5 Ways Workflow Automation Is Disrupting Fintech

Workflow Automation

Workflow automation is transforming the financial sector — mostly by turning it upside down. The first wave of automation upended traditional financial services with tools like mobile banking, credit monitoring, and nontraditional lending. Now workflow automation is disrupting fintech itself.

Workflow automation is being used in many organizations to support HR, accounting, and customer service. And that’s just the tip of the iceberg. Today, only 7 percent of companies say they’ve automated more than a fifth of their internal processes. In fintech, that number is expected to reach 50 percent by 2025.

How Workflow Automation is Disrupting Fintech

Here are just a few of the exciting ways automation is impacting fintech:

1. IPaaS tools are bringing order and integration to the cloud.

We tend to think of fintech as being on the bleeding edge of innovation. Yet many legacy institutions have lagged behind other industries in transferring their data to the cloud. This is due, in part, to concerns over data security and in part to regulation. Data protection laws in some countries make it illegal for banks to outsource their data to a cloud service provider.

It’s not that most banks aren’t using the cloud — just that they don’t have the most efficient cloud strategy. But as the cost of cloud storage continues to decrease, the cost savings will be too compelling to ignore. And with more institutions using AI tools to detect fraud, they’ll have to ramp up their utilization of the cloud. 

With more data come more data silos, which can impede productivity. Not having up-to-date information also makes it more difficult to deliver the best possible customer experience. Integration platforms as a service (iPaaS) tools will be essential for connecting cloud applications securely and efficiently. IPaaS tools allow enterprises to share data between applications and improve that data at every touchpoint. 

2. Intelligent automation is introducing more consumers to investing.

According to a recent report, intelligent automation could bring an additional $512 billion in revenue to the financial services industry. With robotic process automation, organizations were already reaping an estimated 10 to 25 percent in savings. But the shift from RPA to intelligent automation is creating new sources of revenue as well.

One area where workflow automation is disrupting fintech and driving growth is in investing — and not just on Wall Street. Major institutions have been using AI to speed up market analysis for years. Now many fintech companies are offering robo-advising and automated investing services to the average Joe. Companies like SoFi and Acorns use algorithms to build portfolios for clients based on their goals and risk tolerance. The AI diversifies the client’s portfolio and automatically rebalances it — tasks a human financial advisor once performed. 

These robo-advisors have created a whole new class of armchair investors. Consumers who would have been priced out of hiring a human financial advisor can now invest via automation. They don’t have to worry about account minimums or heavy broker fees. They can start right from their mobile app without worrying about asset allocation.

3. Automating paperwork is saving time and reducing errors.

Another way workflow automation is disrupting fintech is by automating cumbersome processes that slowed transactions and were prone to error. Global trade, for instance, has always been a logistical nightmare that creates a long paper trail of documents. Those documents have to be manually handled and modified, which creates massive inefficiencies. Banks have strict rules for compliance, and human stock checkers make mistakes.

Traydstream is a platform for banks, financial institutions, and exporters that uses AI to streamline trade processing. Traydstream scans trade documents and automates compliance checks and document scrutiny. Digitizing all this physical paperwork improves efficiency and reduces errors.

4. Virtual assistants are helping banks serve customers 24/7.

Last year when the pandemic hit, lines outside the drive-thru at banks often snaked around the block. Branches scrambled to serve customers while complying with corporate policies that closed lobbies and limited the number of tellers. Consumers who’d never tried mobile banking suddenly became reliant on their bank’s digital offerings — including virtual assistants.

As natural language processing improves, so do chatbots and virtual assistants. These assistants can be used to perform a number of simple banking tasks outside the typical banker’s hours. They’re proving to be a secure, low-cost way to service customers around the clock.

Last year, U.S. Bank introduced its Smart Assistant, which lets customers speak or text requests within the mobile app. Customers can transfer money between accounts and check transactions. The virtual assistant also integrates with Zelle to allow customers to send digital payments. U.S. Bank isn’t the only major institution to roll out a virtual assistant. Bank of America and Chase also have virtual assistants that can help with simple tasks. These VAs don’t replace human bankers. They just free up humans for more complicated problems by handling a high volume of routine transactions.

5. Machine learning is taking the guesswork out of underwriting.

Though underwriting for many types of loans has been automated for years, much of it is still done manually. For instance, humans always underwrite for mortgage loans. The trouble is that human underwriters are prone to bias, and they don’t always have the full picture. Even institutions that automate underwriting rely on things like consumers’ FICO score and debt-to-income ratio. These metrics are crude at best for evaluating someone’s likelihood to repay a loan.

ZestAI is a platform that uses machine learning to assess thousands of variables to determine a person’s creditworthiness. Zest partnered with Prestige Financial Services, a subprime auto loan company, to approve more borrowers without lowering lending standards.

Affirm offers installment loans to consumers at the point of sale on retail websites. The company argues that traditional underwriting metrics are only reliable for consumers with a long credit history. It uses AI to create a more complete profile for younger consumers who might not have credit history. Affirm uses data such as bank transactions, utility payments, and the type of purchase to determine creditworthiness.

Workflow automation will transform nearly every sector, but none so much as fintech. While financial institutions have historically been slow adopters, they’re feeling the pressure from small, nimble startups to experiment with automation. Automation allows companies to reduce overhead, improve security, and offer their customers the low-cost, personalized services they crave.