By Jim Neckopulos
Robotics or robotic process automation (RPA) has begun to have real impact on our lives and businesses. Many activities that have traditionally been repetitive or have required a relatively low skill level have already benefited from—or become candidates for—RPA. In business, RPA has been applied broadly to include manufacturing and many services.
More recently, the financial services industry has been the beneficiary of robotics. The approach has been especially effective in activities that historically relied on spreadsheet formulas and various algorithms to solve problems or provide insights into data from several, often disparate sources. Another common use of RPA in the financial services industry has been for a number of reconciliation activities.
While these applications of RPA have certainly been useful and have provided benefit, they have been very specific and tactical. The real opportunity for RPA is much greater, particularly when considered in a more strategic context.
What are the fundamental benefits of robotics?
To understand how robotics can achieve broader and more strategic benefits, first look at the potential capabilities:
- Robotics can assist with many activities, and these activities can change as needed, providing a virtual 24/7 workforce.
- RPA provides an auditable trail of activity that increases both traceability and transparency.
- RPA can be quickly implemented—often at a relatively reasonable cost—and can also be used to accelerate key components of large-scale transformation or the development of new and better business models.
That last point is essential to thinking about RPA in more strategic terms. It’s tempting to focus on near-term benefits, such as cost savings, particularly in a margin-compressed environment like banking. However, using RPA to create new business models can provide both positive industry change and minimize the risk of competing against fintech disruption.
Why move toward broadened horizons?
Today, many traditional financial services providers, particularly banks, struggle with finding opportunities to further reduce their operating costs, increase their operating efficiencies, and in many cases, both. Given these pressing considerations, many institutions have begun to be selectively test and implement robotics in an attempt to capture some near-term benefit.
Meanwhile, several banks have also embarked on large-scale transformation programs—some of which have been undertaken to counteract industry disruption by fintechs. Because this comes at a time when capital levels are subject to increased regulatory scrutiny, return on capex must be rapid.
Often these programs have tried to leverage business process management tools and platforms. In most cases, these programs take a long time, cost more than anticipated, and often run out of the needed momentum required for broad acceptance and support.
A top-down view of the objectives of these efforts, focusing on the outcomes and associated metrics, provides an opportunity to prioritize and achieve bite-sized chunks of change. Using robotics in this way can accelerate impact that can be seen and felt—while facilitating the longer-term change or transformation program remains on course.
Although this application of RPA is still largely tactical, it can reduce many of risks of these programs. And as a result, it can increase the likelihood of reaching more of the desired outcomes. While these benefits are important and can provide some near- to mid-term benefits over the next couple of years, in most cases, most of the resulting changes are incremental to existing business models.
Breaking the mold.
A more dramatic application of robotics is the creation of new business models. As noted earlier, fintechs have attempted to disrupt the financial services industry and, in some notable cases, have had some success. RPA, when applied within the context of rethinking businesses, can provide the potential for completely new ways of doing business.
A simple example of this potential for robotics is its use as a virtual workforce to minimize the variability on day-to-day activities. Bank lending processes are particularly susceptible to this variability, which often results in over- or under-staffing resources to complete activities, such as closing and funding.
Using robots to supplement a smaller workforce can reduce the cost of making loans. It can also reduce the time between a customer’s loan application submission and receipt of the funds. Moreover, this approach would enable a smaller number of more skilled resources to focus on improved risk management and/or an enhanced customer experience.
Extending this example further opens some even more interesting opportunities:
- More personalized ways of doing business with customers based on their stated preferences rather than just “tweaking the box” of how current business processes can be improved
- The ability to assign robots to customers to assist with a number of activities — sales, service and access to information and data
The possibilities will only increase as robotics adds more capability, such as artificial intelligence (AI) or “self-learning.”
It’s just the beginning.
While awareness of robotics and RPA is increasing, its ability to significantly impact the financial services industry, and banking specifically, is just beginning to be understood. Like many new concepts, its application is being tested on a small scale and thus far has been very tactical.
Given that robotics does include the application of technology to facilitate implementation, many who are beginning to get familiar with the concept are focusing mostly on the enabling tools (i.e., software). To more fully realize the potential of robotics, taking a more strategic view of desired outcomes can open up new and exciting possibilities—new business models and potentially even new businesses.
Jim Neckopulos is an executive director in Ernst & Young LLP’s Banking practice and is based in San Francisco.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
