The banking industry relies on extensive document workflows to execute multiple business processes.
Lending, client services, information security, regulatory compliance, and supplementary services like foreign cash orders or global money transfers all depend on proper, genuine documentation.
But the volume of documents you have can cause issues. Like slowing down banking processes within different departments while increasing the risk of fraudulent activity. In fact, a 2020 Report To The Nations study found that 10% of fraud schemes in the banking and financial services industry came from financial statement fraud.
So, it's no surprise that banking organizations are digitizing their paperwork to automate internal processes, increase efficiency, and prevent fraud.
This guide covers the benefits of document digitization, how it works, and how banks can use it to counter fraud.
What is document digitization?
Document digitization uses various tools and techniques to convert physical documents into electronic or digital formats computers use to automate workflows or processes.
For example, scanning physical papers to convert to digital documents, capturing critical information, and storing the file in a single repository. It's much easier to retrieve and process data compared to manually searching for information on paper maintained in physical file cabinets.
Document digitization is the big step in your digital transformation journey. To prepare for future automation initiatives, banks are digitizing parts of their processes, such as loan or claims processing, for faster and more accurate execution.
Digitization also contributes to increased and enhanced security, compliance, and auditability, reducing incidences of fraud in banks.
The paper problem in banking processes
Banks of all sizes need to manage and store large loads of paper records and data throughout every phase of their workflows—loan applications, policy quoting, claims processing, and more.
This heavy reliance on paper became an obstacle, particularly during the pandemic. Banks and other financial institutions with paper-based operations slowed to a crawl or halted altogether.
Fortunately, banks no longer have to rely on paper documents.
Instead of storing records in filing cabinets and boxes, or on shelves—negatively impacting efficiency and employee productivity—it's easier and more convenient for banks to digitize paper documentation. And with customer experiences becoming more seamless and intuitive, document digitization enables banks to optimize costs and meet high customer expectations.
Why you should digitize documents
A 2022 Key Issues study by the Hackett Group found digital transformation is a top priority among finance leaders and a critical area for development. That's because digitizing documents brings benefits that boost financial institutions, including:
- Easier accessibility: Your team can quickly retrieve files and folders or gain access to documents instead of sifting through physical cabinets to find important documents.
- More storage capacity and organization: Instead of filling office space with cabinets, you can store digital files on hard drives or in the cloud, which occupy less space.
- Easier and faster collaboration: Making physical document copies to share with coworkers is tedious, time-consuming, and wasteful. Digitizing documents saves on resources and ensures file-sharing and collaboration happen faster, and in real-time, even when you're not in the same location.
- Increased security and better data recovery: You can secure document files through encryption instead of using locks and keys to protect your documents from damage, theft, or destruction. Paper files are harder to recover once damaged or lost than digital backups, which you can restore after a catastrophic failure.
- Increased productivity: Paper files take more time and effort to access. With data readily accessible to multiple departments simultaneously, it's easier for employees to do their work faster, leading to increased productivity.
- Improved customer service: You can index electronic documents with different metadata, making it easier and faster for your team to find information. This way, your customers get more timely communication, greater transparency, and better, more convenient service.
- Meets compliance regulations: Banks and other financial institutions have statutory compliance norms that mandate the maintenance of certain documents in digital format. Document digitization is a quick and inexpensive way to convert your files into digital format and meet those compliance regulations.
- Data integration: Document digitization breaks down silos in your organization and enhances data integration with other business systems. This way, banks have a dependable source of data or insights useful for better decision-making.
- Competitive advantage: With digital files, you can access data and document records from different departments instantly. This is good for analytical diagnosis, which provides valuable insights that give your business a competitive edge.
How document digitization helps banks prevent fraud
Traditionally, banks couldn't provide great user experiences while reducing fraud rates.
With 82% of people using digital payments online or via mobile, and customers expecting seamless experiences, banks are now focusing more on delivering superior user experiences.
Yet fraudsters are getting more sophisticated in their craft. For instance, during the global health crisis, there were increased reports of criminals using falsified information and submitting fraudulent documents to obtain money in relief funding under the CARES Act.
The U.S. Department of Justice says that international organized criminal groups targeted the $860B in federal funds using stolen identities to file for unemployment insurance benefits.
As document fraud increases, digitizing the system prevents criminals from perpetrating fraudulent activities. Banks can automate things from end to end and impose access controls for document submissions in paper-based processes.
In this way, complete document digitization reduces cybersecurity risks and bottom-line fraud-related losses, bolstering revenues for banks and lending institutions. Add to that authentication technologies such as device identity, biometrics, and behavior pattern analysis, and you get greater security and optimal customer experiences.
Fraud detection tools like Inscribe quickly and accurately detect fraudulent documents through forensics and machine learning. This way, banks can trust their customers and grow faster.
Inscribe offers fraud detection in various financial documents, including bank statements, through:
- Document forensics: Inscribe scans documents examining every detail, including file structure, metadata, pixels, and more, to uncover traces of suspicious behavior and evidence of fraud.
- Data network: Through Inscribe's global network of data points and fraudulent documents, it identifies fraudulent activity patterns, used to protect companies from organized fraud rings and prolific fraudsters.
- Verification: Inscribe extracts information like names, addresses, dates, and incomes, matching them to what banks have on file.
Document digitization use cases in the banking industry
Many banks are planning their journey and participation in the digital economy, and one of the most common questions is about potential use cases for document digitization in the financial services industry.
Here are some examples:
Application processing
The loan application process needs to be simple enough for your customers. Document digitization creates easy avenues, such as auto-populating web portals or mobile image capture, which help customers upload the initial set of application documentation.
Customers don't have to do much work, and they can process their applications anywhere and anytime they want, helping banks deliver delightful user experiences.
Decision making
Document digitization also provides banks with a dependable resource to handle entry-level risks.
An operational process with an automated rules engine automatically considers and takes care of such risks during the early stages of lending, helping banks make instant decisions.
This results in faster banking processes and lending decisions, especially when handling applications and appraisals.
Mortgage document management
Converting paper documents is slow, resource intensive, and stressful.
Document digitization tools eliminate these drawbacks, plus the possibility of human errors during data entry.
Digitization gives banks the technical capability to achieve high document management accuracy levels, introducing quality assurance capabilities that'd be impossible through traditional means.
Loan processing and closing
Seamless loan closing requires accurate information and automated compliance checks.
Document digitization helps banks:
- Clear loan conditions automatically
- Verify customer information
- Digitally track loan documents
Banks also benefit from the real-time updates of the various loan approval stages because document digitization enhances data integration across multiple systems, applications, and departments.
Know Your Customer (KYC)
KYC is critical in every bank as it safeguards them from anti-money laundering (AML), fraud, terrorist financing, corruption, and other fraudulent activities.
By digitizing documents, banks can:
- Establish and authenticate their customers' identities
- Retain all the information they need online
- Simplify the customer onboarding process
- Protect customer information used for authentication
- Analyze their actions to validate income sources
- Assess AML risks linked with a customer
- Understand their customers to improve services and manage risks
Manage application documents more efficiently with Inscribe
Paper documents might be good, but digital files are better and will help your bank or financial organization get ahead. Choosing the right tools and strategies can make document digitization efforts in your organization nearly effortless.
Ready to enjoy the benefits of document digitization? It's easy with Inscribe. Talk to an expert to discover how Inscribe can streamline document digitization and management in your organization.
