The Top 5 Automation Challenges Traditional Banks Face

(And How to Overcome Them

With new market players constantly disrupting the business landscape, regulatory norms continuously evolving, and customer expectations from banking services continually rising, there are several reasons for banks to change. As deep-rooted behavioral shifts get established in consumer preferences several opportunities for similarly fundamental transformation present themselves to modern banks. Among them is the push towards automation. Not only does automation promise to help banks compete successfully, but it also helps them develop new value propositions and deliver distinctive customer experiences. 

But given how highly regulated the sector is, banks are constantly under scrutiny for the technologies they use to carry out daily operations. Since the industry deals with extremely confidential and private data, not many banks have ventured into the realm of automation or further afield into AI. And even those who have embarked on the journey often struggle to move past the experimentation stage and scale the technology across the organization. 

From lack of a clear strategy to lack of investments, fragmented business operations to outmoded operating models – the reasons for unsuccessful automation outcomes are many. Knowing these obstacles is the first step to overcoming them. So, here’s looking at the top 5 automation challenges traditional banks face: 

  1. Poor technology maturity level: The biggest challenge facing banks when it comes to embracing automation is their technology maturity level. As part of a traditional industry, banks often lie at the lower level of the technology maturity matrix, relying heavily on legacy systems and infrastructure. Not just that, processes and tools are also often extremely outdated and so is their outlook towards new technology adoption. Many leading financial organizations witness a widespread resistance to adoption as a top challenge that restricts them from embracing automation approaches like RPA. A massive shift in mindset and a robust change management process is required to successfully implement an automation strategy with enterprise-wide potential and achieve a holistic approach towards technology acceptance. 
  2. Lack of a robust automation strategy: Lack of a robust automation strategy is often a major roadblock in implementing (and scaling) the barrier to adoption in the banking sector. Despite investments in tools that can drive modern automation approaches such as RPA and BPA, successful implementation is often impeded by poor strategy and shortage of either leadership or talent, or both. To overcome this, it is important for banks to get the right people involved from the start – including the C-suite as well as expert and strategic partners. This will help them establish a robust Center of Excellence to standardize a framework for business-wide deployment. Such a framework can also help in defining and updating requirements and realizing quicker time-to-value.
  3. The presence of legacy infrastructure: Another obstacle in the automation journey that most traditional, paper-based, branch-heavy banks face is the presence of legacy infrastructure and the rather slow pace of technological innovation in the industry. Despite being one of the most data-driven sectors, most banking organizations lag behind in digital transformation, mainly because their outdated, proprietary systems do not support long-term innovation. Since these systems were developed decades ago, they have an outdated tech stack that is incompatible with new-age technologies. Replacement projects are massive and expensive, and, they pose several risks banks struggle to mitigate. Instead of further postponing the restructuring process and making it riskier and more expensive, banks need to pursue a holistic digital transformation strategy with automation at its foundation, to react quickly to market trends, improve process efficiency, and stay ahead of customer needs. 
  4. Security and compliance concerns: In addition to apprehensions about introducing automation on a wide scale, security and compliance concerns end up playing spoilsport in the adoption of automation. Since implementing RPA in the banking industry necessitates navigating some legal requirements and constraints, banks are tempted to dodge the implementation because they’re unsure of the regulations. With the knowledge being unclear and ambiguous, it is hard for banks to implement automation technologies in a way that they comply with the standards laid out by various regulatory bodies. To overcome these apprehensions, banks need to partner with competent experts who have the knowledge of all the regulatory and compliance requirements and can help in meeting those requirements through process changes, framework adoption, and best practice implementation. 
  5. Lack of standardized processes: Lack of process standardization and organizational misalignment is also among the top challenges that banks face in successfully embracing automation. This challenge is deep-rooted, given the siloed manner in which IT and business departments often function and handle operations. To integrate automation across the banking organization, rigid hierarchies and traditional roles and responsibilities have to be done away with, to create an alignment between the teams involved. At the same time, banks need to carefully identify processes or workflows that will be automated while also standardizing how they will collect and analyze data. This also requires sufficient top management support and the adoption of modern IT capabilities. 

The application of Robotic Process Automation, AI and Machine Learning techniques for automation of human tasks can help banks solve many of the struggles they face: from the classification of legal documents to streamlining of back-office processes, automation of data entry tasks to customer service interactions – automation can truly transform the efficiency of banking processes. But to ensure successful (and sustained) outcomes, it is important for banks to be aware of the various automation challenges and build strategies to overcome them for long-term results.