automation requires more investment but is useful for bringing transparency and rationality to business and IT processes. Instances of process automation
include business process management (BPM), process mining, or
robotic process automation (RPA).
Intelligent automation
More advanced yet is intelligent or cognitive automation, which uses the latest AI technologies to streamline and scale decisioning across systems, teams and organisations. Examples include natural language processing (NLP)-powered
virtual agents, which can be used both internally and externally. Just last year, Commerzbank worked with Microsoft to utilise GenAI and avatar technology in a virtual assistant for its mobile app. This product essentially triages customer queries at speed,
in a personable manner – with minimal human resource investment.
Intelligent automation has been
linked to increased productivity, profitability, accuracy, and customer satisfaction. What is more, after the up-front investment, it works out cheaper than relying on continual human intervention.
How is automation applied?
Whatever the organisation and whatever the technology, automation promises to replace many kinds of manual processes.
On the business side are repetitive tasks that hamper workflows. Automation in this context covers elements such as content management, document processing and management, workflow automation, decision management and process mapping.
On the IT side, automation can upscale processes at every stage of the operational cycle or expedite the deployment of infrastructure and applications. This may encapsulate observability solutions, cloud automation,
hybrid cloud cost automation, and network performance management.
What are the use cases of automation?
The opportunities created by automation for business and IT systems are endless.
Today, firms are increasingly integrating automation with
smart contracts to unlock seamless transactions. This represents a considerable shift in business operations. In the United States, for example, the
market size for smart contracts accounted for $187 Million in 2022 – and is projected to grow to $1,417 Million over the next ten years.
Business-to-business (B2B) entities, meanwhile, are harnessing AI in invoice processing and payment automation to improve their cash flows. In a
Finextra blog, Konstantin Rabin, head of marketing, Kontomatik argues that “automation in payments can lower a firm’s costs by reducing the needed employees for trivial tasks. AI can fully automate the data extraction process and improve decision-making
in invoice processing.”
AI and automation can also be used in combination to
boost sales for small and medium-sized enterprises (SMEs) or
streamline compliance through
automatic testing, for fintech startups.
Are there challenges with automation?
Faced with a range of disparate tools, workflows, and market requirements, automation is a quick-fix answer to many of the challenges around financial services provision.
However, as Aidan Murray, presales consultant, Xceptor,
points out, “intense specialisation across asset classes, regions, and functions, coupled with a reliance on technical debt-ridden legacy systems is needlessly delaying [automation] transitions.”
Indeed, the issue of IT integration is perhaps the biggest roadblock to all-out automation. To advance to the next level of service provision, institutions must move to release themselves from the shackles of incumbent infrastructures, and look to common
frameworks that consolidate systems, without requiring additional capacity. Only then are the benefits of automation there for the taking.