Five ways AI impacts electronic receivables (and what it means)

Artificial intelligence is changing the game for electronic receivables.

Indeed, banks that harness AI’s product development potential for electronic receivables stand to gain their share of an estimated $1 trillion in technology-generated savings over the next 10 to 15 years. Here are five ways AI impacts electronic receivables and what it can do for your bank.

1. Improve operational efficiency and save money

Over the next decade and a half, financial institutions will collectively save $200 billion via back office efficiencies afforded by AI-driven solutions. Integrated receivables (IR) will be responsible for a big chunk of those savings. 

Integrated receivables solve a common challenge for treasury customers: electronic receivables that lack corresponding remittance data. In fact, NACHA estimates that more than 60 percent of ACH payments arrive separately from remittance information, which often resides as unstructured data in PDF, email and other formats that are difficult for traditional systems to access. 

“Stranded” receivables force staff to track down remittances and manually enter data. It’s tedious, time-consuming busywork that delays posting, lengthens DSO and negatively impacts cash flow. It’s a big headache that impedes straight-through processing and costs banks money. 

The good news is efficiency programs can take advantage of AI’s core strength, unstructured data handling, to automatically match incoming electronic and paper payments to open invoice remittance details from accounts receivables processing systems. 

It gets even better: machine learning enables applications to improve efficiencies over time, resulting in greater savings month after month, year after year. Here’s how it works: 

• Machine learning algorithms scan thousands of remittance documents and extract pertinent details from unstructured data: vendor names, payment amounts, invoice numbers and dates, for example.
• The extracted data is compared with open invoice files to create a three-way match: payment, remittance and open invoice.
• The customer makes a one-time confirmation that each match is correct. After that, the IR tool’s self-learning capabilities automatically reassociate all future payments for each vendor account.

What does that mean for your bank? By automatically matching payments and remittance data, AI-powered programs can increase straight-through processing rates up to 95 percent. Combined with other AI technologies, that can yield a 22 percent reduction in operating expenses.  

2. Create new revenue streams

Saving money is only part of the equation. When AI pairs with integrated receivables, banks can offer a compelling product that adds value to their relationships with corporate customers. 

Enormous demand already exists for AI-driven solutions that have the structure, computing power and self-learning functionality necessary to analyze vast amounts of unstructured data, then reassociate payments with remittances without the need for human intervention. 

In fact, 40 percent of businesses plan to implement an IR solution by 2021. Since many businesses will outsource their IR solutions, that presents a massive opportunity for your bank to create an IR product to serve their needs. It’s a big reason why 70 percent of banks view integrated receivables as a high priority. 

Sophisticated machine learning capabilities can quickly resolve businesses’ electronic receivables challenges and deliver incredible value to corporate customers. A corporate-level IR product not only lends itself to FI sales, it also demonstrates your bank’s commitment to innovation. 

When used in conjunction with other AI-driven initiatives, integrated receivables can yield a 34 percent increase in revenue for your bank. 

3. Deepen customer relationships

Integrated receivables enable banking staff to establish stronger, more meaningful customer relationships. Instead of spending tedious hours tracking down “stranded” receivables, staff members can instead focus on high-value activities that enhance the customer experience and spur revenue growth. 

For example, banking staff members can invest time in conversations that lend insight into what your corporate and retail customers need. They can use those insights to deliver personalized offers, upsells and cross-sells customers are likely to act on.

Bankers also have more time to provide individualized financial advice tailored to each customer, recommend financial products that will help customers meet their goals or even develop new products based on market trends and current customer needs. 

Though automation is a foundational benefit of artificial intelligence, there will always be a need for face-to-face customer service – especially for high-value customers who expect a human to answer the phone. 

IR solutions free staff to offer the type of personalized service that fosters trust and long-term customer loyalty. The benefits will show on your bottom line.

4. Maintain a competitive advantage

The race is on to offer IR solutions that satisfy corporate customer needs, and banks that invest in AI technology stand to gain a considerable competitive advantage. If your competitors are slow to the punch—or ignore the opportunity altogether—you can even dominate the market. 

Put yourself in a businesses’ shoes. If you have the choice between two banks, where Bank A has demonstrated a commitment to technology, provides a turnkey integrated receivables solution and offers personalized customer service while Bank B seems to be stuck in the Stone Age, which would you choose? 

The choice is clear for most businesses, which is why so many banks are clamoring to implement IR solutions that serve the needs of corporate customers. Those that fail to do so risk being left behind, as companies must make the responsible decision to choose partners that offer the greatest benefits. Simply put, you can earn more business by offering a product your competitors do not have.

Not only that, but mid-sized banks and credit unions must keep up with the times if they hope to compete with large banks that are already working on IR solutions. How long do you think it will be before they try to encroach on regional and community bank market share? 

For your bank, that means implementing AI-powered IR solutions could be necessary for survival. You may help secure your future by adopting integrated receivables and other AI initiatives. 

5. Bolster risk management and compliance

Though other artificially intelligent solutions exist to detect fraud and ensure KYC and AML compliance, it’s worth mentioning that integrated receivables can help banks minimize risk. 

How? By eliminating human error. Flawed records spell trouble for banks, while accurate record-keeping and reporting are critical to preserve customer confidence. The same benefits can be extended to your corporate IR customers, allowing you to leverage another benefit that earns sales.

Good recordkeeping and reporting also helps your bank satisfy government regulations. Banks know tightening regulations can strain both human and financial resources. 

Automated IR solutions offer unprecedented accuracy and transparency. It offers another level of assurance for customers.

How to implement AI-powered electronic receivables in your bank

There’s no question integrated receivables are the future of banking—and the future is now. Here’s how to get started. 

Identify use cases and make your case to bank leadership

Start by identifying how integrated receivables can benefit your bank, including the impact they can have on your bottom line. That will make it easier to secure buy-in from bank leadership to explore IR solutions. Improved operational efficiency, monetary savings and revenue growth shouldn’t be too difficult to pitch, but you’ll want to cite specific benefits such as: 

• Increase straight-through processing by up to 95 percent
• Reduce the need for human intervention
• Eliminate human errors
• Free staff to focus on high-value activities
• Reduce operation costs by up to 22 percent
• Offer corporate customers a compelling and profitable product
• Gain a competitive advantage
• Increase revenue by up to 34 percent

Prepare your bank

Once you have leadership support, it’s important to bring all relevant departments into the fold. Talk to your team to identify current inefficiencies and how IR can resolve them. Many organizations establish an AI Center of Excellence (CoE), which guides decision-making via a shared services model. Key considerations include:

• How to make AI cross-functional across all departments
• What are your business needs? Who are your end users? These should always be prioritized first.
• What are quick wins afforded by AI? It’s best to develop a minimum viable product as a pilot concept to demonstrate the value of the project’s full potential.
• How to build a digital culture in which IR is injected into current process and new leadership, roles, processes and responsibilities are adopted.

Choose the right partner

AI implementation can seem like a daunting task, especially for mid-sized banks that do not have a well-versed IT team on-site. It can even seem scary to overhaul critical functions such as electronic receivables. That’s why it’s crucial to work with a partner who understands banking challenges and needs, and who has extensive experience helping mid-sized banks implement IR solutions. 

Carefully vet external resources and choose a partner who has a track record of successful IR implementation. Key considerations include:

• What are the most important criteria any partner must satisfy for your bank?
• What expertise and experience does the partner bring to the table? Have they implemented IR solutions for similarly sized banks? Do they have reviews and references? What do they say?
• Are they a good cultural fit for your bank? Do they share your values and work ethic? Trust and good communication are crucial for high-visibility projects.
• What are the risks? Every technology project carries risk, so it’s important to understand them and plan accordingly. Risks associated with outside partners can be skills-based, reputational, financial or regulatory.

AI-powered electronic receivables are poised to revolutionize the banking landscape. Make sure your bank is well-positioned to reap its benefits and secure a competitive advantage now and in the future.