This article, authored by Abe Smith, CEO at Dealflo, first appeared in Finextra.
A recent report by the Future of Work Commission, chaired by deputy Labour party leader Tom Watson, made me reflect on how banks in the UK have dealt with the technological revolution of the last few years, and how they might fare in 2018, when the pace of change will undoubtedly quicken. Indeed, a mainstream newspaper covering the report ran the headline ‘Robots can set us free and reverse decline’.
This made me think:
How true is this for banks? Have they recognised the power of automation yet, and what could it do for them in the future?
The future of work and automation
It’s a simple fact when considering the future of work and automation, that robots can do some jobs that humans simply can’t do. Humans would be hard pushed, for example, to sift through the vast amounts of data that we create every day to spot and analyze patterns of behaviour that can help human achievement. That’s not to say they can do everything humans can do. We certainly beat robots in creativity, imagination and the ability to surprise and delight. Only humans can build trust, sell and manage a relationship. But we are fundamentally prone to errors, and we lack the ability to be infallibly controlled.
When it comes to errors, robots could save us from ourselves. We could use their help in avoiding errors that cost time and money to put right. Robots and automated processes are 100% controllable and if an automated process is set up correctly – that process should either be executed correctly, or not at all, 100% of the time.
Automation in financial services
Banks have taken a long time to fully embrace automation for crucial processes such as client onboarding. Imagine if they had used automation to control how lending and credit agreements were sold between 1990-2010? The PPI mis-selling scandal might have been considerably less damaging. PPI, like so many miss-selling scenarios, was in part a result of lenders lacking systemic control within their sales processes. Had those processes been automated, and controls put in place, the potential for human error would have been mitigated, with customer contract processes mandated, controlled and demonstrable.
So, to the present, and the changes PSD2 has in store for the banking industry. With Open Banking pushing banks further into the technological revolution, innovative banks know that automation not only improves the customer experience but can mitigate risk too. That has to be a good thing in a world where greater regulatory burdens have increased pressure on compliance departments around the world. The last thing they need to worry about is whether forms have been filled in correctly, whether a customer has read the terms of a loan agreement, or whether verification data is stored securely.
The biggest threat of PSD2 for banks is the potential for further distancing them from their customers (more on this in a future post). Automation doesn’t just control processes. It also frees up customer service agents to focus on delivering what their customers want – trust, sales and relationships. In short, a great customer experience. If banks are to claw back customer relationships from third parties in the wake of PSD2, this is more important than ever.
Far from being a threat, automation in financial services could be a saviour for banks.
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