As we move forward in this digital world, the boundaries between humans and technology are blurring. Adding the suffix “tech” to sectors like finance, insurance, human resources and even education ushered in a paradigm shift. Moreover, the global pandemic has accelerated the technological tidal wave in industries and verticals. Banking and finance sectors are struggling to maintain operational efficiency in the face of digital disruption, changing customer demands and rising risk.
With interest rates at historic lows and rising talent and compliance costs, the banking and finance industry must increase operational efficiency to reduce costs, risks and insolvencies. In times like these, financial institutions are turning to modern technologies like AI, ML, automation, and data analytics to improve operational efficiency, attract more customers, and reduce risk. And while the industry has made great strides in recent years, a radical technological transformation can unleash its true potential.
Digitization of the data extraction process
Given the heavy reliance of banks and financial institutions on paperwork, their first step towards digital transformation should be to convert all data to digital format.
However, a manual approach to data conversion can be extremely expensive, time-consuming, and error-prone. The market is full of document conversion services and smart scanning solutions that leverage AI and ML to digitize the data extraction process. Converting financial data to digital format will enable the tracking, evaluation, and analysis of customer data that can improve performance and profitability as well as reduce system inefficiencies.
Eliminate tedious work with AI
By deploying AI-based solutions, the banking and finance industry can delegate all of their time-consuming, low-value, and data-intensive tasks. AI can generate real-time insights into customer behavior and internal performance more accurately and faster. AI can shed light on critical information such as customer behavior, future trends, current performance, etc., which will help banks and financial institutions maximize their operational efficiency.
As a result, employees will be able to move beyond time-consuming tasks and focus on areas that can refine industry operational efficiency.
Improve compliance and capabilities
Heaps of documents containing confidential and vital information pass through banking and financial authorities every day. For example, loan officers process loan applications containing sensitive financial information. To ensure regulatory compliance and accelerate processing capabilities, financial institutions need to automate and digitize their document collection and file management process. Technology can curb the exploitation of sensitive information, thereby ensuring compliance. It will also allow the banking and financial sector to operate faster and reduce the workload of employees.
Reduce redundancy and risk through automation
Banking and finance associates spend a lot of their time on redundant tasks like customer onboarding, KYC, loan process application, etc. Manual verification of vital information is time-consuming, error-prone and can increase the risk of fraud. Instead, the banking and finance industry can automate processes such as customer identification, due diligence, and loan application to reduce processing time, mitigate risk, and create a secure ecosystem.
According to a recent report, robotic process automation (RPA) can reduce data entry costs by up to 70%. Therefore, the banking and financial sector can improve its operational efficiency while reducing risks.
Leveraging ML for Risk Management
Banks and financial institutions are subject to a high percentage of credit risk, but technologies such as ML and data analytics can reduce this percentage of risk. ML can help financial institutions calculate credit default risk, and data analytics can traverse layers of credit risk projections, providing better insights and improving accuracy. With the ability to aggregate and disaggregate extensive data, banks and financial institutions can manage risk assessment, forecast overall risk, and make informed decisions to reduce that risk.
As banks and financial institutions are increasingly keen to reap the benefits of technology, it is essential to remember that technological transformation is a journey. In the face of growing uncertainties, fierce competition, and changing customer demands, technology can help the banking and finance industry operate more accurately, efficiently, and profitably than ever before. Technology can be the key to optimizing risk controls and improving operational efficiency in the sector.
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Posted: Saturday, April 30, 2022, 10:25 p.m. IST