It’s been just over a decade since integrated automation became a buzzword in the financial services space, much like AI is the catchphrase today. Every institution was chomping at the bit to embrace integrated automation, seeing it as a catalyst for growth, and the 2010 – 2015 period saw organisations make substantial technology investments in this area. Some organisations opted for the data warehouse model, with applications plugging into the DW, while others chose a data-mart architecture, with functions (risk, finance, etc.) using their own data-marts. These implementations did not achieve their intended objective for a variety of reasons, including sub-optimal technology choices, inadequate testing and insufficient end-goal focus. The reality, however, is that integrated automation was an idea ahead of its time, and the technologies available at that time could deliver only a small part of the end-state vision.
With recent advancements in data and compute technologies, open-source ecosystems and the reducing cost of infrastructure, truly integrated automation is now within reach of most organisations. Unlike banks who are stuck with unsuccessful or incomplete automation programs, most NBFCs are only now reaching the point where integrated automation can deliver the business value that they need to scale sustainably and profitably. This is perhaps most evident in the areas of risk, treasury, finance, compliance and regulatory reporting, where integrated automation can yield significant competitive advantage while also meeting the increasingly stringent demands imposed by scale-based regulations. It is a good time to look at these automation opportunities holistically rather than in silos, to reduce cost of investments and maintain compliance while promoting efficiency in decision making.
Value derived through risk, regulatory, finance and treasury integration
Reducing the cost of technology investments
– A platform-led approach to integrated automation reduces the overall cost as it mutualises infrastructure, calculation engines, reporting capabilities and data management capabilities. Platforms allow for overall maintenance to be substantially reduced due to economies of scale, and organisations can make incremental investments for new requirements so that these additional modules are not siloed, stand-alone applications but add-ons to the existing platform.
Efficient decision making – The metrics that drive CXO decisions require data to
be aggregated across the organisation and modelled to produce risk and performance metrics for product pricing, profitability, capital planning and allocation, asset quality control etc. These metrics are typically interconnected and dependent on one another – for instance, asset quality and provisions directly impact profitability while FTP and allocated capital drive product pricing. A common platform-led approach allows us to analyse these metrics together and run multi-factor scenarios to assess the impact on all metrics in one go, making decision-making simpler, timely and more informative. Having a common data layer, common calculation and rule engines, and interconnected scenario analysis is easy with an integrated platform.
Unlocking business value from compliance – Ensuring business growth does not come at the cost of compliance is a crucial imperative for NBFCs today, especially with increasingly prescriptive scale-based regulations. Automation in areas that impact regulatory compliance is no longer optional for NBFCs – be it for LCR, CRAR, ICAAP, credit fraud / early warning or regulatory reporting. These areas cut across functions that frequently use stand-alone, siloed applications. A point application approach, however, does not allow business value to be extracted from technology investments and a platform-led, integrated automation approach is key to unlocking competitive advantage. The automation time and implementation effort are not very different between the two options; however, a platform- led approach can deliver a substantially high business advantage in the long run.
Roadmap for extracting superior ROI
NBFCs today are faced with the choice of either opting for stand-alone, point applications that fulfil a specific business or compliance need, or choosing a platform-led integrated automation that future-proofs their technology investments. NBFCS must recognise the value of integrated automation in extracting superior ROI, through:
- Scalable, no-code automation to keep pace with changing regulations, users, integrations etc.
- Flexible, micro-services architecture allowing rapid app development and deployment
- Lower infrastructure costs due to superior performance per unit of infrastructure
- Reduced cost of application maintenance due to economies of scale
Extracting superior ROI through integrated automation can be achieved by embracing the three principles below –
- Selecting the right technology for integrated automation– Having a clear understanding of the desired end- state architecture and the technology components needed to deliver the long- term business vision is key to selecting the right technology platform. Adopting a longer-term perspective on TCO is also crucial, since it is easy to be swayed by point applications for which software costs may be lower but the overall TCO including cost of maintenance, enhancements and infrastructure becomes substantially higher than the cost of automation with a platform-led approach.
- Implementation that keeps an eye on the desired business outcome- This is one
of the major challenges to not achieving the intended outputs from the technology investments. Organisations tend to focus on nearer-term deliverables and outcomes,
losing sight of the broader end-goal for which the technology was selected. Maintaining
the right focus on implementation is as important as selecting the right technology. Showing quick wins through having phased go-lives is key to maintaining confidence and interest in the automation journey. - Expediting technology selection decisions– With multiple business and technology stakeholders, the decision timeline for technology procurement frequently takes 9 – 12 months, exceeding a year in some cases. There is a substantial cost to a long procurement process and the expected business value is frequently diluted due to technology decisions taking too long.
The Acies difference
Making technology work efficiently to support growth is never simple, especially when
the need is for core areas like risk, finance, treasury, compliance etc. to be truly integrated. Delivering innovative technology at scale is where Acies excels, using its no-code platform to drive high-speed, low-cost automation.
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Delivering superior performance on commodity hardware and fully no-code creation of workflows, data schemas, analytical models and BI, Acies’ platform provides a common technology layer for high-speed, low-cost application development. 100+ institutions use Acies’ platform in India and across the world, for their risk, finance, treasury, compliance and regulatory reporting needs, testifying to the value that can be delivered by a platform-led approach to technology innovation.
Views expressed by Abhinava Bajpai, Head, Acies TechWorks
