What You Need To Know About Automation, Banking & Financial Services!
Updated: Nov 13
The world of finance is ever-changing, and at the heart of it, technology is driving the changes and changing finance as we know it. Automation has become a major driving factor in how we perceive banking and financial services now. By now, you already know that banking is a subsector of the financial service sector; however, not all banks can strictly be defined as a financial service.
To fully understand financial services, you will need to know the difference between financial goods and financial services and fully understand the world of finance; you will also need to understand automation in the industry. We here at the Zed Network specialize in providing comprehensive fintech payment solutions with technology at its heart.
Since we ply our trade in the financial services sector, we know all there is to know about the confusion it can create for people looking for financial services. So we thought we should let you know about the difference between banking and financial services and automation in the financial sector. Our goal is to arm you with the knowledge to understand what to expect when you are taking up any financial good or service. We will start with talking about banking and financial services and then move on to talking about automation and financial technology. So without further ado, let’s begin!
Financial Goods vs. Financial Services
According to the IMF, a financial service can be described as a process by which a consumer or business can acquire financial goods. For example, a payment orchestration layer or system is a financial service that allows a consumer or business to accept and transfer funds from a payer. It includes everything from payments through credit and debit cards, checks, and electronic funds transfers.
That means you can’t categorize things like mortgages, stocks, bonds, and insurance policies as financial services but as financial goods. The finance sector has a swath of economic entities, from retirement and investment companies, mortgage brokers, and bank. Not all can be considered financial goods providers as many provide financial services with many serving both, and banks are categorized as financial institutions licensed to offer loan products and receive deposits.
To better understand the difference between financial services and goods, you can look at a financial advisor as an example. A financial advisor is someone who manages assets and offers advice on behalf of a client, but they don’t directly provide investments or any other product. According to Zed Founder and entrepreneur Alan Safahi, the purpose of a financial advisor is to facilitate the movement of funds between savers and the issuers of securities and other instruments, meaning that it’s a service rather than a financial good. On the other hand, mortgages may seem like a service, but they are considered financial goods.
The reason it’s regarded as a financial good is that it lasts beyond the initial provision. Like mortgages, things like stocks, bonds, loans, commodity assets, real estate, and insurance policies are all considered financial goods and not financial services. So now that you have a better idea of what financial goods and financial services are let’s talk now talk about banks and banking, in general, to find out whether they are financial goods or financial services.
Are Banks A Financial Service?
Traditional banks are the best of both worlds as you can consider it a financial service and a financial good. It allows you to open a savings account, make wire funds, and/or take out a car loan all from the same bank. As you can see, banks clearly provide financial services and should most definitely be considered as a part of the financial service sector. Even if you look up federal banks, you will see that they fall in the category of the financial services sector.
Experts from the Department Of Homeland Security have suggested that small community banks and credit unions should be considered a part of the financial services sector. Now, banks don’t make up the entirety of the financial services sector. Institutions like investment agencies and stock market brokers are not banks but are most definitely entities that provide financial services. These financial institutions offer intermediate services and not end goods. You can consider this classification like how economists distinguish between capital goods and consumer goods.
Consider the example of the humble apple. An apple can be both a capital good and a consumer one. When a consumer directly easts an apple, it becomes a consumer good, but if a deli owner uses it to make some sweet apple juice, then it becomes a capital good. So to put it simply, banking is mainly concerned with direct saving and lending, while the financial services sector incorporates investments, insurance, the redistribution of risk, and other financial activities. So when it comes to understanding banking and financial services, the differences are subtle. Banks usually earn their revenue primarily on the difference in the interest rates charged for credit accounts and the rates paid to depositors.
Whereas financial services mostly earn revenue through fees, commissions, and other methods. So that takes care of the differences between banking and the financial services sector. Hopefully, now you understand the subtle differences between the two. Now that explaining the two things is over let’s talk about the tech. In the following passages, we will talk about automation in banking and financial services that’s changing the industry. So let’s check it out!
Understanding RPA, Intelligent Automation, & Intelligent Data Extraction
When you hear the word “bot,” your mind usually goes to the factory floor automation you see in a car plant. However, it’s completely different when it comes to banking and financial services, but automation can completely change how you operate and give you an edge over competitors. Automation in banking and financial services serves the same purpose as in other industries. It’s a suite of technology that helps companies complete tasks that employees would do.
Meaning that the employees are free to focus on much more complex tasks. One of the first automation you should know about is Robotic Process Automation (RPA). RPAs are simple solutions that perform repetitive tasks quickly with minimal input. It’s quick and cost-effective and allows for easy entry into automation for banks and financial service companies. Now at the far end of automation, there is artificial intelligence or autonomous intelligence.
These are software that can make intelligent decisions while still complying with risk or controls. The middle ground of automation tech is intelligent automation and process orchestration that’s a step above RPAs. Here is the progression of automation you can integrate so that you have a better idea about automation. It starts with Macros & Scripts and ends with Autonomous Intelligence. So let’s check them out:
Macros & Scripts: Simple rules-based automation within one specific piece of software that repeats simple work with highly-structured data.
Robotic Process Automation: It’s a program that is designed to perform labor-intensive, repetitive activities across many types of software by training a bot to replicate a user’s workflow
Process Orchestration: Its software that reengineers existing business processes by using other programs, integrating systems, and restructuring labor to create a more efficient workflow.
Intelligent Automation: It’s a full suite of digital labor tools that combines RPA bots and other cognitive capabilities like AI, Machine Learning, and a host of other solutions.
Autonomous Intelligence: Automated decision-making processes without the need for human intervention while simultaneously complying with control and risk standards.
So now that you know the types of automation in banking and financial services let’s talk about the most popular automation technology for this sector. The tech we are talking about is called intelligent automation. Intelligent automation (IA) is made up of a wide range of technologies to improve the functionality and interaction of automation bots to perform tasks.
According to Alan, it’s the bread and butter of fintech payment solutions companies as it means orchestrating a collection of automation tools to solve more complex problems. The best part of IA helps institutions automate a wide range of tasks from simple rules-based activities to complex tasks such as data analysis and decision making. Here is what the Intelligence Automation process orchestration can offer businesses:
Robotic Process Automation: Programs designed to perform labor-intensive, repetitive activities across many types of software by training a bot to replicate a user’s workflow.
Workflow Automation: It’s a manually generated series of automated steps that are created to perform a typically human-performed task.
Process Intelligence: It uses data sets to analyze steps in a process or workflow and feeds them into RPA bots to help navigate a task.
Intelligent Data Extraction: IDE is an extension of data recognition capabilities of conversational interface technologies, learning from the data given and improving the accuracy of those technologies.
Conversational Interfaces: This refers to anything that can “read” data, including natural language processing or generation, language translation, speech to text, or text to speech, and optical character recognition.
Find A Comprehensive Fintech Payment Solution
So there you go, those are some things we thought you should know about automation in the banking and financial services sector. Hopefully, you understand how automation is changing the finance world and that fintech payment solutions redefine how the world looks at finance now. However, we also consider that it may be a bit confusing to understand how it can help you out. We here at Zed work with Fintech companies to provide them with comprehensive fintech payment solutions that enhance the automation process and take care of tasks that free up their time. So if you want to know more about automation in the banking and financial services area, then please contact us.
Or you can put your questions in the comments below, and we will get back to you. You can also send in your queries by hitting up on our socials and send in your feedback on how we can improve our services to you, so please send them in. We love to hear from you and hope to look at the insights you will provide us with. And with that being said, that’s about all we have for you today. We will come back with something new about the financial world for you soon. Until then, see ya!