Automation’s transformative power will change banking

Andrea Tucker, Research and Development Head at e4

---

The banking industry is currently leveraging the concept of automation to drive growth and cost efficiencies on a global scale. While the concept has been met with a mixture of scepticism and hope, ultimately, automation, when done right, has the power to drive transformation. 

McKinsey says that once growing pains have been dealt with, banks will be in a much stronger position to innovate and disrupt using the new capabilities gained by adopting automation strategies.

Andrea Tucker, Research and Development Head at e4 and a fintech software specialist, says that while the future of banking in SA is driven partially by international trends and technologies, the disruption of new entrants has had a bigger influence: “Selling themselves as digital, modern disruptors who are technology-led and have non-traditional operating models, these start-ups claim to scale more quickly. This is possible as they are not hampered by legacy systems, and in customer-speak, can promise to deliver a seamless and remote online client on-boarding experience. 

"Some of these new entrants are selling a value proposition of technology-driven efficiencies, essentially putting banking in the hands of their consumers. Others sell their value proposition as a cost-effective digital banking option, using technology to deliver the service more cheaply.”

Automation lies at the heart of these new approaches, and as the technologies used mature, the application of robotics and artificial intelligence (AI) for bank processes will assist banks, both new and incumbent, to transform. 

Tucker says that local banks have met the challenge head-on and have invested heavily in digital strategies and new technologies, all in the interest of becoming more competitive. With rising costs to service customers and the increased competition and growing base of new entrants, banks need to evolve, and automation is key to the success of this evolution.

“Automation should not be seen in a negative light. It plays a vital role, making it easier for a customer to bank digitally, ultimately improving engagements and ensuring that the bank’s service is more efficient. This needs to be coupled with a strategic initiative to educate customers and encourage them to make use of these more efficient digital options, and to continue to use them,” says Tucker.

According to Tucker, a strategic approach to transformation will influence overall success. While there are case studies sharing successes and improvements, there are banks that have not achieved what was initially intended. Tucker believes that the difference will lie in the strategic intent and roll-out of the transformation project.

Supporting Tucker’s point of view, McKinsey predicts a second wave of automation and AI emerging in the next few years. Here machines will do between 10% and 25% of work across bank functions, increasing capacity and freeing employees to focus on higher-value tasks and projects. To capture this opportunity, McKinsey also says that banks must take a strategic, rather than tactical, approach. In some cases, they will need to design new processes that are optimised for automated/AI work rather than for people, and to combine specialised domain expertise from vendors with in-house capabilities to automate and bolt in a new way of working.