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Robotics and artificial intelligence trends in financial services

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Editor’s note: Robotics and artificial intelligence (AI) solutions are delivering significant cost savings to organizations, and they are hot in the banking and financial services sector. I spoke with Dinesh Venugopal, president of digital and strategic customers at Mphasis, a leading services and solutions provider, about the drivers, competitive advantages, effects on digital accessibility for people with disabilities, and the disruptive impact of robotics and AI adoption. 

What are the primary drivers for moving to automated solutions such as robotics? Is it primarily cost reduction due to streamlining and elimination of FTEs? 

Dinesh VenugopalDinesh Venugopol: Digital is seen in several key components, especially in the financial services sector. The first is how a company interacts with its customers. Every customer wants the Amazon or Facebook experience, which they are not getting today from traditional financial services companies. This is driving a lot of robotics process automation and AI initiatives.  

The second is solving a problem such as reducing cycle time for load processing or the time to evaluate a loan. This is the area of robotic process automation that I am seeing take shape more and more in all industries across the board, but especially in financial services. 

A good example is how we helped an organization with its anti-money laundering (AML) processes. Some regulations and internal company’s quality standards require certain types of transactions to be flagged as needing a second round of review. Most of them are false positives. But a human has to intervene and review the flagged transactions, and that requires getting additional data from several different locations. In AML, as much as 40 hours are required in some cases to determine whether something is a false positive or a true case of anti-money laundering. The majority of the time is spent in fetching data from multiple sources. Mphasis created a next-generation robotics process automation tool that collects the data and enables the human investigator to just make a yes or no judgment from the data. Automating this process cuts the cycle time down to just a couple of hours.  

A third area is using AI and cognitive computing to make some decisions that used to be made by humans only. This area is getting a lot of traction.  

What’s driving this third area? Is it a desire to overcome possible human oversight? Or is AI/Robotics leveraged to minimize possible missed opportunities? 

Dinesh Venugopol: One driver is regulatory compliance often requires humans to check and double-check, especially if there is an audit function. 

Where human decisions have a significant financial impact, automation is looked at very carefully. The insurance underwriting process is an example. Even though it is all very data driven, there are specific cases where you still need the underwriter to look at the data and make an assessment in a particular transaction. As to whether automation and cognitive computing can reduce or eliminate underwriters’ involvement, it’s a matter of what kind of risk each company is willing to take, and how much data they are willing to look at. Companies have to work through the tradeoffs and gain the confidence before deciding how much to automate. 

What about small and midsized businesses? Are they moving to robotics and AI yet? 

Dinesh Venugopol: The trends I see in smaller businesses is that they are looking at it from a technology/ technology tools and standardization perspective. Because of their size, in the past they had to buy their own tools. Now with cloud and standard processes available, their first focus is standardization. They are doing a lot through the cloud. People might say that’s not automation; but in my view, it is automation because you are moving from a less automated, high human effort model, which is customized to your organization, to a more standardized model in the cloud. That’s one movement that I’m definitely seeing. 

Second is their willingness to experiment with AI and cognitive tools on the customer interaction side and target smaller audiences. They are more agile than larger companies in their decision-making process, so they are willing to experiment a lot more.   

As an example, we work with a bank that launched a new brand just for doing student loans. That loan division is completely modeled for the millennials. They like to do everything on their mobile phones, and they don’t want to call a 1-800 number. It needs to be a seamless process. The algorithms, systems and tools used for this are completely new. 

So in small businesses automation is happening in the context of customer experience as opposed to cost takeout, and it’s happening in the context of standardization as opposed to large transformation projects. 

What’s happening with digital transformation regarding accessibility for people with disabilities? How does automation or AI fit into that? 

Dinesh Venugopol: One in five people in the US will have some kind of disability sometime in their life. That’s a significant number of people who need accessible interaction with websites. 

Large organizations see accessibility as a compliance activity. For example, they usually build a website; then hire an external consultant or do an internal accessibility assessment. Finally, they determine what needs to be fixed for accessibility before the release goes out. 

This is not as effective as seeing accessibility as a design issue. Organizations are changing their approach now, but it’s still behind where it needs to be. 

We engage with customers up front and decide how they should design their digital assets. How do you look at a digital asset as an accessibility item? We bring in automation where it makes sense. We start with an automation fact sheet that can tell an organization whether its digital assets are accessible to people with disabilities. We are at an early stage, but Mphasis is building robotic automation solutions for design with disabled people in mind. We believe that the design will be very different, and the design will work for non-disabled as well as people with specific disabilities. 

I see this as very disruptive to competitiveness in the retail industry as well as banking. 

Dinesh Venugopol: It’s absolutely disruptive. That happens when you give designers the right frame of mind. If you design with accessibility in mind up front, you are able to do other functions with the digital asset. In businesses where accessibility continues to be a compliance issue, they will miss opportunities.  

What is the main issue or challenge involved in automating a process? Is it mainly resistance to change or fear of job loss? 

Dinesh Venugopol: The primary reason is that it’s a technology play in the operations area. The technology folks do not understand operations well enough. And the business folks don’t trust IT to come in and tell the business what to do. If a business wants to automate a process, it would need significant buy-in from IT, because the traditional IT delivery has to change. Some of it may need to move to the cloud, or they need significant transformation initiatives. And any kind of transformation initiative that operates across multiple departments rarely works. That is the biggest threat, not so much the fear of job loss. Also, there’s the question of where the savings will come from: IT or operations? And who is going to lead the initiative? 

Where and how do you think automation will affect industries differently in three to five years? 

Dinesh Venugopol: One industry that’s going to be significantly affected by automation is my industry – outsourcing and offshoring. My prediction is that this disruption is just starting, and we are in the early stages. I think in the next 12 to 18 months you’ll see a significant amount of companies saying they don’t need as many people doing what they do today. They will look inward and outward at this. The BPO industry is ripe for automation. 

Automation and digitization is also going to significantly change the way companies interact with customers. A lot has already been written about this. But one area that is not talked about a lot is the role that automation can play in compliance within the financial services industry. We now have a number of laws that resulted from the last global financial crisis, and businesses spend a lot of money and time to get compliant. This area is highly ripe for automation. I think it will be huge. 

You mentioned the disruption and revenue loss to outsourcing providers because of automation and robotics. How do you think the service provider landscape will change over the next five years? 

Dinesh Venugopol: I think that 75 percent of providers’ revenue will have to come from new generation services – meaning services they are not offering today. My prediction is in five years, 75 percent of the outsourced offerings today will be obsolete and replaced by new offerings or offerings with some element of automation in them. A lot of service providers will die and new ones will come in. Automation is absolutely a disruptive trend. 

Of course, they can always outsource; but for companies considering automating processes, how should they start this journey? 

Dinesh Venugopol: In deciding if your organization is ready for automation, you clearly have to look at the current systems and processes in use and determine which human interfaces can be automated. It’s not a simple process to do it. You need domain knowledge in operations, domain knowledge in IT, process experts, automation tools experts and then put all of them together to develop an effective solution. 

A good way to start is to recognize that the technology is definitely disruptive. Then ask: Knowing that the trend is coming, what does our company need to do to prepare for this disruptive trend and how do we get ahead of the trend? 

Dinesh Venugopal is president of digital and strategic customers at Mphasis and a member of the Executive Council. He has over 15 years of leadership experience across technology innovation, marketing and M&A. In his current role, Dinesh focuses on strategies that help clients achieve high performance through solutions that bring together business, technology, operations and customer experience. Prior to Mphasis, he was head of product development at BMC Software and earlier was director of engineering at Marimba.

 

 

 

 

 

 

 

 

 

 

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