The coronavirus pandemic clearly echoed the global need to adopt digitally inclined ways of working, with brick and mortar offices shutting down and a remote working model being the new norm. In line with this, digital banking is also set to experience a steep rise with approximately 397 million Indian adults completely depending on ‘online-only’ bank accounts in the next 5 years. We are about to witness a major shift in the way individuals and businesses conduct their day-to-day banking operations, such as the process of applying for a loan which will be again completely ‘online-centric’.
This is why banks need to ditch their manual process of parsing through pages after pages of financial statements and speed up their loan disbursal by opting for a digital bank statement analyser, to help cater to the increased number of online and offline customers.
But how useful are digital bank statement analysers (BSA) for sound banking? What are their pros and cons? We decode everything related to BSA below pointwise.
Decoding the Pros and Cons of Digital Bank Statement Analysers!
Advantages of Automated Bank Statement Analysers:
Let’s first take a look at the multifold benefits of employing a BSA to take care of the analysis:
Improved Lending Experience:
A bank statement analyser helps upgrade a financial institution’s lending experience by leaps and bounds. By digging into the complete transactional data from the customer’s bank account such as all debit and credit transactions and other such key data, BSA ensures an efficient and convenient lending process. Deep insights into the loan applicant’s transaction patterns, spending behaviour, income, average balance, loan applications, etc. can be obtained within minutes in order to arrive at a comprehensive review of their financial health.
BSA helps reduce the turnaround time to process loan applications and disburse them quickly, by facilitating digitisation and providing an end-to-end improved customer experience.
Reduces the Risk of NPAs:
NPAs have been raising their ugly heads again with the prediction that NPAs may rise over 10% in the first half of 2021, according to a survey conducted by FICCI-IBA. This can lead to a huge banking crisis in the country and there is an ever-increasing pressure on the financial institutions to keep their NPAs under control. This is more crucial during the COVID-era which saw huge loan defaults across the country.
One of the robust mechanisms to put in place in order to effectively tackle the hidden NPAs and nip them right in the bud is to have a bank statement analyser in place. Eliminating manual errors by automating the process of undertaking a detailed bank statement analysis is a must. By doing so, it is possible for banks to ascertain the creditworthiness of the applicant and conduct a thorough accurate risk assessment at a large scale.
Consistency:
Every bank has a different format of reporting financial statements and as such translating them to a common and concise arrangement can be cumbersome. There may exist data from different time periods or may consist of random narrations/descriptions and that too in layouts that may be typical to those banks. It may seem outdated for a manual team to calculate and arrive at the creditworthiness of the prospective borrower in the age of AI driven mechanisms. A BSA is an intuitive, AI-based, innovative tool that nullifies such routine challenges and streamlines the process, as well as brings consistency across different formats of bank statements available.
Real-Time Customisable Data:
BSA has the potential to enable data transfer directly from one bank to another by integrating APIs. Customers can simply upload their PDF files onto the bank’s website, which banks can fetch in the form of a real-time comprehensive report. Besides, it is also possible to generate customisable reports that may be specific to a bank’s internal financial statement analysis.
Suppose a report that highlights transactions in a particular window needs to be fetched, say a bank needs to assess the financial behaviour of an applicant from two corresponding periods from January to March 2019 and January to March 2020, it is possible to apply customisable parameters and generate specialised reports.
Disadvantages of Automated Bank Statement Analysers:
While bank statement analysers have proven to be a huge boon to the financial sector, there may be some cons associated with the process of analysing financial statements, which might raise concerns with the process itself. Here are a few of them:
Judgement:
BSA automates and amplifies the loan disbursal process with considerably reduced turnaround times. It helps generate comprehensive reports within minutes and does so efficiently without any errors, but it is simply a means to reach conclusions. It can in no way take the place of sound judgement or human intelligence. Ultimately, the decision to disburse loan is taken by an analyst who depends on personal intelligence and skills to arrive at the conclusion. Therefore, even after having an AI centric approach, it is not possible to completely eliminate manual intervention from the BSA process.
Past Data:
There is an inherent limitation associated with financial statement analysis. An applicant’s bank statements will consist of only past information, which means only the data that is available till present can be analysed and the creditworthiness of the applicant can be judged only till date. The element of future risks involved is based on AI predictions and hence banks have to depend upon forecasts and budgets, which may not turn out to be correct.
Managerial Ability:
Financial statements are results that shed a light on financial health. They do not involve or do not provide any indication of the managerial capabilities of the applicant. BSA cannot depict the good or bad management that may be behind an organisation, leaving room for inconsistencies in judgement.
Having said that, the utility of bank statement analysers for an efficient and reliable lending process cannot be ignored. Finezza’s very own bank statement analyser called ‘Precisa’ can process over 15,000 transactions in up to a maximum of 6 minutes!
With high-tech inbuilt capabilities and useful features such as gathering data on business flows, circular transactions, high value transactions, conducting fraud checks, providing statistical and predictive analysis and much more, Precisa can be readily integrated into the existing systems via APIs. It is a must-have tool for staying ahead of the curve and providing a complete evaluation of the applicants’ creditworthiness and reduced turnaround times.
Mumbai