The Top 5 Automation Challenges Traditional Banks Face

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 toward automation. Not only does automation promise to help banks compete successfully, it also helps them develop new value propositions and deliver distinctive customer experiences.

But given the highly regulated sector, banks are constantly scrutinized for the technologies they use to carry out daily operations. Since the industry deals with extremely confidential and private data, only a few banks have ventured into automation or further afield AI. And even those who have embarked on the journey often need help to move past the experimentation stage and scale the technology across the organization.

There are many reasons for unsuccessful automation outcomes, from a lack of a clear strategy to a lack of investments, fragmented business operations, and outmoded operating models. 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: Banks’ biggest challenge when embracing automation is their technology maturity level. Banks often lie at the lower level of the technology maturity matrix as part of traditional industry, relying heavily on legacy systems and infrastructure. Also, processes and tools often need to be updated, as does their outlook toward adopting new technology. Many leading financial organizations witness 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 toward 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 a shortage of either leadership or talent, or both. To overcome this, banks need to get the right people involved, including the C-suite and 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 define and update requirements and realize 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 must catch up 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, posing several risks banks need help 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 need clarification on the regulations. With the knowledge needing to be clearer and clearer, 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 know all the regulatory and compliance requirements and can help meet those requirements through process changes, framework adoption, and best practice implementation.
5. Lack of standardized processes: Lack of process standardization and organizational misalignment is among the top challenges banks face in successfully embracing automation. Given the siloed manner in which IT and business departments often function and handle operations, this challenge is deep-rooted. To integrate automation across the banking organization, rigid hierarchies, and traditional roles and responsibilities must 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 the 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.