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For banks, inefficient back-office administration can create a huge amount of drag on the business. Approval processes are a great example of this. Most financial products require carefully calculated approvals that control the risk for the bank and for the customer. Banks set their own approval parameters, but they are also bound by industry regulations.
Make no mistake, both these complex requirements for approvals and regulations are a good thing. Not only do they protect financial institutions from fraud and maintain financial stability, but they also protect customers by assessing their ability to meet financial obligations, helping to avoid financial distress.
However, this need for administration in approvals creates a burden, and when that burden is met with insufficient planning and resources, the result is slow and unreliable approvals. That’s where approval automation comes in.
The approval process can often create a bottleneck and slow things down. This bottleneck leads to missed deadlines and unsatisfied customers. Confronting this problem, to meet deadlines and keep customers happy, staff sometimes look for the path of least resistance and attempt to by-pass some approvals, which can lead to missing compliance requirements.
Even when all the right steps are followed, the question is, can you prove it? When tasks are based on emails, spreadsheets and paper simply gathering the documents and tracing what’s happened becomes very challenging, preventing you from acting quickly.
Automating the approval process ensures that tasks within the process don’t get held up and all compliance requirements are met and recorded because every point is mapped out in a workflow and pushed along with triggers and reminders.
The term approval automation refers to automating different steps within an approval process, which help to make the process more efficient such as criteria-based approval triggers and automated alerts. This may feel like a misnomer, as some actions will still require manual approval, but you can still automate the trigger that sends the approval request to the person that needs to sign the action off. Importantly, in a multi-level approval process, you can see a clear status of what stage it has reached.
Faster approval times: Automated workflows can be triggered to send documents to the appropriate decision-maker, accelerating the process. There is no need for physical paperwork to be passed back and forth, and automated email reminders prevent cases from being buried in the email inbox.
Decrease in errors: By introducing standardization and consistency, automation reduces the risk of manual errors by ensuring that an application meets a set of pre-defined thresholds or rules.
Reduced operational costs: You can save time, resources, and operational expenses as process automation reduces the need for paperwork, chasing the status of items, and manual intervention.
Improved customer experience: Automation will make processes more efficient, for example providing quicker responses to customers on the status of the loan application, improving customer satisfaction.
Real-time monitoring and reporting: Automation allows stakeholders to track the progress of approvals in real time via dashboards and workflows. This helps keep customers and other stakeholders updated on the progress of the application as well as helping to identify bottlenecks in the process to aid continuous improvement.
Transparency for audit trails and compliance reporting: All steps that are automated in the process will be mapped out in a workflow and available to review. This trail is useful to prove compliance with regulations, internal and external policies and saves employees time from having to manually create audit documents.
Adaptability to changing regulations: Banking regulations are often subject to change. Automated systems and workflows can be easily adapted and updated allowing banks to remain compliant with less time and effort.
Document management: Automation allows all documents to be saved in a central repository, allowing for compliant and efficient storage and retrieval, making it easier for stakeholders to access any information they need.
Reduce human bias: Automated processes follow predefined rules and workflows consistently, and can integrate with data-driven algorithms, helping to make fair and objective decisions without any personal bias.
Scalability: Automated approval processes can handle high volumes of applications and scale seamlessly as the bank grows. This scalability is essential as the bank's customer base expands or during peak application periods.
One of the most common, and arguably most important approval processes that banks will use is loan approval. No matter the amount of money being leant, there are vital steps that you can automate within the process to ensure a smooth and efficient process, including:
Application processing: Automatically flag any applications with missing information and return them to the applicant to be amended.
Quality checks and fraud alerts: Assess information provided by applicants to ensure compliance and that all information is accurate before funds are released.
Funding: Once all requirements have been met, funds can be automatically released, saving time and allowing employees to focus on other activities and delighting customers with prompt funds.
Approvals Automation Success Story: AgFirst Credit Bank
AgFirst Credit Bank used Bizagi’s low-code automation platform, to automate its loan approval process. They created a mobile platform to offer customers an omnichannel way to apply for loans and increased the efficiency of loan analysis to close loan cases 60% faster than before, with 97% of loans analyzed in the expected timescales.
When customers apply for a credit card, they expect a smooth and seamless process as more and more lines of credit are offered online via an omnichannel experience. But banks need to ensure that customers are credit-worthy before granting approval. Automating and digitizing the steps can help move the process along while ensuring thresholds are being met, for example:
Pre-qualification: Automation speeds up this stage of the process so you can instantly establish whether an applicant is ready to proceed or whether further documentation is required.
Real-time application status tracking: Automating the process allows both employees and customers to see the status of the credit card application, with automated alerts keeping both parties updated. This keeps the process moving internally and improves customer satisfaction.
Credit decisioning: Systems can be automated to instruct your system to adjust the loan amount or interest rate if the applicant doesn’t meet the credit criteria. This helps ensure a consistent, unbiased approach to all decisions.
Approvals Automation Success Story: AEON Credit Service Asia
ACSA sped up its credit card application process using Bizagi’s low-code automation platform. The old paper-based process used to take over 2 weeks, was reduced to just 30 minutes. This meant they could offer set up credit card sites within department stores to combine with promotions and used on-site embossing machines to give customers their new cards, ready to use, on the spot.
Whether it’s a large transaction in personal banking, such as a deposit for a new home, or a large business transaction, banks will take several steps to ensure compliance, risk management and ensure proper decision-making. Automating steps in the process can help to minimize risk and satisfy customers, such as:
Compliance checks: Important regulatory checks, such as AML & KYC, can be automated so banks can ensure that they are not approving any fraudulent transactions.
Board or Committee Approval: In some cases, very large or exceptional transactions may require approval from the bank's board of directors or a designated committee responsible for overseeing significant transactions.
Post-transaction reporting & documentation: Automated processes will leave a document trail, all stored in a centralized location ready for exportation, making it easy to provide instant documentation on any transactions that have occurred.
Exception approval or loan forgiveness: To some extent, a loan forgiveness or exception approval process can never be fully automated, as it usually involves specific circumstances which need to be reviewed by a human. However, there are certain tasks and workflows within the process which can benefits from automation to make the process more efficient, such as:
Document review & verification: Integrate with intelligent technologies such as Optical Character Recognition (OCR) to automate document review to see if customers the requirements to take them forward in the forgiveness application.
Decision on forgiveness: Rules and thresholds can be set to determine whether an application can be passed on to a human manager for review to determine if they are eligible. Any that do not meet the specified requirements can be automatically rerouted and dealt with separately.
Approvals Automation Success Story: VKB Bank
At the peak of the Covid pandemic in 2020, VKB Bank were inundated with credit deferral requests. They usually managed 150 per year, but were seeing an average of 100 per day as people were forced out of work. They used Bizagi to automate the review of customer data and evaluate the duration of the deferral. The entire approval process now takes just four to six minutes, rather than 40-60 minutes. That change enabled the team to manage the increased demand, without hiring additional staff.
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