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

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

Andrea Tucker, Research and Development Head at e4, a fintech software specialist, asserts that while the future of banking in South Africa is partially driven 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 quicker.

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 literal hands of their consumers. Others sell their value proposition as a cost-effective digital banking option, using technology to deliver the service cheaper.”

Automation lies at the heart of these new approaches, and as the technologies used mature, the application of robotics and artificial intelligence 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.

Making banking more efficient

“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 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 impact the 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% to 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 couple specialised domain expertise from vendors with in-house capabilities to automate and bolt in a new way of working.

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