5 Cutting-edge Technologies Making Waves in Finance Automation
Technological advances over the past few decades have influenced how humans communicate, do business, make transactions, and more. Although the financial sector cannot brag about being a frontrunner in terms of adopting new technologies, it has gradually caught up. The entry of new technologies has reshaped how consumers and financial institutions interact with money.
New technologies have paved the way for new processes that are much more streamlined, accurate, and efficient. While there are immense benefits for consumers, financial institutions are also reaping the benefits of new technologies. In an era where improving customer relationships is becoming increasingly important, automated technologies are making their presence felt.
Experts within the financial services field are of the opinion that the finance industry will see a huge automation wave in the near future. Finance automation without a doubt presents abundant benefits. However, on the flip side, concerns over people losing their jobs to these automated processes are beginning to mount.
This blog will cover the following points:
- What is finance automation?
- What are the technologies used for finance automation?
- Emerging technologies in finance
- Finance services that can be automated
- Benefits of financial automation
- Challenges for financial automation
What is finance automation?
In simple words, finance automation means leveraging the latest advances in technology to automate the current finance processes. The increasing usage of novel technologies such as artificial intelligence and machine learning in different areas of finance to minimize human intervention can also be called finance automation.
What are the technologies used for finance automation?
It would be fair to say that most technologies in the automation space largely rely on machine learning. Here we have listed down a few technologies that are being used for finance data automation.
1. Document automation
According to a recent study published by Accenture, the financial services industry is embracing automation by leveraging the benefits of AI technologies. AI is gradually relieving financial personnel from performing repetitive and mundane tasks – benefitting from $ 1.2 trillion in gross value added (GVA) by the end of 2035 [1].
Document automation allows the processing and generation of electronic documents. Logic-based systems that utilize pre-existing text and data segments are the core components of document generation software.
Some of the primary examples of this technology being deployed under the financial automation umbrella are generating standard financial reports and invoices.
In recent years, financial companies have leaned towards technologies such as optical character recognition (OCR) and machine learning to enrich and validate documents. This allows documents such as invoices to be generated in an automated manner.
2. Robotic process automation
Robotic process automation (RPA) is a tool that leverages screen-scraping and similar technologies to create agents that can automate secretarial processes.
Across a finance process, RPA bots play an important role in boosting efficiency by freeing humans from performing manual tasks and enabling them to prioritize working on value-added processes.
3. Process mining
Process mining is a group of techniques that largely helps organizations assess their processes and pinpoint strengths and weaknesses within them.
The onset of multiple process mining tools allows finance teams to identify what processes take time and which processes can be automated.
4. Machine learning
Finance departments around the world are making the most of machine learning technology. Contrary to rule-based automation, machine learning algorithms rely on past customer interactions and transactions to create patterns.
Finance teams can use these patterns to make future decisions. For instance, finance teams can prevent losses or stay on their toes to prevent an adverse scenario by relying on patterns created by machine learning technology.
5. Chatbots
A chatbot is a program that enables individuals to gain information from machines via voice and text. Although financial firms are yet to completely embrace conversational agents, the tide is slowly shifting.
Advances in AI have enabled the development of advanced chatbots that augment a user’s overall experience while operating a platform.
Chatbots are gradually making their way into the finance field as teams continue to explore their potential as virtual assistants.
Other emerging technologies in finance
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Artificial intelligence
When we talk about the digital transformation of the finance sector, AI is one of the key technologies leading the charge. Financial institutions of all sizes, right from large-scale banks to minuscule credit unicorns, are investing in AI and reaping the benefits.
Although chatbots are a great representation of AI at the front end, artificial intelligence can influence back-office, risk management, product delivery, security, and marketing.
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Blockchain
This one is hard to miss! Blockchain is one of the hottest technologies that is tipped to revolutionize the financial services industry. However, in the current scenario, accessibility is a challenge and requires attention from both, government as well as financial institutions.
At present, numerous organizations are focusing on the development of wider blockchain solutions. However, most banks are proactively implementing blockchain solutions. Nearly 90% of banks in the U.S. and Europe started tapping into blockchain in 2018. [2]
Financial institutions have reportedly spent around $552 million on projects powered by blockchain. [3] Many predict that blockchain will be the catalyst for change in the finance industry in the upcoming years.
Finance services that can be automated
- Source-to-pay
- Accounts payable
- Financial planning
- Account reconciliation
- Order to Cash
- Accounts receivable
Benefits of financial automation
By now we have established that finance teams are burdened with manual processes. Financial tasks that involve a lot of paperwork, emails, spreadsheets, and siloed software slow down financial processes and have plenty of manual errors.
Finance data automation has several benefits. Before we take a look at them, here are a few interesting stats related to finance software that you may find interesting.
- Finance automation software provides 79% time-savings. [4]
- Automation in finance provides 61% cost-savings. [5]
- Finance automation boosts business productivity by 69%. [6]
Now, let’s look at the major benefits of automation in finance:
- Cost-savings
- Faster financial processes – Financial institutions can handle and perform more tasks with automation.
- Minimal manual errors
- Better visibility across financial activities due to audit trails.
- With automation, finance staff can focus on higher value-added tasks.
Challenges firms face with finance automation
Although automation in the finance sector brings with it plenty of advantages, there are still some roadblocks that need to be negotiated. Understanding the root cause of these challenges is very important before they can be addressed.
Finance operations keep businesses ticking which is why businesses are hesitant to make major changes. Vendors need to design and deliver automation solutions that can be seamlessly integrated into financial workflows and client processes.
Let’s look at some of the main challenges for finance automation in the current scenario.
Lower return on investment (ROI)
Let’s admit it! Automation can result in thousands of dollars being spent on switching systems. When companies choose to automate their processes, they need to make a steep upfront investment which reduces the ROI of automation initiatives.
There are multiple vendors in the market that provide flexible payment plans.
Businesses need to take into account the long-term benefits of automation such as labor savings, improvement in overall operational efficiency, and enhanced productivity.
Delays in automation that depend on process standardization
It is fair to say that financial process automation is easier to execute in standard processes. In reality, large companies have complex processes that are customized in accordance with their requirements.
One of the main challenges automation vendors need to tackle in the upcoming years is to offer solutions that fit into the customized processes of organizations to avoid delays.
Past trends suggest that business organizations have had their fair share of struggles while integrating automation platforms with their existing systems.
Data management
Traditionally, data management has by and large not been a very straightforward process for financial institutions that store large volumes of data. It is important to ensure that this data is arranged and delivered optimally with automation.
Slow and steady wins the race right? Well, that holds true in this case. Initially, implementing automation could be a daunting task. Financial institutions need to take small steps and prioritize which process they wish to automate and build from there.
Entering an era of smart finance
Although automation in finance is still in its infancy, we have entered an era of smart finance. Financial organizations have started to identify and realize the benefits of automation. Besides, a number of companies have managed to reduce costs by automating their end-to-end processes.
In the current scenario, financial institutions may not understand why robotic process automation solutions are important. However, in the upcoming years, it won’t come as a surprise to see them invest in RPA to stay competitive.
Automation will also play an important role in enabling firms to make better decisions by providing insights into the future.
A large chunk of financial leaders around the world believe that they are equipped with the right automation tools to take their business forward. While that may be true, customers are asking for more from financial firms. Companies should capitalize on the opportunities while they are ripe and look beyond automating their operational tasks.
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