Only a few years ago, the idea of Autonomous Finance, like the idea of autonomous vehicles, would have seemed like something out of a futuristic, incomprehensible sci-fi novel. However, anyone familiar with customer and technology trends in the financial industry would be hard-pressed to argue that rapid technological advances have not only made “self-driving finance” a not-too-distant reality but are also serving as an impetus to rethink how banks and customers alike approach financial services.
A McKinsey report says by using the right technologies, and it is possible to automate 45% of the activities that people are paid to do. Using the right technology allows your team to handle time-consuming tasks like bookkeeping, expense management, and bank reconciliation with little human intervention. Employees can then devote their time to strengthening their organizations and influencing overall transformation and growth. But before we delve deeper, let’s first understand the areas of your department where it can be used successfully.
Automation is a driving force in the Fourth Industrial Revolution. According to the most recent EFMA-Infosys Finacle ‘Innovation in Retail Banking’ study, pervasive automation is an important priority in banks’ digital transformation agenda.
As the name implies, this is accomplished through technology such as automation, artificial intelligence (AI), and machine learning(ML). This technology requires minimum human input in decision-making. Integrating these technologies allows each customer to have a virtual private banker giving all financial suggestions to make better decisions.
As the financial-services industry rapidly modernizes with the introduction of real-time fund transfers, mobile applications, chatbots, and AI-based solutions to manage customer complaints, the era of customers making financial decisions is coming to an end soon. Future financial applications will be tailored to each customer’s unique journey, portfolio, and financial requirements.
By allowing advanced algorithms to run tasks like portfolio management or bill payment automation, the goal is to improve fund allocation, bring efficiencies, and reduce the possibility of human error.
Autonomous finance or autonomous banking makes it easier for consumers to manage their finances. By integrating technology, automation reimagines the entire concept of financial services delivery. This begs the question of how automation and technologies like Artificial Intelligence will change the banking sector. Let’s cut through the hype through this article.
We live in a world where financial businesses are becoming increasingly unconventional. Companies should be more agile and foresighted in today’s unpredictable business environment, where customer needs are changing and evolving faster than ever, especially in the banking sector.
According to Deloitte’s Q1 2021 CFO Signals Survey, which focused on pre-and post-pandemic changes, automation skills are a must-have skill requirement by CFOs.
In the traditional process, countless hours are spent on transactional communication with clients, such as payment reminders and inquiries about payment status, among other things. These types of client communications can be automated using AI and automation, and the client receives payment updates immediately without any manual intervention.
Financial planning and analysis (FP&A) is another finance area primed for automation. Automated forecasting approaches can streamline and simplify the traditional spreadsheet-driven manual methods used in many businesses today. It can also help to eliminate the biases that can creep into the forecasting process and support a company’s major business decisions and overall financial health.
Finance huddles many processes that directly impact a company’s bottom line. The following are the key financial processes in a business.
Accounts payable (AP) refers to the money owed by a company to its suppliers for goods or services purchased on credit. Receiving sales orders, reviewing and reconciling order details, routing them for approval, negotiating terms, processing payments, and ensuring vendors are paid on time are all part of the job. Failure to make timely payments may result in late fees and damage your relationship with your vendors.
Receivables are the outstanding payments owed by your customers to your business. Accounts receivable responsibilities include sending and tracking invoices, reminding customers to pay, and ensuring that open accounts are closed on time. Collecting payments on time and maintaining an accounts receivable report is critical to avoiding a negative impact on your organization’s cash flow. Most industries benefit from a Days Sales Outstanding (DSO) of less than 45 days.
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Account reconciliations encompass all activities completed at the end of the month and during the year-end close. Simply put, it compares general ledger accounts to sub-ledgers and third-party data sources such as bank statements and other transaction details. Accountants investigate the cause of the discrepancies and make adjustments to correct errors or missing transactions if the balances do not match. Consider the compound annual growth rate (CAGR) for each financial process’s automation solution. Because the reconciliation process directly impacts a company’s profits and cash flow, finance executives should prioritize automating it.
Keeping up with your competitors is easier if you have implemented automation in the financial process. It is the future, and prepare your company and ensure that you reap the benefits tomorrow. Self-driving finance can be designed and trained to perform various financial tasks, including automating savings, managing a personal stock portfolio, and providing spending alerts and budgeting advice. Besides this, here are some key advantages of automating and enabling your finance operations to run autonomously.
According to a Salesforce study, 89% of financial service leaders believe that the first to implement autonomous finance will set new customer experience benchmarks. Understanding your customers’ preferences, habits, and individual needs on a deeper level benefits your organization. A better understanding of your customers and their requirements allows you to attract, serve, and retain customers more effectively.
Banking customers always appreciate anything that makes their lives easier. The process of pre-qualifying new loan applications requires several validations of documents and information submitted by the end customers. Using advanced technology to automate the complete process allows faster customer response time and improves overall efficiency.
In most organizations, employees will be working manually on tasks that could be automated. Streamlining and automating processes without long paper trails allows your employees to devote more time to revenue-generating activities. For example, credit and risk management is a manual process by which banks decide whether to grant a customer a loan. Automating this task by incorporating AI-based technology will save employees time and quickly complete the process.
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By implementing automation, banks can customize their customers’ products and services according to their specific needs. For instance, recommending refinancing products when existing interest rates are set to rise or limiting credit card offers if they already have many cards.
Automated solutions speed up processes, help clear bottlenecks, and reduce errors in the process. Other expected customer benefits include proactive customer service, simplified financial decisions, improved financial wellness, and automated account transfers, which make it easier for customers to meet their savings goals.
Automating financial functions can deliver predictive insights, effortless compliance, and greater flexibility in financial strategy. Ready to get started? Here are some tips you have to consider before automating your financial processes.
Understanding the current state of your financial process is the first step toward standardizing it. The next step is to document the existing processes and identify areas for automation. Documenting the narratives in flowcharts, diagrams, or workflow sketches quickly reveals gaps and dependencies between processes. It can assist you in making appropriate changes and streamlining tasks. After identifying your requirements, you can look into automation solution providers to create a digital version of the financial processes you want to automate.
After determining which financial processes to automate, ensure that your systems can communicate and efficiently share information with the customers and other integrated systems. Choose system-independent tools, easy to integrate and best suited for your specific fintech business requirements.
Begin with a test environment and scale up the process to see how the solutions work. Compare the results to your objectives. Determine the gaps and make the necessary changes. It is also essential to listen to customer feedback and update the system to maintain a healthy business relationship with the customer.
Businesses in the finance sector can improve the efficiency of their end-to-end processes by implementing either a standalone RPA system or intelligent automation (a combination of AI and ML). Autonomous banking is beneficial to process optimization and is also required to remain competitive in the market.
Choosing the right automation solution will make the job easier for everyone on the team. Automation removes bottlenecks, increases ROI, ensures quality results, saves resources, and adds transparency to all processes. Finance leaders must embrace new technology and automate mundane back-office finance functions to focus their resources on better, valuable tasks.
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