Banking Automation History: A Brief Overview
At its heart, banking is all about managing money. For centuries, this has been done manually, with people working day and night to keep track of transactions and ensure everything adds up. When most people think of automation in banking, they likely think of ATMs and online banking. However, banking automation history goes back much further than that. In fact, it dates all the way back to the mid-20th century. Here’s a brief overview of how automation has transformed banking over the past century.
Banking Automation History: 20th Century
Early banking automation history came in the form of the ATM, which John Shepherd-Barron invented in 1967. Barclays Bank installed the first ATM in Enfield Town, England. This machine was able to dispense cash and process deposits. However, only Barclays customers who had inserted a special cheque could use the machine. The first ATM, available to all customers, debuted in 1969 in Rockville Centre, New York. “The ATM that debuted in New York in 1969 was only able to give out cash, but in 1971, an ATM that could handle multiple functions, including providing customers’ account balances, was introduced.” – History. ATMs were designed to dispense cash to bank customers who had inserted a specially programmed card. While this may not seem like much by today’s standards, it was a breakthrough at the time.
In the early 1970s, banks started experimenting with computerising various banking functions such as record-keeping and loan approvals. Banks also developed Electronic funds transfer (EFT) systems around the same time. These systems allowed customers to transfer funds between banks without visiting each bank physically.
The 1980s saw the development of ATMs that could dispense multiple currencies and debit cards linked to customer accounts.
The Rise of Online Banking
While ATMs were a major convenience for customers, they did not allow users to perform all their banking tasks without visiting a physical branch. That all changed with the advent of online banking in the 1990s. Online banking became possible with the development of secure sockets layer (SSL) encryption technology. This allowed customers to view their account balances and transaction histories, transfer funds between accounts and pay bills from the comfort of their own homes. As broadband internet became more widespread in the 2000s, online banking became even more popular. Today, there are over 1 billion online bank users worldwide. And we can do all of this and more from our smartphones!
Banking Automation History: 21st Century
One of the most important—and costly—aspects of running a bank is detecting and preventing fraud. This was largely a manual process in the past, with humans combing through transaction records to look for suspicious activity. But today, banks use artificial intelligence (AI) and machine learning to detect fraud automatically. By analysing data patterns, these systems can flag potentially fraudulent activity much faster and more accurately than humans ever could.
This is not only good for banks but also for customers. After all, no one wants to be a victim of fraud. Automation can also help prevent so-called “friendly fraud,” where customers claim that they didn’t receive products or services they actually did. In this type of fraud, automated systems can compare customer claims against transaction records to see if there’s a match.
In recent years, there’s been a growing trend towards “branchless banking.” This is where customers can do everything they need to do online or through a mobile app without ever having to visit a physical bank branch. Automation plays a key role in making this possible.
For example, automated systems verify their identity when new customers sign up for an account. This helps ensure that only legitimate customers can open accounts and limits the chances of fraudsters opening fake accounts to launder money or commit other crimes. Automated systems also process loans and other financial products. And, of course, mobile apps and online banking websites wouldn’t be possible without automated back-end systems to power them.
24/7 Customer Service
Gone are the days when you had to wait until 9 am on Monday morning to talk to your bank about an issue with your account. These days, many banks offer 24/7 customer service via phone, email, or live chat. And in most cases, automated systems handle these interactions rather than human customer service reps.
For example, many banks now use chatbots as a way to provide self-service for simple inquiries such as balance checks or account deposits. Natural language processing (NLP) powers these chatbots, allowing them to understand human speech and respond accordingly. And if they can’t answer your question themselves, they’ll escalate it to a human customer service representative who can assist you further.
Automation in corporate banking
AI and machine learning can now automate back-office tasks such as payment processing and reconciliations. In fact, there are now several banking platforms that offer these capabilities. One such platform is F³, conceived and developed by Fennech Financial, which provides various back-office automation tools for corporates and banks. These tools or solutions include a payment engine, account reconciliation module, and In-house virtual bank, to name a few.
These platforms can greatly simplify and speed up back-office tasks for their customers, freeing up time and resources for use elsewhere.
In the past, corporate customers had to open a separate bank account for each currency they wanted to use. This was both time-consuming and expensive. But with virtual accounts, companies can have multiple currencies and debit cards linked to a single account. So, companies can easily switch currencies without opening and closing various accounts if they do business in several countries.
Virtual accounts also make it easier for companies to track their spending. Rather than having to log into several different online banking systems, they can see all of their transactions in one place. This makes it simpler to stay on top of expenses and budget for upcoming projects.
It’s amazing to think about how far we’ve come in such a short period of time. From having to physically visit a bank to conduct all transactions to be able to do everything from our phones to automating the entire back-office, automation has drastically changed how we bank. What started as a simple cash dispenser has evolved into a complex system that allows us to check our account balances to transfer funds between accounts—all without ever having to step inside a bank branch!
Contact us for more information on how to automate your entire back-office and digitally transform your finance or treasury departments.