This may sound controversial, but I want you to pause a minute and ask yourself this question: Why do we have an army of officers in most banks processing transactions in lower volumes compared to Fintechs?
According to a 2022 report by the World Bank, the average Cost-Income Ratio (CIR) for Fintechs in sub-Saharan Africa is 40%. However, there is a wide range – with some companies reporting CIRs as low as 20% and others reporting CIRs as high as 60%.
Banks in sub-Saharan Africa, on the other hand, have an average CIR of 60%. Similar to those of Fintechs, Banks also have a wide range of CIRs between 40 % and 80 % as per a 2021 report by the African Development Bank.
The unique differentiator here is operational efficiency through process re-engineering and automation.
The latest financial results released in the first quarter of 2023 by DBS Bank (headquartered in Singapore) indicate that the bank’s CIR for the first quarter of 2023 was 38%. This is an improvement from the CIR of 41 % in the same quarter of 2022. The improvement in CIR was driven mainly by increase in operational efficiency by leveraging on its heavy investment in Digital solutions.
Banks in sub-Saharan Africa can improve efficiency and lower CIR by implementing Robotic Process Automation (RPA) to eliminate repetitive and rule-based tasks. This goes beyond implementation and announcing the use of RPA to the world. Its impact has to be felt on the profit and loss – either by increase in revenue as result of high volumes or through lower operating expenses.
Additionally, customers can be beneficiaries of lower fees and interest resulting from operational efficiency due to lower cost in serving.
Finally, customers may benefit from exceptional customer experience. A request that could take hours or days to complete will be done in minutes.
Banks can use RPA to automate a wide variety of tasks, including:
- Processing customer payments; Opening and closing accounts; Managing loans and mortgages; and Complying with regulations
Conducting Risk Assessments, Generating reports
- RPA will not only improve efficiency but also accuracy, compliance and freeing-up employees to focus on more strategic
Of course, there are also some challenges associated with using robotics to deliver financial services. These include:
- The need for specialised skills: RPA requires specialised skills to develop and implement, so financial institutions may need to invest in training their employees.
- The need for integration: RPA solutions need to be integrated with existing systems, which can be a complex and time-consuming process.
- The risk of job displacement: Some employees may be displaced as their jobs are automated. Financial institutions need to develop a sustainable plan to train and reassign impacted employees.
Overall, the benefits of using robotics to deliver financial services outweigh the challenges. RPA helps financial institutions to improve efficiency, reduce errors, improve compliance, enhance customer service and reduce cost of service. As the technology continues to develop, it’s likely RPA will become even more widely-adopted in the financial services industry.
