Process Mining: A Necessity for Modern Banking


In March 2023, the news of the collapse of one of the most prominent banks in the United States grabbed the headlines worldwide. At the heart of this undoing, it appeared, is the intuition’s perilously high exposure to long-term treasury bonds since 2021. This strategy is unsustainable in the current scenario of the Federal Bank raising the interest rates to curb inflation. A subsequent chain of events threw the bank into a severe liquidity crunch and insolvency. 

For many, the incident is simply one more instance of a bet gone wrong and a classic case of mismatched deposits and assets. Nevertheless, it raises far more profound questions for banking as a business. Is it possible for financial institutions to proactively detect fundamental but conveniently hidden flaws in their processes? More importantly, how can banks better manage risks and ensure transparency to pre-empt such calamities?

Apparently, banks need an evidence-based pathway to make better business decisions rather than acting on assumptions, as we see in the case above. It is what process mining techniques promise for banks, helping them to understand their operations better, identify areas of inefficiency or potential risk, and take proactive steps to mitigate them.

One of the key benefits of process mining is that it provides banks with greater visibility and insights into their processes. By analysing data from multiple sources, including transaction logs, customer interactions, and employee activity, process mining can reveal hidden patterns and inefficiencies contributing to operational or compliance failures. Banks can take informed steps to streamline their processes and improve controls with this intelligence. In fact, reliable process intelligence also forms the strong foundation for systematically vetting the existing internal processes and conducting in-depth analysis to avert risks like the perpetration of fraud and overexposure to asset classes.  

Another benefit of process mining is that it can give banks a heads-up well ahead of time and help tackle systemic flaws before they can escalate into a crisis. By analysing data from multiple systems and processes, process mining can identify patterns that may indicate violations of regulations or policies. For instance, if a bank’s employees are consistently bypassing required approvals or making changes to customer accounts without proper documentation, this may indicate a need for additional training or stricter controls.

Further, process mining can also help banks improve business management by providing real-time visibility into their operations. By monitoring key performance indicators and identifying trends and anomalies, banks can pinpoint priority areas for business capability build-ups. For example, if a bank’s loan processing times increase, this may indicate a need for additional resources or changes to the loan underwriting process. Process intelligence is essential for modern banking, not only to hedge risks and improve transparency but also to stay competitive and compliant. The data-driven insights can readily translate into reduced business risks, improved transparency, and richer customer experience. Irrespective of the size and nature of the financial institution, such benefits can be true business differentiators, keeping it ahead of the curve.

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