APIs and algorithms can make banking automation a reality

The promise of automation has always loomed large in banking.

Clayton SpillwayCo-founder at FISPANand Tony WimerManaging Director, Head of Data and Analytics at JP Morgan Paymentstold PYMNTS that the promise is becoming reality with the help of advanced technologies.

At a high level, Wimmer noted that the benefits of automation itself could be categorized into a number of categories.

There is automation related to payment processing, where wire transactions or card transactions are streamlined through straight-through processing. Plus, there’s automation that can make it easier to create, maintain, and renew subscriptions. And finally, he added, automation can be a boon to decision-making.

Automation, Weir said, can reduce the steps involved when an individual or business decides to open a bank account and, in some cases, can eliminate human intervention by the financial institution (FI). . In the background, Weir said, are the distant payment rails and all sorts of files that need to be reconciled.

“There are such a disparate number of systems that underpin a bank’s value proposition,” Weir noted, “that walking you through these steps is always painful.” This is especially true for businesses that literally have to submit their data when seeking access to a range of financial services.

Also Read: APIs to Drive Banking-as-a-Service Growth in 2022

As for automation: To achieve this level of frictionless interaction, Wimmer said, it becomes more critical than ever to use advanced technologies such as application programming interfaces (APIs) and algorithms, as well as high quality data.

“You need APIs,” Wimmer said, “because you need interactivity and interconnectivity…to keep growing and driving more automation.”

Reduce complexity

But getting there is easier said than done, he added, due to the fragmentation and complexity of the banking ecosystem itself.

Weaknesses become particularly acute when banking activities cross borders: each country has a different way of sending transfers and has different onboarding processes – and so bringing at least some activities into a standardized format can make things easier to understand for all stakeholders. Then, the “human” part of the bank can confine itself to managing exceptions that only represent a few percentage points of transactions.

Wimmer said companies such as JPMorgan Chase have been able to create a sense of “payment intelligence” that leverages collaboration and a database to ensure accounts are indeed valid and have been “seen” by various parties. Along the way, Wimmer said, there’s room for emerging technologies like blockchain to help make these offerings easier to consume. A small FI in Singapore, for example, can “ping” JPMorgan’s Link network to see if other banks around the world can validate an account before the FI starts transacting with this newly encountered entity.

Ultimately, as Weir put it, automation helps FIs take “the present and past services that the bank offers and makes them much easier to consume, directly, by users. “.

Advanced technologies, Wimmer and Weir said, can end up having an outsized return on investment for FIs and for businesses. The elimination of back-end processes means CFOs have greater visibility and control over cash forecasting.

Wimmer observed that “there’s a ‘hard’ cost here – a cost where if you don’t automate and digitize, you’re going to have high costs and inefficiencies…and you’re going to lose business. “

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Sharon D. Cole