Intelligent Automation and its part in Financial Transformation

This article is a synopsis of recent conversations with banking and asset management clients regarding the projected trajectory of digital transformation in their operations. Maybe not surprising to some is the increasing part that will be played by intelligent automation.

Executive Summary – key points why intelligent automation provides value to banks and other financial institutions:

• Client feedback confirms that continued digital transformation in financial institutions enables faster, more accurate work, and at lower cost.
• The prime value of document and workflow automation is in improving the speed at which activities are completed (from start to end). There is evidence that the resulting boosts in team capacity and customer satisfaction are fuelling growth.
• Enhanced quality control inherent in document and workflow software has shown measurable improvements in straight through processing.
  Flexibility and adaptability are becoming increasingly valued by banks and fund managers as systems enable continual evolution with changing business needs and also the data provision from workflow monitoring drives management improvement actions.
• Two banks have confirmed that systemising even the most complex of documents and workflows, such as legal document creation is practical, achievable and beneficial.    
  Ecosystems combining multiple vendors and systems continue to emerge where they provide true value in assembling a full solution.
• Ecosystems combining multiple vendors and systems continue to emerge where they provide true value in assembling a full solution.
• AI elements are becoming an expected feature in software.

Disruption drives change. It heralds in new challengers and it shakes the established either into action or decline. Smart financial firms have long realised the need to focus on delivering the best customer experience and increasingly so as they compete with the increasing challenge from digital-first players.

The Covid-19 pandemic served to accelerate digital transformation plans as both front and back offices rapidly adapted to the ‘new normal’. Remote work and virtual business transactions are so mainstream that going back to the office may seem as old-fashioned as asking a client to send a telegram!

It is widely expected that financial firms will continue to scale and automate operations more broadly; taking advantage of key technological developments that enable accelerated digitisation. Following client research conducted by LPA, the following areas are where we believe intelligent automation will play a role in the continuing digital transformation of financial firms.

Workflow Data Analysis and Dashboards make Working More Efficient.

It is that old phrase, ‘Don’t work harder, work smarter!’ The realisation of no longer being bogged down by legacy systems and manually intensive processes drives a need for automated, continual and personalised analysis. This is especially so when it helps to focus on the most pressing tasks. We are not talking about ‘bots’ replacing humans, but AI data extraction to help humans. In terms of efficiency, processing speed and team capacity, the system will enable more to be done with the same people and at lower cost. This can bring the agility needed for competitive advantage.

After completing a post-project review with a major German commercial bank where LPA had implemented a post-trade processing system the client had indicated that they were seeing an approximate 30% increase in productivity from reduced manual interventions required to deal with exceptions. A consolidated static data source and a central processing engine provides optimal data analysis and dashboard reporting. The system processes and confirms all auto-matched transactions and highlights those needing verification. Together with a low code configuration for document and interface design, this has maximized straight through processing rates making this team more efficient that ever.

Evolving from; Procedures and processes to Workflows.

As financial products are intangible, the closest thing to a physical manifestation of the product is the documents that come with the product (Key Information Documents, Term Sheets, Credit Support Annexes etc.). The increasing scale of transactions and the increasing requirements for documents means that banks are more like manufacturing facilities, mass-producing documents. Each one may have some unique information. Each must be compliant. In addition, many must reference previous documents. This calls for a manufacturing-like process where repeatability is matched with the ability to customise elements. The resulting need is to automate as much of the monotonous, cut-and-paste data entry as possible.

Workflow Automation and AI document data extraction makes mundane tasks fast and simple. By taking a data element and re-using it everywhere else it is needed (hence eliminating repeated data entry) workflows become streamlined and frictionless. The front office applications are clear but the value for middle and back office, where automation can deliver enhanced quality control and so dramatically reduce the manual interventions for confirmations and settlements is enormous.

An illustration of the value of this came to light in a recent client review with a leading Middle-Eastern bank. Legacy manual processes of OTC derivative trades were holding back growth. The challenge was further exacerbated by an increased incidence of smaller value trades from the banks clients. By implementing an LPA system to automate trade processing the bank was able to connect front, mid and back office workflows into a holistic processes, and achieve full integration with the core system which delivered faster completion of trades, even including the client receiving a quote in a matter of seconds.    

Flexible, Adaptable Software is Fundamental for Continuous Transformation.

Platforms and systems are becoming more intelligent, decision makers and team leaders leaders are increasingly empowered to control their own destiny to deliver the targeted commercial results. In the past, IT would have mostly handled automation efforts and technology initiatives. However, today’s flexible, adaptable software places the capability in the hands of team leaders to continually evolve their information-intensive financial workflows. This new approach boosts agility and accelerates time-to-market. 

Working for some years with a southern European headquartered global banking and financial services company, the inherent system flexibility in LPA Capmatix has enabled the system to extend its use to many additional areas. Initially to automate processing of structured product sales, this extended to an idea to develop a digital client interaction tool for the corporate treasury sales team who needed to find the most efficient way to ensure regulatory compliance whilst also delivering the most positive client experience possible. The success of that project prompted other teams to consider how LPA could improve other processes. A recent project to systemise the complex documentation process for commodity trade finance deals was taken from initiation to completion in a matter of months. The combination these multiple uses for modules of the same Capmatix system has had a positive effect in simplifying what had become a complex IT landscape within the bank. To date, over 10 separate systems have been decommissioned.

A similar story was found with a Scandinavian bank whilst completing a fast-paced project to install a system to process trades for structured investment products including calculations of costs and risks and generation of all KIDs (Key Information Documents). As the prime users of the system became aware of the potential and capabilities of the Capmatix software, they made numerous running changes and adaptations to extend the software to cover adjacent teams and processes. Indeed the project leader at the bank is often requested by other teams and functions to demonstrate the system and the project implementation. The fact that the team themselves are able to safely control their own destiny means that they are not totally reliant on an internal IT function, or indeed need to continually be in contact with LPA to make changes.      

Complex Document Navigation Tools Transform Hitherto Untouched Departments. 

Digital transformation in banking and capital markets transactions is increasingly extending to legal documentation. An area seen by some, probably unfairly, as one of the last bastions resisting the onset of workflow automation. However, to the wise, complex transactions potentially involving many separate internal functions and external parties cannot continue to be manually processed.

The golden opportunity for the legal function lies in the digital extraction and utilisation of data that can be automatically structured in a way that allows it to be auto-transferred and placed in related and future documents. The benefit therefore is that an automated process, leveraging technologies such as; AI etc. can boost efficiency, cut costs and help drive business growth.

A landmark project with one of the world’s most highly regarded investment banks was initiated to systemise the creation of the legal documents related to complex financial trades including CSA’s, ISDA’s, Tax, Client Outreach, IBOR, Pricing supplements etc. The problem was that the bank’s legal team were working from a database of template documents, which although fine, had culminated in the team doing significantly more basic manual tasks that desired. For example, simple cut & paste of key details, manually checking track changes that were often scattered throughout long detailed documents and then manually verifying any changes that came back from counterparties. For skilled and qualified legal experts, they knew the time had come to embrace a digital transformation. The core capabilities of the LPA Capmatix software were very applicable to this situation. Firstly, as the software ensures a consistent process the scope for differentiation between different staff is eliminated. Secondly, by monitoring document change history and mandating the correct approvals the risk of ‘rogue’ changes to terms is eliminated. Thirdly, base data is entered once and is repeated across supporting documents and fourthly, using AI data extraction, external documents can be fed to the system dramatically reducing the need for manual re-entry of data. The net result was that the team were able to boost efficiency supporting internal clients to complete trades on a much more timely basis. The automated processes have driven consistency, efficiency and cost-savings. Additionally, the head of legal now has an intelligent reporting and workflow monitoring system at their fingertips; aiding decision-making, flagging errors and driving continual improvement.

Software Ecosystems Combine to Meet Unique Requirements in Banking.

Many software systems can claim to be one-stop-shop platforms with pre-integrated, complementary automation technologies providing the capabilities to drive rapid results. However, Banks and indeed other financial institutions will often need customisations for processes unique to them. Ecosystems will continue to emerge and evolve as the go-to resource for filling that gap. Platform providers have assembled networks of technologies, applications and services operating within their open, dynamic and integrated architectures – providing access to a network of services, pre-built connectors, templates and solutions. Financial organisations will increasingly rely on these ecosystems as they become more sophisticated in being able to construct the required solution.

Embedded AI will become the Norm. 

No longer the stuff of ‘white coat’ data scientists and ‘black box’ algorithms, The use of AI will increasingly spread throughout the financial sector. Machine Learning (ML), Natural Language Processing (NLP), Intelligent Optical Character Recognition (OCR), and Image Recognition embedded in intelligent automation platforms will empower leaders in financial organisations to achieve digital workflow transformation, dramatically elevating productivity levels and accelerating work throughout the enterprise.

AI and intelligent automation will enable financial firms to become more efficient, cost-effective and scalable. Furthermore, as the machines handle the routine work, financial employees will spend more time providing higher value services to customers. Harnessing digital workflow transformation at scale will drive the agility financial organisations need to create a stellar customer experience and competitive advantage in the years to come.

Additional Thoughts…

Through our experience, the following considerations may be useful when embarking upon an automation project:

Incremental Approach: Test in one area and grow from there. Plan for re-use and repeatability. Be prepared to experiment. Remember the long-term aim of scale.

Workflow driven approach: Do not focus solely on teams and potentially not on processes, but map the workflows and build around that.

Stakeholder buy-in: is key for ongoing and long-term commitment. This is especially so for workflows that affect numerous teams or external parties.

Consider IT Infrastructure: No system can exist purely on its own. Consideration of the interface with the existing core and legacy systems and the required support from internal IT and external vendors will ensure faster implementation and longer-term maintenance and improvement.