Why Back-Office Automation Is Banking’s Next Digital Transformation Step

As banking undergoes significant transformation, particularly in the post-COVID19 era, the value of digital channels and Banking Automation strategies is more evident than ever. In light of pandemic-induced business and employment shifts, reducing costs to offset pandemic-related losses is paramount.

The global crisis has served as a catalyst, prompting banks to rethink their business models. The development of new Business Process Management (BPM) strategies that optimize processes while maintaining back-office performance and compliance has become critical.

Given the high costs of managing the back-office via legacy systems, embracing Banking Automation is an indispensable step in modern banking’s evolution.

Banking And Technology

There is certainly a determination to embrace digital transformation, with a 2020 survey by KPMG revealing that 71% of 412 participating banking officials saw supporting digital transformation was a key priority for the future. Also, 75% confirmed that their bank was leveraging Cloud computing to enable them to enable their digital transformation.

The fact that fintech app use rose by 72% during the coronavirus pandemic only justifies their faith in the future, and willingness to invest.  A 2011 study carried out by Capgemini Consulting showed banks globally set aside nearly $13bn for investments in digital channels in 2011 alone. And a Accenture report in 2019 revealed $1 trillion had been spent by commercial and retail banks globally between 2015 and 2018.

However, banking automation investment has been heavily focused on improving the customer experience, not least mobility. The banks’ core systems, nevertheless, still depend on outdated legacy architecture.

The reluctance is based on several reasons but cost and impact of principal amongst them.

• Legacy systems are complex and it would be extremely difficult to replace them without unsettling established running operations

• Any attempt to upgrade these legacy systems is going to be expensive

Retail banks tend to have between 300 and 500 back-office processes to manage and monitor, leaving staff to deal with redundant tasks, excessive manual processing, and slow response times.

The result is an architecture that incorporates:

• High Costs
• Labor Costs Infrastructure
• Maintenance Costs
• Error and Rework Costs
• Poor Agility
• Inability to Launch New Products Rapidly
• Low Customer Satisfaction
• Delayed Response Times
• Lack of a Seamless Experience

Benefits of Automating The Back Office

1. Lowers Costs

Document Management Systems are far more cost-efficient than traditional paper-based processing. According to Capgemini, an automated DMS can reduce the amount of time employees spend locating, retrieving and filing documents by nearly 75%.  It’s calculated that digitized back-office systems can reduce the costs associated with these areas by 6% annually.

2. Streamlines Business Processes

Banking activities can be streamlined, further saving on the  time spent within the legacy systems. The activities include account openings, mortgage and loan processing, and document printing. Adopting automated DMS allows banks to significantly reduce paper-related costs.

3. Faster Through Digital Signatures

Financial services are still heavily dependent on the age-old system of getting manual signatures, with an estimated 94% of firms in that sector printing documents to be signed by pen. However, by adopting a Digital Signature, paper costs not only fell but time required to complete documentation fell too.

Research from the Global Banking And Finance Review discovered 72% of organizations experience delays due to the need to collect signatures, but that through digital signature solutions, these delays are reduced. What’s more, according to AIIM research, the returns from a Digital Signature implementation can be rapid, with 81% in their survey reporting seeing a 100% payback within 12 months, and 25% in just three months.

4. BPM Boosts Productivity and Customer Satisfaction

A business process management (BPM) solution is an integrated platform brining real-time process monitoring, modelling and optimization together onto one system. By providing real-time insights, banks can foresee process issues and take corrective action very quickly. According to Capgemini, a BPM solution can translate to as much as 15% savings annually.

5. Helps Meet Regulatory Challenges

The banking industry faces considerable regulatory scrutiny, but the complexity of legacy systems make it difficult to meet established demands. In fact, in 2020 global fines were above $2.2 billion, with a similar figure expected for 2021. Back-office digitization simplifies document storage, search and retrieval, and enables banks to furnish compliance related information more easily to regulators.

If you would like to talk to a member of the Kefron team and learn more about automating your back-office processes click here, our team of experts are here to help.