Time to Automate All Bank Processes

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The uncertain economic environment, with a recession likely on the horizon and inflation driving up costs, has given banks a unique opportunity: revisiting their existing compliance and operational systems, and exploring long-term, scalable solutions in response to looming and increasing regulatory pressure.

Leveraging machine learning and automation to power digital transformation can address the concerns that keep bank directors up at night — especially since financial institutions may be expected to begin providing more data over the coming months. This comes at a time when banks are dealing with a number of external challenges; however, bank directors know they cannot skimp on adherence to strict compliance requirements. Missing a revenue goal is unfortunate, but from what we’ve heard from our customers, missing a compliance requirement can be a devastating blow to the business.

Increasing Regulatory Risk
Banks and other lenders may encounter financial strain in adding more compliance staff to their teams to address new regulations. Among them, Section 1071 of the Dodd-Frank Act requires financial institutions to report demographic information on small business loans. Regulators are reworking the Community Reinvestment Act. In response, banks are considering how they can leverage automated compliance systems for fair lending, loan servicing and collections.

Bankers are quick to acknowledge that the manual processes involved in data verification should be eliminated if their institutions have any hope of staying ahead of the curve. Furthermore, labor shortages and increased competition for talent has increased costs associated with these tasks — yet their necessity is imperative, given regulatory scrutiny.

As loan originations decrease during an economic slowdown or recession, it may look like delinquency rates are increasing as the ratio of delinquent loans to originations increases — even with no notable changes in delinquency cases. The increasing ratio could trigger scrutiny from the regulators, such as the Consumer Financial Protection Bureau.

If that happens, regulators look into whether the borrower should have received the loan in the first place, along with any fair lending bias concerns, and whether the bank followed appropriate procedures. Regulators will scrutinize the bank’s loan servicing and collections compliance procedures. Given that traditional manual reviews can be more inconsistent and vulnerable to human error, this becomes an incredibly risky regulation environment, especially where data integrity is concerned.

To mitigate risk and increase operational efficiency, banks can use end-to-end document processors to collect, verify and report data in a way that adheres to existing and pending regulation. Implementing these processes can eliminate a large portion of time and labor costs, saving banks from needing to recruit and hire additional compliance professionals every time fair lending and servicing requirements become more demanding.

Automated Processing
Lenders like Oportun, a digital banking platform powered by artificial intelligence, have found that leveraging intelligent document processing has reduced the cost of handling physical documents and traditional mail by 80%, increased margins, lowered instances of human error and improved data integrity. Enhancing customer experiences and providing quality data are crucial for Oportun; this makes their operational goals more cost-effective and scalable, and increases the capacity for Oportun’s team.

“[Automation] has helped us establish some strong controls around processing mail and servicing our customers,” Veronica Semler, vice president of operations at Oportun, says. “It’s reduced the risk of mail getting lost … it has increased our efficiency and made things easier for our team members in our stores.”

Institutions that leverage automated systems and machine learning for compliance can reduce labor costs, provide customers with high quality, efficient service and deliver accurate data to regulators. This provides companies like Oportun, which was an early adopter of machine learning, with an advantage over competitors that use traditional manual review methods.

Implementing document automation into existing systems allows banks to address compliance concerns while laying the groundwork for growth. Automation systems provide the tools for banks to reduce friction in lending and operations, enhance their controls and reduce human error — giving boards confidence that the bank can provide accurate, quality data ahead of any new fair lending and servicing regulations. Now is the time for boards and executives to recession-proof their banks and facilitate long-term success by investing in automation for document processing.

How Banks Can Win the Small Business Customer Experience

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In the first stages of the pandemic, it became apparent that many banks were unable to effectively meet the needs of their small business customers in terms of convenience, response time, fast access to capital and overall customer experience. Innovative financial technology companies, on the other hand, recognized this market opportunity and capitalized on it.

Bankers recognize the importance of providing their business banking customers with the same fast and frictionless digital experience that their consumer retail banking customers enjoy. So, how can banks ensure that they are competitive and continue to be relevant partners for their small business customers?

The reality of applying for most business loans below $250,000 is a difficult experience for the applicant and a marginally profitable credit for the bank. Yet, the demand for such lending exists: the majority of Small Business Administration pandemic relief loans were less than $50,000.

The key to making a smooth, fast and convenient application for the borrower and a profitable credit for the lender lies in addressing the issues that hinder the process: a lack of automation in data gathering and validation, a lack of automated implementation of underwriting rules and lack of standardized workflows tailored to the size and risk of the loan. Improving this means small business applicants experience a faster and smoother process — even if their application is declined. But a quick answer is preferable to days or weeks of document gathering and waiting, especially if the ultimate response is that the applicant doesn’t qualify.

But many banks have hesitated to originate business loans below $100,000, despite the market need for such products. Small business loans, as a category, are often viewed as high risk, due to business owners’ credit scores, low revenues or lack of collateral, which keeps potential borrowers from meeting banks’ qualifications for funding.

Innovative fintechs gained the inside track on small business lending by finding ways to cost-effectively evaluate applicants on the front-end by leveraging automated access to real-time credit and firmographic and alternative data to understand the business’ financial health and its ability to support the repayment requirements of the loan. Here, much of the value comes from the operational savings derived from screening out unqualified applicants, rerouting resources to process those loan applications and reducing underwriting costs by automating tasks that can be performed by systems rather than people.

To make the economics of scale for small dollar business lending work, fintechs have automated data and document gathering tasks, as well as the application of underwriting rules, so their loan officers only need to do a limited number of validation checks. Adopting a similar approach allows banks to better position themselves to more cost effectively and profitably serve the borrowing needs of small business customers.

Although some fintechs have the technology in place to provide a faster, more seamless borrowing experience, many lack the meaningful, personal relationship with business owners that banks possess. They typically must start from scratch when onboarding a new loan customer, as opposed to banks that already own the valuable customer relationship and the existing customer data. This gives banks an edge in customizing offers based on their existing knowledge of the business client.

While consumer spending remains strong, persisting inflationary pressures and the specter of a recession continue to impact small businesses’ bottom lines. Small business owners need financial partners that understand their business and are nimble enough to help them react to changing market dynamics in real time; many would prefer to manage these challenges with the assistance of their personal banker.

The challenge for bankers is crafting and executing their small business lending strategy: whether to develop better business banking technology and capabilities in-house, buy and interface with a third-party platform or partner with an existing fintech.

Better serving business customers by integrating a digital, seamless experience to compliment the personal touch of traditional banking positions financial institutions to compete with anyone in the small business lending marketplace. With the right strategy in place, banks can begin to win the small business customer experience battle and more profitably grow their small business lending portfolios.

Taking Control and Mitigating Risk With a Collateral Management System

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For many banks, managing the manifold economic and internal risks has been a stressful and very manual process.

Truly gaining a comprehensive overview of all the collaterals associated with a bank’s lending business is often the top desire we hear from clients, followed by in-depth reporting and collateral management workflow capabilities. Historically, collateral management in wealth management lending has often been a siloed process with each department managing it individually. And the need for additional resources in credit and risk departments has been a growing trend. In our research, the processes in which banks are managing their collaterals vary but often involve collecting data from a variety of sources, tracking in spreadsheets manually, and pulling rudimentary reports from the core banking system that only gives basic aggregated information at best.

Banks need a way to monitor and manage collateral for all their lending products, not just securities-based lending. An enterprise collateral management solution allows credit and risk professionals to:

• Gain an accurate and up-to-date overview of collaterals across different asset and loan types in real-time for marketable securities, if desired.
• Set up multiple credit policies.
• Perform portfolio concentration analysis for more in-depth insights on potential risks.
• Pull pre-defined and custom reports quickly and efficiently.
• Automate collateral release support.
• Assess borrower’s risk across the entire relationship through data visualizations and modules.
• Conduct in-depth “what-if” stress testing for marketable securities to proactively mitigate any potential risks.

Make Decisions and Act With Efficiency
Many organizations are siloed and visibility across groups is an organization struggle. The lack of visibility across teams can cause operation and client-facing staff to struggle with making timely and informed decisions. A digital, streamlined enterprise collateral management solution can create efficiencies for cross-team collaboration. Your bank’s team should look for solutions with features like tools, reports and workflows that enable them to make informed decisions and act with efficiency, including:

• Automatic calculation of collateral release.
• Portfolio concentration analysis to provide more in-depth insights on potential risk.
• Rule-based and streamlined workflows to support collateral call management in scale with efficiency and at a reduced cost.

The standards for bank risk management and customer service today are at some of their highest levels today; management teams are looking for immediate answers to their questions in this uncertain environment. It is essential that banks have a technological solution that equips their team to have the answers at their fingertips to provide the service clients expect and deserve. Now more than ever, financial institutions need a collateral management solution that provides speed, transparency, efficiency and a streamlined digital workflow to support the new hybrid working environment.

How Banks Can Speed Up Month-End Close

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In accounting, time is of the essence.

Faster financial reporting means executives have more immediate insight into their business, allowing them to act quicker. Unfortunately for many businesses, an understaffed or overburdened back-office accounting team means the month-end close can drag on for days or weeks. Here are four effective strategies that help banks save time on month-end activities.

1. Staying Organized is the First Step to Making Sure Your Close Stays on Track
Think of your files as a library does. While you don’t necessarily need to have a Dewey Decimal System in place, try to keep some semblance of order. Group documentation and reconciliations in a way that makes sense for your team. It’s important every person who touches the close knows where to find any information they might need and puts it back in its place when they’re done.

Having a system of organization is also helpful for auditors. Digitizing your files can help enormously with staying organized: It’s much easier to search a cloud than physical documents, with the added benefit of needing less storage space.

2. Standardization is a Surefire Way to Close Faster
Some accounting teams don’t follow a close checklist every month; these situations make it more likely to accidentally miss a step. It’s much easier to finance and accounting teams to complete a close when they have a checklist with clearly defined steps, duties and the order in which they must be done.

Balance sheet reconciliations and any additional analysis also benefits from standardization. Allowing each member of the team to compile these files using their own specific processes can yield too much variety, leading to potential confusion down the line and the need to redo work. Implementing standard forms eliminates any guesswork in how your team should approach reconciliations and places accountability where it should be.

3. Keep Communication Clear and Timely
Timely and clear communication is essential when it comes to the smooth running of any process; the month-end close is no exception. With the back-and-forth nature between the reviewer and preparer, it’s paramount that teams can keep track of the status of each task. Notes can get lost if you’re still using binders and spreadsheets. Digitizing can alleviate some of this. It’s crucial that teams understand management’s expectations, and management needs to be aware of the team’s bandwidth. Open communication about any holdups allows the team to accomplish a more seamless month-end close.

4. Automate Areas That Can be Automated
The No. 1 way banks can save time during month-end by automating the areas that can be automated. Repetitive tasks should be done by a computer so high-value work, like analysis, can be done by employees. While the cost of such automation can be an initial barrier, research shows automation software pays for itself in a matter of months. Businesses that invest in technology to increase the efficiency of the month-end close create the conditions for a happier team that enjoys more challenging and fulfilling work.

Though month-end close with a lack of resources can be a daunting process, there are ways banks can to improve efficiency in the activities and keep everything on a shorter timeline. Think of this list of tips as a jumping off point for streamlining your institution’s close. Each business has unique needs; the best way to improve your close is by evaluating any weaknesses and creating a road map to fix them. Next time the close comes around, take note of any speed bumps. There are many different solutions out there: all it takes is a bit of research and a willingness to try something new.

How Banks Can Benefit From Adopting Automation for Month-End Close

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The finance industry is no exception when it comes to the general shift toward automation in daily life.

Automation is a powerful tool that eliminates repetitive manual processes, whether it’s to improving the bottom line by increasing productivity and output or offering better service to bank customers. One area of the business that bank executives and boards should absolutely take full advantage of automation is back-office accounting. Here are some of the top benefits banks can gain from automating the month-end close process.

Perhaps the most immediate benefit of automation for banks is the amount of time they can expect to save. Many bank accounting and finance teams are not closing on a timeline they or their CFOs are satisfied with. The month-end close is not something that can be skipped, which means allocating the time it takes for a full close can encroach into other projects or duties. Executives who have worked as accountants know that if the month-end close is not done on time, stressful days turn into late nights in the office. Automating areas of the close, such as balance sheet reconcilements, can free up time for more high value work such as analysis.

It is not uncommon for bank accounting teams to run lean. Cracks in the month-end close can lead to an overburdened workload, burnout and mistakes. When accountants work under stressful conditions, exhaustion that results in an error can be common. Even one mistake on a spreadsheet can create a material cost for the bank; it’s amazing how the tiniest miscalculation can multiply exponentially. One way to reduce human error is to automate processes with a program that can complete recurrent work using algorithms.

An additional pain banks must consider is compliance: external auditors, regulators and more. Things can start to go downhill if the finance team doesn’t properly generate a paper trail. That’s assuming they have, in fact, properly completed the close and balance sheet reconcilements. When a bank takes shortcuts or makes errors in their accounting, it can result in heavy fines or in extreme cases, even sanctions. In this context, automating the month-end close assumes the ethos of ‘An ounce of prevention is worth a pound of the cure.’ Digitizing the month-end close and supporting documents makes it easier to locate important data points and lessens the potential for discrepancies in the first place.

Lastly, accounting automation can help minimize a bank’s fraud risk. Fraud can go undetected for a long time when banks don’t perform due diligence during the month-end close. Reconciling accounts every month will make it easier to spot any red flags.

Companies that take advantage of available, advanced technology available have more chances to keep up with the ever-shifting business landscape. Bank accounting teams can benefit hugely by automating month-end close.

Banking’s Netflix Problem

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On April 19, Netflix reported its first loss in subscribers — 200,000 in the first quarter, with 2 million projected for the second — resulting in a steep decline in its stock price, as well as layoffs and budget cuts. Why the drop? Although the company blames consumers sharing passwords with each other, the legacy streamer also faces increased competition such as HBO Max and Disney Plus. That also creates more choice for the 85% of U.S. households that use a streaming service, according to the U.K. brand consulting firm Kantar. The average household subscribes to 4.7 of them.

Our financial lives are just as complicated — and there’s a lot more at stake when it comes to managing our money. A 2021 survey conducted by Plaid found that 88% of Americans use digital services to help manage their money, representing a 30-point increase from 2020. Americans use a lot of financial apps, and the majority want their bank to connect to these providers. Baby boomers use an average of 2.6 of these apps, which include digital banking and lending, payments, investments, budgeting and financial management. Gen Z consumers average 4.6 financial apps.

“Banks can be material to simplifying the complexity that’s causing everybody to struggle and not have clarity on their financial picture,” said Lee Wetherington, senior director of corporate strategy at the core provider Jack Henry & Associates. He described this fractured competitive landscape as “financial fragmentation,” which formed the focus of his presentation at Experience FinXTech, a tech-focused event that took place May 5 and 6 in Austin, Texas. Successful banks will figure out how to make their app the central hub for their customers, he said in an interview conducted in advance of the conference. “This is where I see the opportunity for community financial institutions to lever open banking rails to bring [those relationships] back home.”

During the event, Wetherington revealed results from a new Jack Henry survey finding that more than 90% of community financial institutions plan to embed fintech — integrating innovative, third-party products and services into banks’ own product offerings and processes — over the next two years.

Put simply, open banking acknowledges today’s fractured banking ecosystem and leverages application programming interfaces (APIs) that allow different applications or systems to exchange data.

Chad Davison, director of client solutions consulting at Fiserv, creates “balance sheet leakage” reports to inform his strategic discussions with bank executives. “We’ve been trying to understand from an organization perspective where the dollars are leaving the bank,” said Davison in a pre-conference interview. Some of these dollars are going to other financial providers outside the bank, including cryptocurrency exchanges like Coinbase Global and investment platforms like Robinhood Markets. This awareness of where customer dollars are going could provide insights on the products and services the bank could offer to keep those deposits in the organization. “[Banks] have to partner and integrate with someone to keep those dollars in house,” said Davison, in advance of a panel discussion focused on technology investment at the Experience FinXTech event.

Increasingly, core providers — which banks rely on to fuel their technological capabilities — are working to provide more choice for their bank clients. Fiserv launched a developer studio in late 2021 to let developers from fintechs and financial institutions access multiple APIs from a single location, said Davison, and recently launched an app market where financial institutions can access solutions. “We want to allow the simple, easy connectivity that our clients are looking for,” he said. “We’re excited about the next evolution of open banking.”

Jack Henry has also responded to its clients’ demand for an open banking ecosystem. Around 850 fintechs and third parties use APIs to integrate with Jack Henry, said Wetherington, who doesn’t view these providers as competitive threats. “It’s a flywheel,” he said. “Competitors actually add value to our ecosystem, and they add value for all the other players in the ecosystem.” That gives banks the choice to partner and integrate with the fintechs that will deliver value to the bank and its customers.

As fractured as the financial landscape may be today for consumers, bank leaders may feel similarly overwhelmed by the number of technologies available for their bank to adopt. In response, bank leaders should rethink their strategy and business opportunities, and then identify “the different fintech partners to help them drive strategy around that,” said Benjamin Wallace, CEO at Summit Technology Group. Wallace joined Davison on the panel at Experience FinXTech and was interviewed before the conference.

The Federal Reserve published a resource guide for partnering with fintech providers in September 2021, and found three broad areas of technology adoption: operational technology to improve back-end processes and infrastructure; customer-oriented partnerships to enhance interactions and experiences with the bank; and front-end fintech partnerships where the provider interacts directly with the customer — otherwise known as banking as a service (BaaS) relationships.

Banks will need to rely on their competitive strengths, honing niches in key areas, Wallace believes. That could be anything from building a BaaS franchise or a niche lending vertical like equipment finance. “Community-oriented banks that do everything for everyone, it’s really difficult to do” because of the competition coming from a handful of large institutions. “Picking a couple of verticals that you can be uniquely good at, and orient[ing] a strategy and then a tech plan and then a team around it — I think that’s always going to be a winning recipe.”

Improving Workflow Saves Time and Money

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Progressive banks add new features and functionalities on a regular basis. Most can attest to a long technology wish list, but bankers and their technology partners must be careful not to lose sight of what’s most important: the employee and customer experience. The multitude of disparate departments, systems and protocols that drive banks can be intricately interwoven and inherently inefficient. Standard workflows can involve the shuffling of paper and manual data entry, passing responsibility back and forth between numerous divisions with a general lack of ownership that creates longer turnaround and service times.

In an environment where bankers are regularly challenged to do more with less, improving workflows can be a goldmine for process efficiencies, regaining resources and creating an optimal user experience. Too often, banks just continue to hire staff to run redundant, menial processes, which only serves to put a band aid on the problem while still absorbing an inordinate amount of time and resources. The problem compounds as banks grow larger in size and are faced with scaling and combining already burdensome procedures.

Banks and vendors alike must consider new approaches to how they’ve done things in the past and address these inefficiencies. Most procedures that involve multiple steps, departments and systems can be streamlined into a simpler, expedited process. Think about the implications here: streamlining and automating the viewing, refiling, printing and indexing of documents for a bank with approximately 40,000 actions each month would save employees dozens of work hours a month, translating into tens of thousands of dollars in annual cost savings.

There are many practices banks can easily adapt for efficiency gains. The first step is to evaluate current processes with a careful eye for redundancies and bottlenecks. You can’t fix what you don’t know is broken, so begin by identifying the problems and determining their cause. During this step, it’s important to consult employees from all areas of the bank to gain sight of the bigger picture.

Next, prioritize where to focus first. Starting with a few targeted projects will give you a firm understanding of how to create and implement proper workflows, straightening out any kinks and asking any questions before tackling larger and more numerous projects. Workflows can be applied to nearly every area of banking, so it’s important to have a strategy in place or it may become overwhelming.

The Bank of Missouri, headquartered in Perryville, Missouri, recently teamed with Jack Henry Banking, its core technology provider, to transform its internal processes with a workflow solution. The bank recently surpassed $1.3 billion in assets in just six years through both acquisitions and organic growth. Its branch infrastructure also increased from 13 to 23 (soon to be 26) locations. This growth and merger of cultures came with some inevitable growing pains, most notably the need to standardize processes and optimize efficiency.

The Bank of Missouri worked closely with Jack Henry to automate arduous multi-step processes, both internal and customer facing. Its goal was to significantly improve its efficiency ratio and make a positive contribution to the bottom line by creating consistent, cost effective processes that reduce operational risk and unnecessary expense.

After taking the time to learn how to identify problem areas and create appropriate workflow solutions, The Bank of Missouri now has 17 workflows in production, enabling it to eliminate redundant data entry, boost visibility and streamline processes across several areas of the institution, including HR, IT, deposit operations, loans, retail and more.

An example of the bank’s success is how it transformed the deposit fee refund process. Front office staff had to print, manually fill out and scan documents before the reversal process was performed by back office staff who also imaged and indexed the document, consuming a large amount of time and manual effort. With its workflow solution, multiple steps and searches are now automated and approved. This workflow alone is currently saving the bank approximately 54 hours and $1,000 per month, yielding an annual savings of $12,000.

In addition to creating unrealized efficiencies, leveraging a workflow solution can also allow banks to channel resources that were previously spent on burdensome tasks into more strategic and customer facing activities. When bank employees are empowered to add and cultivate skillsets, they’re more likely to feel valued and stay with their institution longer. Returns such as this can prove to be indispensable for any well run financial institution.

Dedicating just a small portion of resources to improving the back office can make a monumental impact. If the only reason for your processes is history, they may be outdated. Revamping workflows to streamline procedures and optimize efficiency is an integral component of any modern and progressive bank.

Chris Congiardo, systems analyst manager for The Bank of Missouri, is theco-author of this piece.

How Fintech is Improving Back Office Efficiency

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The fintech revolution has had a dramatic impact on the financial services industry. From digital wealth management (robo advisors) to automated payment systems, a variety of disruptive technologies have made their mark on the sector. For banks, the rapid development of financial technology poses the threat of losing business to competitors that are quicker to reap the benefits of automating their operations—whether those competitors are other banks that have purchased or partnered with fintech startups, or the fintech startups themselves.

Automating back office processes offers banks a host of benefits: reduced costs, quicker customer response and easier record keeping for compliance purposes. Given the substantial advantages innovative technologies offer in this regard, a wide variety of bank processes are subject to disruption or enhancement through the use of financial technology. An article by sector expert Naresh Kirpalani lays out some of the most notable areas to watch for fintech innovation in 2016, including:

  • Further development of the blockchain as a crucial technology in several key segments of banking infrastructure.
  • Payments as an area subject to further technology disruption and intense competition.
  • Robotic process automation as a means of dealing with processes related to risk and regulatory issues.
  • Accelerated innovation at banks and a focus on taking aggressive steps to outsource legacy IT applications and replace them with interfaced applications using APIs.

Other areas that have seen increasing focus by banks attempting to add efficiencies to their back office processes include automated decisioning solutions and digital signing.

In the United States, fintech upstarts—while pushing banks and other financial institutions to evolve with new technology—have not (or at least yet) massively disrupted their businesses. This may be at least partly due to the readiness that some banks have shown to purchase promising fintech startups, preventing them from posing a long-term threat to the bank’s business.

A market worthy of the U.S. banking industry’s attention in this regard is payment processing in China, where three nonbank players now dominate the sector. The same article cites a Citigroup report that questions whether banks in the U.S. and Europe can take advantage of innovation before fintech firms gain the scale and distribution needed to disrupt them. The study expects increased technology adoption at banks to result in a decline of 40 percent to 50 percent in headcount as they make cuts in their branch networks. “Branches and associated staff costs make up about 65 percent of the total retail cost base of a larger bank,” the report stated. It further noted that automation could help remove “a lot of these costs.”

When it comes to payments, U.S. banks have adapted by offering their customers the ability to pay bills online as one method of accommodating the demands of the Internet age. Nevertheless, the success of digital payments firm PayPal and the cryptocurrency Bitcoin shows that this is a market ripe for disruption. As a result, it is no surprise to find that a number of banks have announced that they are working with or investing in blockchain technology to develop their own next generation payment systems. Along these lines, global investment bank Goldman Sachs, private equity firm Bain Capital and MasterCard have invested in firms using the blockchain technology for applications dealing with the Bitcoin cryptocurrency.

In another major development in the field, IBM announced recently that it has finished a pilot project in conjunction with China UnionPay, a Chinese credit card company, to help share loyalty bonus points between banks via the use of blockchain technology. The system the two firms has developed is designed to allow consumers around the world to swap bonus points from their banks, enabling them to choose the rewards they desire. In the United Kingdom, Barclays is the first bank there to partner with a virtual currency company, Circle, which uses blockchain technology to aid its goal of building a template for borderless currency.

Workflow automation is another innovative process attracting interest from banks looking to use technology to improve their operational efficiency. The attraction of the technology for many banks is the ability of these types of solutions to eliminate paper as much as possible and improve the productivity of their overall operations. A study on the benefits of automated workflow solutions revealed that the majority of the institutions queried believed that the ability to increase approval and routing speed was the most significant benefit associated with an electronic routing system.

Thirty-one percent of the banks and financial institutions included in the survey indicated they “desperately needed” a system that was more automated so they could close more loans. One respondent bemoaned the difficulties caused by combining paper documents with a mostly paperless process, as the lack of electronic signature functionality caused the need for a paper signature form, which at times would get lost.

These concerns have led to the spread of digital signing technology, which has allowed banks to improve the efficiency of their back office processes. With the passage of the Uniform Electronic Transactions Act, and the adoption of electronic signatures by leading banks such as JP Morgan Chase & Co. and the Royal Bank of Canada, the practice has spread widely among banking institutions.

In addition to enhancing efficiency by speeding up account origination and other basic tasks, digital signing allows retail bank employees to access customer records more easily, improving their ability to interact with and service customers when they visit a branch. In an article about the process, JP Morgan Chase’s Alan Varrasso was quoted as saying of e-signatures: “This has changed the way we open accounts, manage workflow and provide checks and balances and controls.”

The ultimate result of the fintech revolution for banks in North America and Europe is as of yet unknown. Will banks be able to adopt cost-cutting and customer-friendly technology rapidly enough to stave off upstart fintech competitors? Or will banking as we know it be disrupted as other industries have been by technological innovation? A bit of both may be the most likely answer. In any case, what can be said is that the technological innovation unleashed by fintech startups has already had major effects on bank operations—and there is likely still more to come as the automated processes introduced by innovators in the sector continue to work their way through the operational infrastructure of banks both large and small.