IBSi Blogs

Amit Kumar is Senior Principal with Infosys Consulting.

Most success stories around Robotic Process Automation (RPA) are larger than life: cost savings of 60 to 80 per cent, projected ROI in three digits, or turnaround times that go from days to minutes. But there is a flip side to consider: 30 to 50 per cent of initial RPA implementations fail.

In the financial services industry and in other industries, the reasons for the underwhelming performance of RPA range from lack of scalability and excessive reliance on IT to inadequate preparation to unrealistic expectations and short-term thinking. Also, a big problem is that enterprises often choose the wrong processes for automation.

Still, the financial industry is understandably excited. According to arecent global study, 33 per cent of major enterprises, and 44 per cent of banking and financial services companies, have committed serious investments in RPA within the next two years.

Implementing RPA in large financial services organisations takes careful consideration and diligent planning. The following is a list of top ten tips for selecting processes for RPA to help guide financial services organisations to successful implementations:

1. Assess processes consistently across the enterprise: rather than shopping for use cases at random, enterprises should employ a standardised, “top down” process hierarchy to assess the right candidates for automation.
2. Estimate effort accurately: enterprises should base their business case for RPA on current and accurate data on the effort, number of steps, and manpower needed to complete different processes. This assessment relies significantly on inputs from process subject matter experts, and would also benefit by factoring the results of time and motion studies, activity based costing, and average handling time/ effort analysis.
3. Minimise process variation: a number of RPA implementations go over budget and miss deadlines because processes vary so greatly. Financial services organisations should address that by mitigating the usual causes, such as multiplicity of systems and interfaces; variation in the extent of process centralisation across different country operations; proliferation of country-specific processes shaped by legal or local requirements; and lack of standardisation in the formats and processes employed by different vendors.
4. Build a solid business case: broad brushstrokes and gut feel have no place in process selection. Rather, the decision should be grounded in a comprehensive business case, which takes all costs, benefits, complexities (e.g. number of systems, data types etc.) and risks (e.g. legal, regulatory etc.) into account.
5.  Factor in other strategic technology and business programs: large organisations have many simultaneous digitisation initiatives, which may impact some of the processes selected for robotic automation. It is vital to take that into consideration before going ahead with RPA.
6.  Think end-to-end: in RPA, the sum is greater than the parts. When assessment is conducted in silos, a process that occurs in or draws data from two or more functions is in effect treated as two (or more) separate processes. This is suboptimal from an automation standpoint. For example, a key process called balance sheet control is part of the financial controller’s domain. However, to make up the balance sheet account totals, the process needs transaction data from other functions, which is sent to the finance team for reconciliation. An organisation trying to automate ledger “proofing” without an end-to-end view will automate only the activities of the finance function, leaving all the feeder activities in the other functions to be performed manually or automated in a separate exercise.
7. Measure complexity, so you can manage it: since no two RPA use cases are of the same complexity, enterprises cannot base their calculations on general assumptions. They should create a continuum of activities that are graded by complexity to assess feasibility and decide priorities.
8. Include solution analysis in process assessment: after assessing the complexity and nature of a use case, the organisation should analyse the various solutions available to identify an appropriate toolset. This has a direct bearing on the business case since implementation costs and timelines vary by tool.
9. Review and redesign: walking through a process will help to identify its pain points. The enterprise should then try to determine the “dominant root cause” of each before proceeding to redesign the post-RPA process. For instance, are pain points caused by policy and procedure, organisation design, or poor error detection.
10. Perform assessment in “sprint” mode: often, organisations try to complete the assessment and identification of use cases in a single iteration, which creates a long gestation period until implementation by which time the opportunity might have stalled or the process itself might have changed. There is also a risk of misinterpreting or dropping information required for the implementation. The ideal approach is to take up RPA in “agile mode” – maintaining a process backlog that allows the development team to plan for the next few sprints as well as account for any feedback from the previous iteration.

Here’s an example of a large financial services company, which turned around an RPA implementation that was headed nowhere. The company’s shared services unit had run into serious problems with its robotics-led initiative, which had not operationalised even a single process yet. The reasons for this included wrong selection of processes, unrealistic cost saving expectations and a team that was totally unprepared for the job.

The company then with some help from external partner set out to define the right RPA demand generation model, compute the business case, design the post-implementation operating model and flows, and execute the project in agile mode. Thanks to this exercise, the unit now has a clear line of sight into RPA backlog and a sound business case. Having found the right RPA solution, it is now implementing several RPA projects and is on the way to meeting its cost saving targets.

Following as many of these tips as possible, financial services organisations should identify the right automation tool and partner to achieve their goals.

Ten Nepal-based bank have signed up to use SWIFT’s Sanctions Screening service to underpin their sanctions compliance. The banks join a group 600 strong, built up since the service’s launch in 2012 as the first of SWIFT’s financial crime compliance portfolio.

Sanctions Screening is a hosted utility service that screens financial transactions in real time, according to SWIFT. It holds information up against “more than 30 up-to-date lists of sanctioned individuals and entities from all the major regulatory bodies, including OFAC, the United Nations, and the European Union.”

The service is aimed at small and mid-sized financial institutions as well as corporations and payments businesses.

“SWIFT is a valued and trusted partner in our sanctions compliance efforts,” says Ashoke SJB Rana, Chief Executive Officer of Himalayan Bank Limited, one of the banks to sign up. “Using Sanctions Screening helps us focus on core parts of our business while actively ensuring we are meeting our sanctions compliance obligations, reducing manpower and costs.”

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Chinese firms Dianrong and FnConn have launched a blockchain-based platform for supply chain finance. Named Chained Finance, the system is the result of a successful pilot and proof of concept.

The industry has been limited by existing technology, the two firms claim, and has only managed to serve around 15% of suppliers needing financial resources. A “vast majority” of the 40 million SMEs in China remain underserved.

Chained Finance will be targeted three major sectors: electronics and auto and garment manufacturing. Dianrong and FnConn are hoping to triple the number of SME supply chain operators with access to funding in China.

“Blockchain is revolutionising the finance industry and offers seamless solutions to any company operating and financing complicated supply chains,” says Soul Htite, Founder and CEO of Dianrong. “The complexity and scale of supply chain finance has posed major challenges in ensuring adequate funding and efficient operations.”

By using the Chained Finance platform, adds Jack Lee, Executive Director and CEO of FnConn, every payment and supply chain transaction can be more transparent, manageable and easily authenticated.

Chained Finance has launched with an initial 40 employees, though the number is expected to grow throughout 2017.

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Sub-Saharan Africa is, today, the second fastest growing region in the world– and home to some of the most exciting emerging markets on the planet. These emerging markets, combined with frontier markets of equally great potential, “present a future cross-border trade and economic environment that could, one day, emulate Asia in diversity, opportunity and growth,” says Vinod Madhavan, Group Head of Trade for Standard Bank.

Efficient, effective and sustainable trade structures and technologies are central to achieving this vision for growth – and also for alleviating the poverty that still grips many parts of the continent.

Economically excluded populations can be rapidly included in meaningful economic participation by growing sustainable and inclusive domestic, regional and global trade value chains. Trade has the potential to drive inclusive growth in Africa by leveraging new technologies – especially in information – able to link sustainable African industries with a new generation of global consumers.

Now has never been a better time for Africa to sustain growth by taking charge of its own growth momentum, by rapidly expanding the continent’s internal and cross-border cash, trade and securities capabilities. This will, deepen local capital markets, enabling the development of sustainable, diversified and inclusive domestic economies through cross-border trade.

To achieve this vision, however, the information that Standard Bank has access to, across its 20 markets shows how important it is that legislators get the cross-border and policy basics right. At the same time, Africa’s financial institutions should look to developing the digital and sustainability solutions necessary to leverage the continent’s potential.

 Cross-border 

Cross-border integration (of production, supply and markets) through trade, drives the rationalisation of standards, the efficiency and growth of markets, and the diversification of economies – naturally.

Creating the financial markets that allow this evolution to happen is critical for Africa to successfully claim a greater share of global productivity – and the trade networks that support these.

 Progressive policy 

Africa will not, however, realise the benefits of regional and global trade without, at the minimum; liquidity, access to capital, progressive foreign exchange regimes, and clear tax systems. Being supported by; rational infrastructure, agile labour policies, relevant education and efficient customs and excise rules coordinated by regional trade bodies, will free Africa to expand growth internally – while continuing to attract foreign investment.

 Digitisation 

From a cash, trade and investment services perspective, Standard Bank is seeing a lot of evolution in digitisation being driven by our clients and their customer. As the various players in the client ecosystem – i.e., producers, suppliers, service providers – push the bank’s clients to adopt cheaper, more digital, technologies. The bank’s clients also expect the bank to be able to operate and deliver across these platforms.

Our clients continue to search for operational efficiency (especially in a largely paper intensive trade finance business) and hence we expect to see increased adoption of digitisation and digitalisation in trade (across the physical supply chain, the financial supply chain and the documents chain). Technologies such as Blockchain naturally lend themselves in realizing benefits from the digitisation of financial supply chain and documents chain (that secures the documents legal transferability while drastically reducing delays in couriering etc.).

Keeping close to clients, especially in Africa where mobile and other such digital solutions are evolving independently – and often ahead of the rest of the world, places Standard Bank in a position to observe these evolutions first hand – and then evolve solutions that support these digital needs.

Getting this right requires a culture without a territorial or parochial view of innovation and technology an innovative culture completely at home with the democratic and universal culture of today’s digital consumer, client, customer or business person.

 Sustainability 

Since the competitive management of trade information, in the modern age, includes end-users being aware of how sustainable products and services are developed and delivered, businesses also need to develop clear, transparent and fair procurement and production environments – that are sustainable over the long term says Mr Madhavan. While the growing importance of sustainability in business and trade is a challenge in many parts of the world, in Africa the shift to sustainability presents the continent with a myriad of opportunities to develop new, clean and efficient industries – from the ground up.

Standard Bank, as one of the two African banks signatory to the Equator Principles on sustainability in banking and finance, is acutely aware of the opportunity that the global sustainability movement offers Africa. Standard Bank is also the only Africa bank currently involved in the Sustainable Trade Finance working group constituted by ICC (International Chamber of Commerce, Banking Commission).

Getting sustainability right is likely to place Africa at the epicentre of a new global trade in sustainable products and services. This will have profound implications for growth and inclusiveness on the continent.

Standard Bank is ideally placed to help Africa achieve this vision by deploying its technological, policy, market and human insights – built up over 154 years and now present in 20 markets – in the development of a cross-border trade environment that drives inclusive growth and effective global competition in a rapidly changing global environment.

Vinod Madhavan, Group Head of Trade, Standard Bank

Many see the money transfer sector as a market that is more than ripe for technological disruption. While it is true that customer demand for digital options to transfer money is on the rise, we need to understand what a truly customer-centric approach to channel strategy looks like. After all, we are aiming to reach as large a range of consumers across the globe as possible. The world-wide rise in financial inclusion and the subsequent changes in how people manage their money plays an integral part in finding the right balance when it comes to our channels.

Technology is necessary, but not sufficient in its own right

Operating with a singular and one-sided channel strategy is no longer a sustainable option in a world where consumers have grown accustomed to an increasingly customer-centric financial services sector. While digital solutions are an integral component for success in the cross-border payments industry, they are not enough to act on their own. A sustainable channel strategy must look beyond technology to deliver the widest range of choice for customers because offering more flexibility allows you to reach the largest possible amount of customers.

The right response to increasing financial inclusion

Despite the fact that money transfer businesses have traditionally been seen as competitors to the banking sector, a key focus for a sustainable and forward-looking strategy should be the development of strong relationships with financial institutions. This is because a growing banking sector across the world means that financial institutions will play an increasingly crucial role in letting people receive and access their money.

Between 2011 and 2014, over 700m people in the world received access to a bank account for the first time. While the current number of ‘unbanked’ people across the world is still estimated to be around 2bn, the World Bank and its partners are working towards reducing this number considerably by 2020: the target is to add another 1bn bank account holders by 2020. For markets like India and China, where currently almost a third of the world’s unbanked population is located, this rise in access to accounts is going to have a significant impact in the way that people handle their money and make use of financial services. In the money transfer sector, we can be certain that the demand for transfers directly into bank accounts will rise steadily over the next few years as a result.

Partnerships with banks as the way forward

Money transfer businesses which have a direct agreement in place with banks are best positioned to take full advantage of the rapidly increasing financial inclusion, because these relationships have an immediate impact on the user experience of our customers. Without a direct agreement in place, money that is transferred to banks disappears into the abyss of the international systems of inter-bank payments for several days. Usually, with a large number of middle-men in the picture, it is hard to predict exactly how long a transfer is going to take, or what amount of money will exactly arrive in the recipient’s bank account due to different exchange rates and fees applied by financial institutions along the way.

Developing direct relationships with banks makes transferring money overseas easier for the business as well as the customer. Money transfer businesses must consider taking advantage of the potential explosion in financial inclusion by going beyond a singular, technology-driven strategy, to a truly multi-channel approach that embraces technology, as well as alternative avenues that customers might use to transfer their money. By partnering with banks, money transfer businesses can complement their sophisticated digital solutions and make their channel strategy more sustainable. After all, we must remember that we are first and foremost a financial service – in other words, we must not forget the ‘Fin’ in FinTech.

Nick Day is founder and CEO of London-based money transfer business Small World FS

The concept of cloud is now firmly established among corporate decision-makers. But, rewind ten years, and the mere mention of cloud would have been met with a furrowed brow. Times have changed, and for many, the adoption process went from never, to maybe, to we need it now.

This main catalyst is that today’s world needs a new approach. For companies trading in complex markets like commodities, price fluctuations, increasing regulation and geopolitical uncertainty are the new normal. Add in increasing operational intricacy and an explosion in structured and unstructured data volumes, and it’s clear that a technology that enables precise risk management, scalability and data-enriched transparency is a must.

For firms exposed to these markets, the possibility of cloud has largely been dictated by the availability – or, until now, the unavailability – of solutions that offer the rich functionality they need.

Now, a truly enterprise-level trading, treasury and risk management cloud solution exists. Breaking down the siloes between these functions will profoundly transform the way companies respond to customers, manage risks and run their business.

Robust, secure and flexible

A cloud solution means less hardware to manage, freedom for IT teams to focus on value-added projects and the ability to match operating costs with business demands in a much more agile way. It means a platform that’s built to address today’s security challenges, with cloud operations typically offering much more robust, expert security than on-premise installations.

But the transformation goes much deeper. With a cloud solution that combines exceptionally rich functionality with vast, almost unlimited, computing power and extreme flexibility, traders and risk management departments are empowered. For the first time, the infrastructure can scale to meet peak demand, and scale back again. Firms have the resources to complete analysis of and report on, previously unimaginable volumes of data, faster, to understand current VaR or P&L, without relying on an overnight run based on yesterday’s positions. They’re able to manage volatility in real-time. And they’re able to act on accurate real-time views of risk and take full advantage of the opportunities presented. Actions that were simply a pipe dream until recently.

A deeper transformation, not a pipe dream

From a finance perspective, cloud provides the springboard to shape how the business operates, by providing accurate data to the board to influence decision-making – data that has for too long been largely unavailable. This enables firms to develop strategies and carve out competitive advantages without being constrained by long lead times, or the costs and bureaucracy required to scale up their infrastructure and support capabilities. For the first time, chief financial officers (CFOs) can rely on the data they receive to get an accurate picture of cash flows and liquidity when it’s needed. Treasurers can shift their focus towards the annual capital allocation process, earnings and capital at risk. All of this makes it a far more strategic function.

Ultimately, the need for agility, scalability, security and flexibility will only be met through cloud deployments. In the near future, on-premise alternatives will struggle to deliver what a modern firm needs, and in a very short time, companies will have to search far and wide for reasons not to move to the Cloud.

By John E. O’Malley, CEO, Openlink, in conversation with Marco Scherer, Head of IT, Uniper