Why straight-through processing is the holy grail for banks
Stripping away human intervention
“They’ve all got the right strategy, but it’s a lot harder to do in the retail channel and I wouldn’t say that any of them have nailed it yet except in certain domains,” Jacobs agrees.
“That sort of stuff is still held together behind the scenes, whether they’re doing it offshore in India or in Australia, it doesn’t matter – there are still manual processes and people involved,” Gee says.
The white whale
Arguably, the banks’ straight-through processing white whale is the mortgage. Gee says this is the most expensive product for banks to vend and digitising it would pull both banks and consumers out from under a mountain of paperwork.
“All that paperwork that’s done is kind of wasteful because no one reads it - not even the lawyers read it, right?”
However, issuing new credit cards and opening new accounts is relatively simple compared to mortgages.
Banks can draw on readily available risk management systems and well-stocked consumer credit checking databases.
But mortgages have even more moving parts and could require valuation certificates, input from lands and titles offices and other asset registers.
Following from its core banking upgrade in October 2013, CUA has established a personal lending platform and it’s working on the mortgage platform.
However, CUA chief operating officer Steve Chugg says it won’t be a pure digital offering for the foreseeable future.
“There are technology solutions that will allow some degree of verification. From a CUA point of view, there is a need to have information confirmed or verified manually," he says.
“So to answer whether you could originate without any human intervention, that’s certainly not on CUA’s radar today."
Hampered by regulation
It’s not hard to understand why the banks are taking a cautious approach: bank regulators appear to be struggling to keep pace with the technology.
To verify the identity of their customers, banks are required to carry out 100-point evidence checks.
It's a requirement that halts the flow of what could otherwise be an entirely digital process.
"As regulated entities, there are some boundaries we can’t cross," former BoQ CIO Bale said last year.
She raised the option of using digital certificates or some other digital mechanism of trust, potentially combined with a social log-in, to replace this onerous verification process.
The federal government’s financial system inquiry, while warning of the regulatory challenges from technology-driven change, indicated such a vision might not be too far off.
The paper devoted an entire chapter to innovation, recommending the establishment of a trusted digital identities token for consumers, which would remove a large number of digital processing bottlenecks.
The report's authors also said that while the benefits of innovation were hard to quantify, efficiency gains and improved customer convenience in areas like online banking were obvious.
"As the pace of technology-enabled innovation accelerates, it is crucial that government and regulators be aware of, and enable, the benefits of innovation to flow through the financial system while appropriately managing risks," the report recommended.
