Top Financial Services Use Cases for Intelligent Document Processing (IDP)

In the evolving landscape of financial services, technological advancements continue to reshape the way organizations operate. One such innovation that has gained significant attention in the field of financial services is Intelligent Document Processing (IDP). IDP harnesses the power of optical character recognition (OCR), artificial intelligence (AI), and machine learning (ML) to streamline document handling and processing, thereby revolutionizing various aspects of the banking and financial sectors. Financial enterprises adopt IDP technology to reduce the operational costs associated with manual document processing and enhance organizational efficiency. Relying on the services of an experienced document scanning company can help financial organizations stay on top of the competition. In this blog, we explore the transformative potential of IDP, including its key benefits and top use cases of IDP in financial services.

The banking and insurance industry is estimated to be one of the biggest adopters of intelligent document processing technology in the global market. Earlier, most of the banking organizations were leveraging traditional methods in document processing. However, with increased digitization, they have started shifting to IDP technology. Banks usually deal with different types of documents including online forms, account opening forms, statements, and other PDF files. So, adoption of IDP technology can be seen as an important part of document processing in the banking sector. In addition, adopting IDP solutions saves time and delivers a better customer experience.

Challenges Related to Document Processing in Financial Services

92 percent of the world’ s top 100 banks are still relying on legacy systems for processing data (2022 statistics). This essentially means that the banking industry has been slow to embrace new technologies to speed up their services and improve customer service. Even though there are many challenges associated with processing bank documents, a major one is the large volume document generation. Online forms, images, signatures, blueprints, and PDFs are crucial to the banking system and are used in day-to-day operations. Besides documentation, other day-to-day challenges include account opening, closure of accounts, and credit application. Often, these involve difficult and cumbersome processing operations. Banks can employ manual intelligence using IDP to carry out these tasks, automatically extract data, and finally, feed them to the existing portal/system while maintaining consistency in various tasks. Other roadblocks that come up while processing banking documents include issues such as long wait lines due to manual processing, verification errors, and wastage of resources. Another concern is the legacy IT infrastructure that is inflexible and often hard to avoid.

Key Benefits of IDP in Financial Services

Intelligent Document Processing (IDP) offers numerous benefits to the financial services industry, transforming how organizations handle document-driven processes and operations. Here are some key advantages:

• Improved Operational Efficiency – IDP automates manual, time-consuming tasks involved in document processing, such as data entry, verification, and extraction. This helps with faster document processing, reduces processing times, and increases operational efficiency.

• Cost Savings – By reducing the need for manual work and minimizing errors, IDP helps financial institutions cut the costs associated with document handling, processing, and compliance. This frees up resources for more strategic initiatives.

• Accuracy and Reduced Errors – IDP employs advanced data extraction and validation techniques, minimizing the risk of human errors inherent in manual document processing. This ensures accurate data entry and enhances data quality.

• Scalability – IDP can handle a large volume of documents consistently and quickly, enabling financial institutions to scale their operations without significantly increasing their workforce.

• Enhanced Compliance – IDP ensures consistent adherence to regulatory requirements by automating compliance checks, data validation, and audit trails. This reduces compliance-related risks and improves reporting accuracy.

• Improved Customer Experience – By accelerating processes such as loan applications, account opening and claims processing, IDP enhances the customer experience, reducing wait times and increasing customer satisfaction.

• Regulatory Reporting – IDP simplifies the process of gathering and aggregating data from various sources for regulatory reporting. This ensures timely and accurate submissions, reducing the risk of penalties.

How IDP Can Help in Bank Automation: Top Use Cases

By automating the identification of documents, IDP helps streamline the key components of KYC compliance and reduces the workload of in-house staff. Moreover, end-to-end automation of document processing makes it easier for banks to achieve their business goals. Here are some of the top use cases for IDP in financial services:

• Loan Application Processing – When it comes to loan processing, a clear and complete understanding of the various provisions of loan agreements is critical to prevent mismanagement of funds, defaulting, and poor customer relationships. Poor data management can result in unwanted termination of loan contracts, legal action against breach, missing important deadlines and dates, regulatory fines, and ambiguity in the payment details. One of the initial steps of loan agreement management is the digital categorization of data from the agreement. The use of IDP elements such as Natural language Processing (NLP) and ML-based data extraction streamlines the loan origination process. The technology can automatically extract and verify data from various documents such as income statements, tax returns, and credit reports. This accelerates decision-making and improves customer experience.

IDPs can be equipped with intelligent clause detection functionalities that enable contract management entities to easily access pertinent information such as the applicant details and financial clauses within the loan-provider’ s pre-approved clause library. IDP software enables understanding of keywords specific to loan agreements, including recognizing descriptions of dates. It can recognize semantic similarities and identify provisions and clauses, with adequate training. In short, IDP helps banks save their customers’ time by expediting loan application processing.

• Online Forms Processing – The banking process involves several activities such as account opening, account closing, and cash withdrawal that take place in the bank and clients are required to fill out the needed forms. The probability of error while filling paper-based forms is high and it is also a time-consuming method. By leveraging IDP capabilities, this process can be digitalized, enabling customers to access the services through online portals. This will simplify the process by converting all the data into text, tables and graph formats where machines can detect and process it for further business operations.

• Mortgage and Loan Document Verification – Banks need different types of documents to process mortgages when an individual or an organization approaches them. These include bank statements, proof of ID, pay slips, tax refunds, purchase documents, profit and loss accounts, balance sheets, cash flow statements, and so on. By combining these documents, a database can be developed to extract and validate data, which will help organizations to track their mortgages. IDP verifies mortgage and loan documents by cross-referencing data from various sources, ensuring data consistency and reducing the risk of fraudulent applications.

• KYC and AML Compliance – IDP assists in automating the Know Your Customer (KYC) and Anti-Money Laundering (AML) processes by extracting and validating identity-related information from documents, reducing manual effort and ensuring regulatory compliance.

• Invoice and Receipt Processing – The accounts payable and accounts receivable processes are most likely to benefit from IDP systems. As with most documents, invoices come in a variety of formats, types and styles. IDP automates the extraction of data from invoices and receipts, facilitating accurate and efficient accounts payable and receivable processes. This reduces errors, accelerates payment cycles and avoids other inefficiencies that could crop up in the manual process.

• Account Reconciliation – IDP helps reconcile account statements, detecting discrepancies between records and statements, and automating the resolution process. This improves accuracy and reduces the risk of financial errors.

• Contract Management – IDP assists in contract analysis and management by extracting key terms, clauses, and obligations from contracts, enabling better tracking, compliance, and risk management.

• Fraud Detection – IDP aids in fraud detection by analyzing documents and transactions to identify suspicious patterns or anomalies.

• Client Onboarding – Client onboarding is an initial task for any bank and may include details regarding customer entity, geography, services, transactions, etc. Leveraging an IDP solution here can help banks extract the relevant pieces of information from documents such as the social security number, or a valid government-issued photo ID such as driver’ s license, passport, and so on. IDP accelerates client onboarding by automating the collection and validation of necessary documentation.

• Regulatory Reporting: IDP automates the extraction and aggregation of data from diverse sources for regulatory reporting, ensuring timely and accurate submissions.

• Customer Feedback and Communications – Financial institutions have become more customer centric nowadays. With increasing digital communication with the customer, information from feedback and survey forms must also become digital, intelligently categorized and classified to enhance customer experience. All types of client feedback such as online forms, comments, complaints, and posts must be coherently structured, organized, validated, and used for meaningful engagement with existing and potential customers. IDP solutions go beyond merely digitizing feedback data. It also includes analytics functionalities that use the data to drive critical business processes and transactions. IDP also helps personalize customer communications by extracting insights from various documents, enabling banks to offer tailored financial advice and services.

• Data Entry and Migration – IDP assists in migrating data from legacy systems to modern platforms by automating the extraction and transformation of data from old documents.

• Risk Assessment – IDP contributes to risk assessment by analyzing documents related to creditworthiness, market trends, and industry reports, providing valuable insights for decision-making.

• Asset Management – IDP supports asset management firms by automating the extraction of data from financial statements and reports, aiding in portfolio management and analysis.
• Tax Document Processing – The filing of tax returns and even tax provisioning involves a lot of data, both structured and unstructured. The volume of data, constantly updated tax rules, and deadline-oriented nature of the work complicate the processing of unstructured data in taxation and tax provisioning activities. The integration of structured and unstructured data from finance and tax repositories complicates the process.

The tax calculation and provisioning must be error-free as inaccurate estimates could lead to financial loss, and reconciliation complications. IDP automates the extraction of relevant information from tax documents, simplifying tax preparation and reporting processes. IDP solutions can intelligently extract data from W2 forms, pay stubs, receipts, invoices, and bank statements and categorize them. When combined with tax report forms, they can populate the various fields and also calculate the tax estimates, filings, and returns.

• Insurance Claims Processing – IDP streamlines insurance claims processing by extracting data from the related documents, and expedites the assessment and settlement of claims.

Incorporating Intelligent Document Processing into financial services operations can have a transformative impact, driving efficiency, accuracy, compliance, and customer satisfaction. The use cases discussed highlight the impact of IDP across various aspects of the financial services industry. By leveraging IDP’s capabilities, financial institutions can drive operational efficiency, reduce manual errors, enhance compliance, and deliver better customer experiences. Outsourcing document digitization services to an experienced provider can help financial organizations transform their document management processes.