Financial Services at a Crossroads: Unlocking the Power of Straight-Through Processing (STP) with AI and Digital Transformation

Photo by Luca Florio

Financial institutions, facing fierce competition from agile fintechs and grappling with siloed systems, must embrace straight-through processing (STP) enabled by AI to enhance customer experiences and operational efficiency. By adopting a platform-based approach and breaking down silos, financial organizations can achieve touchless operations, eliminating non-core human intervention, improving accuracy, and amplifying customer satisfaction. A roadmap to achieving STP includes understanding manual interventions, digitizing data, optimizing processes, and integrating AI into workflows, paving the way for a future centered on efficiency, scalability, and innovation.

Atom Bank, a mobile-only bank, has transformed consumer experience by enabling straight-through processing of mortgage applications directly on their app. Lemonade, the built-for AI insurance platform, has managed to do what no other traditional insurer has achieved – issuing new policies and processing claims in a matter of minutes. These companies are just a preview of what lies ahead for financial services.

The Financial Services Crossroads

Fintechs unencumbered by legacy systems are pushing the envelope, introducing digital-first, customer-centric solutions at breakneck speeds, effectively setting the pace for the rest of the industry. And modern consumers who seek omnichannel experiences, convenience, and instant gratification have gravitated to them in droves.

Fierce fintech-led competitive landscape and mounting expectations of unforgiving customers, in addition to shrinking margins, global headwinds from inflationary pressures, economic uncertainty, and stringent regulations, have left the traditional financial services players scrambling to keep up.

While most of them have rushed to adopt digital solutions and embraced artificial intelligence (AI), these implementations have been in siloes. They haven’t been able to move beyond experimentation to truly scale AI across their operations and end-to-end customer journeys. This, despite billions of dollars spent on change-the-bank technology initiatives each year!

What is preventing them from unlocking the true value of digital transformation efforts? The answer is:

  1. Siloed people, processes, technology, and data.
  2. Non-scalable solutions that exacerbate the silo issue.
  3. Short-sighted tech investments.

To prevent being overshadowed by fintechs or tech giants, banks must overhaul their approach. Instead of disjointed initiatives, the focus should be on comprehensive customer experiences and achieving the zenith of operational efficiency: straight-through processing (STP).

Financial Services’ Tech Renaissance: Touchless operations

A few decades ago, no one could even imagine that a highly regulated industry like financial services could leverage data to remove non-core human intervention in business-critical areas like credit decisioning. Yet today, AI-first banks have leveraged open banking to reimagine lending journeys and made them almost touchless to approve instant loans.

STP-enabled touchless operations that eliminate non-core human intervention will be at the heart of financial services’ tech renaissance. This, in turn, will need financial institutions to adopt a zero-ops mindset paired with a platform-based approach to tech transformation.

A platform-based approach can enable seamless connectivity and ensure a free flow of data across the enterprise. Platforms aren’t just integrative tools; they’re the catalysts for innovation, bridging operational gaps and weaving a cohesive, intelligent fabric throughout the organization. Their adaptability means they can overlay on existing infrastructures, evolving according to business needs, and ensuring optimal returns from both past and future tech ventures.

Executed right, such an approach can drastically cut costs, often by up to 80%, setting new industry benchmarks through increased straight-through processing and enhancing overall customer experiences.

Amplifying CX, Efficiency, And Accuracy With Straight-Through Processing

  1. Amplify Customer Experience: Straight-through processing removes redundancies and waste to deliver the speed, convenience, and personalization that modern consumers demand. Consider the case of real-time loan approvals or dynamic credit limit adjustments based on spending patterns. Similarly, a US bank automated its KYC process to shorten customer onboarding cycles. And as McKinsey found, satisfied customers translate to phenomenal business growth.
  2. Redesign for Efficiency: Straight-through processing is the holy grail of operational transformation that can eliminate inefficiencies across user journeys. Extreme automation removes manual interventions, elevates decision-making across operations, and builds resilience. For instance, the US bank with KYC automation was able to process 40 million KYC documents across 60+ document types for different geographies, bringing speed, scale, and accuracy to the process. Similarly, a large US financial services provider achieved 90% STP for its automated E-Sign post approval of policy application that kept their business running even during the pandemic.

 Improve Accuracy: An AI-first, STP approach isn’t just about efficiency; it’s also about precision. Even unintentional human errors can lead to unsavoury consequences, especially in an industry like financial services. Improving accuracy can bolster trust and improve outcomes. For instance, automated transaction validation can flag fraudulent attempts, safeguarding both the institution’s reputation and its bottom line.

A Roadmap To Achieving Straight-Through Processing

  1. Understand the reason behind manual intervention – Process and task discovery can help understand the underlying processes and identify manual touchpoints. The business can create optimal process maps to identify the potential roadblocks in the journey toward touchless operations
  2. Digitize data and accelerate exchange – Despite digitalization efforts, vast unstructured data still exists and is continuously generated within the enterprise. This data needs to be digitized and made available for consumption to enable STP. In addition, financial institutions also need to remove data latency and build a common vocabulary for effective, real-time data exchange.
  3. Optimize and automate – Reimagine end-to-end processes, revamp existing workflows, and remove all non-core human intervention with automation. With enough of the right data, you can begin deploying automated scripts that reduce the level of manual operations, thereby speeding up work while improving reliability and accuracy.
  4. Bridge the gaps and integrate AI into the workflow – Deploy over-the-top platform and connect workflows to ensure a seamless flow of data and information required for processing a business request. Ensure that the insights generated by AI in the process are integrated into the workflow for faster, smoother action.

Blueprint for the Future

In the AI era, banks and financial institutions must shed rigid structures and point solutions and focus on digitizing the entire customer journey. As banks reshape, they’re not just upgrading—they’re forging a future centered on efficiency, customer satisfaction, and precision. This transformation requires breaking traditional silos and enabling touchless operations to boost resilience, scalability, and innovation, prepping financial institutions to be future-ready, not just future-proof.

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