The average worker spends nearly six weeks a year doing repetitive tasks, according to a 2019 Gartner study of 150 senior executives. So it’s no wonder firms are looking for ways to relieve their employees of such monotonous work and make them more engaged, more productive, and more likely to stay.

Traditionally, outsourcing repetitive work was an obvious and effective solution. However, businesses are increasingly tending to keep these tasks in-house with robotic process automation (RPA). This is especially true in finance firms, where the amount of avoidable ‘rework’ can take up as much as 30% of an employee’s time, according to the study.

RPA is an attractive alternative – or at least complement to – business process outsourcing (BPO), in which a firm contracts an external company to undertake its back office functions. Nearly three-quarters (74%) of firms from a range of industries are implementing RPA, according to Deloitte’s 2022 Intelligent Automation Survey, and nearly half of the 479 companies surveyed in 35 countries plan to implement artificial intelligence (AI) in the next five years. This follows Deloitte’s 2020 Global RPA study, which shows that companies are overwhelmingly positive about the benefits of RPA, which include improved compliance (92%), quality and accuracy (90%), productivity (86%), and cost reduction (59%).

Bots free up people to do the critical thinking that only humans can do “RPA is an obvious route for back office functions,” says Prakesh Narayanan, India-based head of digital RPA and intelligent automation at global digital tech solutions company Cyient Digital. “It’s about rules-based, high volume tasks, and you get increased capacity from bots who don’t take sick days or holidays and do the job a million times to the same faultless standard in a process that can be managed by one person. And it’s all instant. Whereas a human answering a call might need to put a customer on hold, look at a few screens, check things and then return with answers five minutes later, bots can do this instantly. And they free up people to do the critical thinking that only humans can do.” 

Back offices shape mergers and acquisitions

An organised, efficient, and cost-effective in-house back office also shapes the pathway of many finance firms’ partnerships, mergers, and acquisitions.

The pressure on institutions to find new ways to fight financial fraud means huge back office investment, and partnerships increasingly offer both parties economies of scale when it comes to back office functionality. Following numerous mergers over the past decade of bank technology specialists with merchant payment firms (such as successive, ever-bigger deals which saw Mercury Payment Systems bought in 2014 by Vantiv, which then merged with Worldpay, which was itself bought in 2019 by FIS), mainstream financial institutions have also combined to shore up joint back offices.

When US financial services firm BB&T bought fellow American institution SunTrust Banks for US$28bn in 2019 to create the US’s sixth-largest bank Truist, its execs cited developing technology and shared digital back office functions as a key factor. Similarly, when Raymond James completed its acquisition of City of London wealth management firm Charles Stanley in January 2022, the former’s CEO Paul Reilly enthused about investing in “technology, infrastructure and back office partnerships to enhance the firms’ already strong offering”.

But firms seeking to keep back office in-house by investing in automation need to ensure they have the capability to manage it – which means a robust, reliable, and knowledgeable IT department and sufficient knowledge or training for everyone using the system to ensure that it is managed correctly. “The main thing you need is strong governance,” says Prakesh who, before working at Cyient, was vice president of RPA and AI delivery at Barclays in India. “If you were investing in BPO, your chief security officer would do due diligence to monitor and evaluate firms, with a detailed investigation of their systems and security protocols. In-house RPA needs the same rigour.” 

Cost is critical

A key expense is RPA software licensing, which can range from US$5,000 to US$15,000 per single software bot, according to Deloitte, and many providers insist on a minimum spend.

Providers offer different packages with prices based on such variables as robotic environments, capabilities, and number of users, making it difficult for businesses to make direct cost comparisons. “It’s quite a complex process for businesses to work out how many robots they need or can get for the selected licence and what scale their project needs to be for the cost to be viable,” says Prakesh.

Aside from the direct cost, firms investing in RPA need to factor in annual licence renewal fees, training and consultation costs to implement the system, as well as an in-house IT team with the capability to maintain the platform and automation tools.

But in-house automation is not led by IT, says Prakesh, “it’s led by those at the top of the organisation”. He explains that IT will allocate, according to guidance given by leadership, different levels of access to users, and will ensure data security and compliance so that, for example, a bot will perform as expected and there is no room for manipulation or hacking. “Companies investing in RPA to bring back office in-house need to do the same checks, ensuring the tools they use have the right encryption levels and that they comply with digital security standards, such as the US Federal Information Processing Standard (FIPS 140-2) and GDPR.”

In-house automation is led by those at the top of the organisation But RPA, as with any digital system, is not without risks. While it can speed up data entry and manipulation, accurately carry out transactions, manage cash and project accounting, produce management reports, and consolidate financial statements, it can – if not managed correctly – compromise internal control over financial reporting. Abnormal bot activity can severely affect existing IT system functions and an RPA system needs the same rigour around monitoring and controls as any other in-house or outsourced back office function. Failure to monitor and identify changes to algorithms supporting RPA or the data sources and applications can not only result in significant control failures but, left unchecked, can magnify the effects of mistakes.

Automation potentially brings regulatory risks too. For instance, the use of AI to solicit customers for new products, based on existing customer data, could breach privacy laws. The UK’s financial services regulator, the Financial Conduct Authority, stipulates that all customers must be treated fairly and communicated with openly. This could be compromised by algorithmic biases in automation – a situation which has seen a class action in the US against insurance firm State Farm, in which black insurance policyholders allege that biased algorithms are delaying their claims. UK financial services currently have no RPA/AI-specific regulations – in October 2022 the Bank of England published a discussion paper (closed on 10 Feb) on this.

All of this means training staff in different departments across the firm to use RPA responsibly and effectively. Companies should identify skills gaps in their organisation from which to create role-based learning plans, train in-house trainers to ensure the learning is sustainable and, given how quickly tech changes, ensure a continuous learning programme is in place to enable employees to adapt to innovations.

Streamlining the back office, including keeping it in-house, has seen finance firms reduce their costs by 30%, according to research by McKinsey. But there is an added financially unquantifiable benefit to in-house RPA – the freedom it gives workers for creative thinking and enterprise value creation. The same study finds that leading financial firms spent 19% more time on value-added activities in 2020 than they did in 2012. Further to the study’s findings, relieving staff of mundane repetitive tasks will likely mitigate the fallout of the so-called ‘great resignation’ and ‘quiet quitting’ trends.

Prepare to change direction

The next step, according to the McKinsey study, is to build on the RPA savings to shift into even more sophisticated, high-end automation. The report’s authors add: “Instead of focusing solely on mature, first-wave automation approaches such as RPA, a few leading companies are using machine learning and similar advanced technologies in ‘second-wave’ automation use cases in capital allocation, financial planning, and audit. The complexity of employing these technologies should not be underestimated, however. Several companies have stumbled in their use of AI. It is critical that CFOs overinvest in piloting these technologies to identify the right use cases, and be prepared to change direction if initial experiments fail.”

Increased demand for RPA means the related software market will boom, with revenue having soared 40% year-on-year in 2022 to US$10bn, according to a report published in February 2023 by Fortune Business Insights, which forecasts that the market will grow from US$13.86bn in 2023 to US$50.5bn by 2030.

However, while many workers are embracing the idea of automation – 40% of workers improved their digital capabilities during the pandemic, according to a global study of finance firms by PwC – confidence that such tech will bring positive change varies globally. Worldwide, 80% are confident they can adapt to new technologies entering their workplace, including 69% of workers in India and 66% in South Africa who are “very confident”. But only 5% of employees in Japan share the same optimism. And 60% are worried automation is putting jobs at risk, with 39% believing their role will be obsolete within five years.

Overall, however, the increasing capabilities of RPA, coupled with companies’ growing desire to have more hands-on control of their back office functions, is making thousands of firms explore the benefits of in-house automated systems to do their repetitive tasks. In doing so, they free up their staff to do what humans do best – think creatively – to take their companies forward.