“Cognitive technologies are transforming capital markets. Once the preserve of IT experts, they are now moving to center stage—offering enhanced speed, accuracy and efficiency, and creating 20 to 30 percent in additional capacity, as employees in areas such as post-trade processing are freed from automatable tasks to focus on highervalue activities. The challenge for market participants, facing an array of solutions, is to implement at scale and capture the maximum value at the lowest possible risk.
Cognitive technologies are applications and machines that perform tasks that previously required human intelligence. They include robotic process automation (RPA), machine learning and natural language processing, which reduce the need for human input and increase effectiveness through new insights and ways of working. Many of the technologies operate at the frontier of the technologically possible, but as the price of hardware falls the case for their use gets stronger. The question for many banks is not whether to engage but how to engage effectively.
McKinsey Global Institute research suggests that 60 percent of all occupations have at least 30 percent of activities that are technically automatable.1 For capital markets banking, the strategic and implementation challenge is particularly complex, and programs often see efficiency gains offset by budget overruns and fewer-than-expected benefits. In addition, many banks struggle to balance the imperative to renew with cutting overall spending.
Cognitive technologies present the same challenges, and there is a puzzle to solve in securing value and achieving a coherent result across diverse processes and product lines, while remaining flexible enough to accommodate change. Still, as forward-looking capital market participants will testify, technology’s steady drum beat is hard to ignore, and already there are numerous examples of cognitive technologies in action. In the trade lifecycle there are at least five either ready to roll out (with commercial solutions in place) or being piloted across the industry (Exhibit 1):
■ RPA: Automation of routine tasks through existing interfaces, used for activities including data extraction and cleaning.
■ Smart workflows: Routing and integration of tasks such as client on-boarding and month-end reporting (usually in combination with RPA).
■ Machine learning: Application of advanced algorithms to large data sets to identify patterns, helping make decisions in areas such as idea presentment (CRM), product control and trade surveillance.
■ Natural language processing: Turning speech and text including legal documentation and client service queries into structured, searchable data.
■ Cognitive agents: Computerized interaction with humans, used for example in employee service centers, on help desks and in other internal contact centers.
New technologies do not guarantee double-digit uplifts in revenues. However, they offer significant opportunities to streamline operations, deliver products more efficiently and embed continuous improvement in business processes, leading to a lower marginal cost per trade. In embracing cognitive technologies banks will become agile and innovation-focused, making it easier to integrate technology, operations and business. The result should be better responsiveness to markets and customers, faster and more relevant innovation and a significant reduction in costs…”
Contributors: McKinsey & CompanyCategories: SIG U Resource, Whitepaper
SRC Type: Disruptive Digitization, Robotic Process Automation (RPA)