3 Common Misconceptions About Automation and How to Overcome Them

During a time of compressed margins, high labor costs, and increasing regulation, improving operational efficiency is at the top of the priority list for many banks, credit unions, and insurance firms.

According to KPMG, “improving processes across the business” is the most frequently cited technology goal for financial services firms, named by 53% of industry executives surveyed.

This is one reason automation is a critical focus area for financial services organizations, with respondents to SMA’s 2024 State of Automation in Financial Services survey of 580 U.S.-based executives from the banking, credit union, and insurance sectors ranking automation’s importance to their organization’s success at an average of 8.5 out 10.

Yet, the survey uncovered a significant gap between these organizations’ current and desired degrees of automation. According to our research, the median percentage range of operations currently automated is between 41-50%, while the median desired level of automation is between 61-70%. This 20-point gap makes a strong case for implementing comprehensive, end-to-end automation throughout the organization.

The truth is, financial firms are confronting a series of challenges that prevent them from optimizing their use of automation throughout the organization and achieving the process efficiency they desire.

3 perceived barriers holding organizations back

Financial services organizations clearly want to automate more of their operations to achieve their strategic business goals. So, what’s standing in their way?

We asked executives this question, and their responses included a mix of expected challenges like insufficient budget, a dearth of staff and project resources, other priorities taking precedence, and time constraints, as well as some that seem less intuitive, like inadequate staff training, a lack of executive buy-in and support, and limited interest in managing automation in-house.

These concerns highlight several perceived barriers to deploying automation that are holding organizations back from achieving their stated goals of improving efficiency, growing their business, and getting time back to focus on higher-level, more strategic initiatives. Here are three of the most common misconceptions about automation (and some tips for overcoming them):

Misconception #1: Automation is too expensive!

The reality: It’s a common trope that the financial burden of automation is a significant barrier preventing organizations from achieving their automation goals. The reality? Major financial investment isn’t necessarily required for effective automation—it’s arguably more important to implement the right automation solutions in the right order, and it costs less than you think to do so!

The fact is, while automation does have a cost, it costs more not to automate. This is why automation leaders—those organizations with 80% or more of their operations automated—spend more on automation than slow adopters (those with less than 40% of their operations automated). In fact, 79% of leaders surveyed spent at least $250,000 on automation in the past year, and three in four intend to spend even more in the year ahead. And they’re getting their money’s worth for these investments—69% of leaders reported cost savings of $100,000 or more each year from automation, compared with just 41% of slow adopters.

“For any organization that has a lot of human-driven business processes, automation can recover so many work hours that you can dedicate to other purposes within your institution,” says Robert Carter, Systems Engineering Manager at HAPO Community Credit Union. “Automation takes time, money, and resources to deploy. But you can’t afford not to.”

Overcoming this barrier: Get executive buy-in and support.

Support for automation starts at the top. Yet, one of the biggest challenges for IT leaders is how to explain the value of automation to non-IT C-suite executives, especially considering the wide variety of solutions on the market today.

Take the time to explain automation concepts to your organization’s top leaders and share how the technology’s benefits align with your firm’s goals and objectives. Also make sure to share the ROI and impact that automation can have on your organization’s bottom line.

Misconception #2: Outdated infrastructure, particularly legacy systems, prevent organizations from implementing the latest in automation tech.

The reality: Modern automation solutions are designed to be flexible and integrate across a variety of tech stack setups, including on-prem, cloud-based, and hybrid systems. Legacy systems are an easily surmountable hurdle for advanced automation solutions that include cross-platform orchestration capabilities.

Interestingly, although “harmonizing systems” was not commonly cited as an automation goal by respondents to the State of Automation survey, it was cited as a top benefit. This underscores the fact that many financial services organizations discount automation’s immense potential to help bring their legacy systems up to speed.

“With [WLA], we have the capability to schedule across all environments: in the cloud, on servers, and on the mainframe,” says an Operations Team Manager at Ameritas. “Now, we’ve got the software in place, and we’re ready to start scheduling. We’re ready to start moving forward.”

Overcoming this barrier: Training and low-code solutions.

Implementation doesn’t end at installation. A successful process features an end state where the IT team feels comfortable administering their new automation environment and creating new workflows.

Look for a partner that considers these factors and ensures your team is prepared to go live and manage your automation and orchestration during hand-off. Even if it means taking your key staff out of the operation for a week for remote training classes, the short-term inconvenience is well worth the investment.

In addition, leading automation solutions now offer low-code and no-code options, such as self-service capabilities, which enable front-line and non-technical staff to initiate fully automated workload routines (even those spanning modern and legacy systems) with zero risk of error or downtime to critical systems.

Misconception #3: A lack of sufficient resources—whether financial, human, or technological—is a significant barrier to implementing automation.

The reality: In actuality, automation returns bandwidth to staff, allowing organizations to achieve more, even with limited resources. One of the top benefits of effective automation is the ability to get time back, allowing staff and leadership to focus their time and efforts on higher-level, more strategic business challenges and initiatives.

“Without an automation tool, we had to schedule employees to cover system processing 24 hours per day,” says a core systems analyst at Veridian Credit Union. “Now we’re able to let the schedule run automatically, have no more overnight shifts, and we’re able to expand automation into other parts of the organization.”

Aligning automation objectives with organizational goals is something that automation leaders do differently. They focus on setting strategic business goals like revenue growth, digital transformation, and better customer service outcomes, recognizing that automation is the key to freeing up time for higher level, interconnected thinking, empowering the organization to move forward and achieve its strategic goals.

According to Kim Mehlhaff, IS Operations Manager at Noridian Mutual Insurance Company, automation has been a key driver of organizational growth. “Over the years, automation has helped us grow our business without adding additional staff. Today, we have grown so complex and so large, that our business literally couldn’t run without automation."

Overcoming this barrier: Outsource your automation management.

Businesses are struggling to find the time and talent to run their automation initiatives, and it’s hurting their ability to grow. Outsourced managed automation services function as an extension of your team, handling all aspects of the implementation and maintenance of automation solutions at a fraction of the cost of a dedicated employee. In turn, this allows your organization to focus on high-value work like strategic initiatives and new product development.

Managed automation services allow you to benefit from the expertise of experienced IT staff who’ve worked in your industry without the overhead of hiring a full-time employee. It also allows you to achieve the scalability and efficiency of system-wide automation and benefit from 24/7 coverage, providing you with peace of mind. Lastly, a managed service solution ensures your software stays up to date with the latest features, best practices, and security protocols.

Once you address the misconceptions your organization has about automation, you put comprehensive, end-to-end automation well within reach, which is the key to improving process efficiency throughout your organization and achieving your business objectives.

By deploying this type of solution across the entire enterprise, financial services firms can finally achieve the promise of modern automation and obtain the ROI they desire to remain competitive and innovative in a dynamic, evolving industry.

Gain insights about how your financial services peers are using automation today to streamline processes throughout the organization and achieve higher-level business goals in the 2024 State of Automation in Financial Services Report. And to learn more about how to effectively deploy an end-to-end automation solution in your organization, contact the financial services automation experts at SMA.