Intelligent Document Processing in Financial Services: Streamlining Efficiency and Compliance

Introduction

Financial institutions deal with a mountain of data every day. Many workflows hinge on extracting and processing data from documents, which is where Intelligent Document Processing, or IDP, in financial services comes in.

IDP is an automation technology that scans, reads, extracts, and organizes data from documents, particularly paper-based ones. It eliminates manual effort and human error, which are rampant in traditional data collection from paper documents.

This article will explore the role of IDP in financial services and how it can help banks and other institutes accelerate document processing. We’ll also discuss MST’s IDP capabilities and why finance businesses should embrace its solutions.

IDP vs. Traditional Document Processing

IDP technology today utilizes optical character recognition (OCR) and Artificial Intelligence (AI) to process information from scanned images of physical documents. This use of technology makes it far superior to traditional approaches, which involve simple scans that aren’t searchable for data for manual entry of information by a person.

Here’s how IDP differs from traditional document processing:

• Manual Processes and Human Errors: Traditional document processing heavily relies on manual data entry and review, increasing the likelihood of errors and inefficiency. IDP, on the other hand, has a very high accuracy rate. The algorithms in OCR are capable of recognizing both typed and handwritten text. With recent advances, these technologies can even correct errors in text, such as smudged characters or spelling errors.
• Automation and Accuracy: Manual data entry from paper documents is laborious and time-consuming. IDP automates data extraction and classification, improving accuracy and reducing the need for manual interventions.
• Speed and Scalability: Banks and other financial services companies deal with large volumes of data. Even a small retail branch may have thousands of customers, leading to loads of paperwork. Traditional methods struggle with scaling document processing in response to business growth, while IDP handles large volumes quickly and efficiently. The right tool may process multiple documents in a matter of seconds.
• Compliance and Data Security: Traditional methods require significant oversight for regulatory compliance. That’s not the case with security-first document management systems. IDP ensures adherence to regulations automatically through built-in validation and security features. With access-based controls, banks can control who accesses the IDP tool and sees the processed documents, which may contain personally identifiable information.

Use Cases of Intelligent Document Processing in Financial Services

IDP technology has a myriad of applications in the finance sector. That’s mainly because, despite digitization, it remains a physical document-dependent industry. Here are the various use cases of IDP in finance:

• Credit Applications and Income Verification: Many credit applications begin on paper in many banks. Walk-in customers often fill out forms for credit. IDP automates the extraction and validation of applicant data, improving turnaround times for loan approvals. Similarly, it can speed up data extraction from supporting documents like pay stubs and tax returns.
• Underwriting and Risk Management: Banks can use IDP to streamline the processing of large data sets, enabling better risk assessments. When data is in the form of printed statements and reports, it can be extracted and processed faster with IDP technologies like OCR and AI.
• Fraud Detection and Compliance: IDP solutions may also help with fraud detection by verifying the authenticity of a document. This is typically done through document comparison tools, which compare the copy with the original. This way, any inconsistencies can get flagged promptly before the document goes higher in the command chain.
• Claims Processing and Auditing: IDP automates claims analysis to speed up processing while reducing the risk of errors. Financial institutes with insurance products can process claim evidence submitted in paper documents or scans quickly. The information can be provided to claim processing software or an adjuster.
• Loan and Mortgage Processing: Automating document verification in loan applications ensures faster approvals and reduces errors. That, in turn, leads to better customer experience.
• Customer Onboarding: IDP streamlines customer onboarding by automating the processing of identity documents, contracts, and compliance forms. For instance, many banks ask customers to fill out Know Your Customer (KYC) forms, which include personal and source of income information. This information on paper can be quickly added to their database with IDP.
• Financial Audits: IDP may also help automate document retrieval and classification for audits, reducing the time required for regulatory compliance.

Benefits of IDP in Financial Services

Today, IDP enables AI-powered document management for finance, which has numerous benefits.

Increased Operational Efficiency

IDP reduces the manual workload, allowing staff to focus on higher-value tasks. Instead of looking at a document and entering the data onto a computer manually, they can simply scan the document and let the IDP tool do the rest.

As a result, employees have more time to work on tasks requiring their thinking skills. In essence, it reduces mundane functions for employees.

Error Reduction and Accuracy

Manual data entry is prone to errors because humans are prone to making mistakes. And in a sector like finance, there’s no room for errors. Even a tiny mistake may result in big blunders, ultimately resulting in penalties from regulators.

Scalability

One of the lesser apparent benefits is the adaptability of IDP to growing business needs without compromising on speed or accuracy. As financial services grow, they may deal with high volumes of documents for processing. IDP can streamline that workflow via financial document automation and reduce the stress the volume is causing on operations. In other words, finance businesses can continue to grow without compromising the quality of service for their customers.

Cost and Time Savings

IDP can cut processing time by nearly half. That, in turn, saves money. Automating document workflows leads to significant cost savings and faster turnaround times for use cases like loans, mortgages, credit cards, etc., which are the real money-maker for many finance businesses.

Improved Compliance and Audit Trails

IDP systems provide detailed audit trails, ensuring regulatory compliance. Banks have to follow a variety of regulations, such as AML and KYC. These regulations begin with paper-based documents, which must be turned into digitized files. IDP makes this process much smoother.

Faster Decision-Making

IDP significantly accelerates document-intensive processes, enabling financial institutions to make faster decisions. It eliminates manual bottlenecks and reduces processing times by automating data extraction, verification, and routing tasks. This allows for quicker approvals of loans, credit applications, and customer onboarding, resulting in improved customer satisfaction and enhanced business agility.

Reduction of Paper-Based Processes

IDP plays a crucial role in reducing reliance on paper-based processes. By digitizing documents, IDP minimizes the need for physical storage, transportation, and retrieval. This not only saves space and reduces costs but also has a positive impact on the environment by reducing paper consumption. Also, digitizing documents improves accessibility and searchability, making it easier to find and retrieve information when needed.

Challenges and Solutions in Implementing IDP

IDP, or Intelligent Document Processing, offers significant benefits to financial institutions by automating document-intensive processes. However, its implementation can present several challenges.

Integration with Legacy Systems

One of the primary hurdles is integrating IDP with existing financial systems. These legacy systems may have outdated technologies or incompatible data formats, hindering seamless data exchange. To overcome this challenge, organizations can rely on MST’s integration capabilities to bridge the gap between IDP and legacy systems and ensure smooth data flow.

Data Security and Compliance

Financial institutions handle sensitive customer data, making data security a paramount concern. IDP solutions must adhere to stringent regulations like GDPR and KYC to protect personal information. Robust security measures, including encryption and access controls, are essential to safeguard data privacy.

Customization and Flexibility

IDP solutions must be adaptable to the unique requirements of different financial institutions. While standardized templates can streamline processes, flexibility is crucial to accommodate variations in document formats, data fields, and workflows. Customizable IDP platforms allow institutions to tailor solutions to their specific needs.

High Initial Implementation Costs

Deploying IDP can involve significant upfront costs, including hardware, software, and professional services. The initial investment may be substantial, but the long-term benefits, such as increased efficiency and cost savings, can justify the expense.

Change Management

Implementing IDP can disrupt existing workflows, requiring employees to adapt to new processes and technologies. Effective change management is essential to minimize disruptions and ensure a smooth transition. Training programs and support can help employees embrace the new system and maximize its benefits.

How MST’s Solutions Enhance Intelligent Document Processing

MST’s eViewer solution enables financial institutes to embrace IDP. With various features, it provides an easy, quick, and scalable way for banks, insurance providers, and investment firms to streamline document-centric workflows, especially those involving paper documents.

• Document Classification in Banking: MST offers advanced document classification capabilities, allowing users to automatically categorize different types of financial documents, streamlining the process and reducing manual input. For instance, policy documents can be labeled as such to make them easily recognizable and searchable.
• Data Extraction: MST’s solutions enable the extraction of critical information from various document types, enhancing efficiency in financial workflows. The built-in OCR software in the eViewer enables data extraction from printed or handwritten documents.
• Continuous Machine Learning: MST’s machine learning capabilities continuously improve document processing by learning from each document interaction. Importantly, all data and learning occur on the client’s servers, ensuring data privacy and security.
• Pre-Processing and Human-in-the-Loop Validation: MST provides options for document pre-processing and ensures human oversight in critical stages of document review through human-in-the-loop validation, guaranteeing accuracy while reducing manual workload. This can be beneficial for document workflows involving critical documents with sensitive information.
• Seamless Integration: MST’s solutions integrate smoothly with existing financial services platforms, enhancing operational efficiency and compliance with industry regulations. Banks can integrate the software into their proprietary or third-party systems thanks to APIs.

Case Study

WorldPay, a well-known financial company, turned to MST for IDP. It had a problem with disputes over payments. To fix this, they used the eViewer tool to view documents more easily. This helped them solve disputes faster and improve their relationships with other businesses.

WorldPay needed a safe way for people inside and outside the company to view documents. They also needed to be able to scan documents, find old documents, and add scanned documents to their system. After uploading documents, they needed to separate them into different groups and save each group as a picture in a special format called TIFF.

MST’s eViewer enabled them to do all that while ensuring strict security measures for document data were maintained.

Conclusion

IDP has been a transformative technology in the finance industry, offering significant benefits and addressing key challenges. It enhances efficiency, improves accuracy, and accelerates decision-making by automating document-intensive processes.

As the finance industry evolves, IDP, especially with AI, will play an increasingly vital role in driving innovation and competitiveness. By embracing IDP solutions, financial institutions can position themselves for success in the AI-driven age.

MST’s solution brings IDP into the tech stack of financial services businesses. Contact now to learn more!