Does business automation need a human touch in FinTech?

Published : 6 years ago, on 18/08/2018

The advent of Artificial Intelligence (AI) and machine learning has meant we are amid one of the biggest technological revolutions of our time. Emerging SMEs have taken advantage of this and since 2015, a new AI company has launched almost every week in the UK. This access to innovation has meant that smaller firms, if fast-adapting, have a very real chance of overtaking established corporates across all sectors.

What could be a cause for concern during this technological rise, however, is the abandonment of human interaction in business altogether.

For Peter Tuvey, Co-Founder and Managing Director at Fleximize, start-ups need to remain mindful whilst adapting to this tech and ensure a maintained balance with human interaction is still core to any business function.

The FinTech sector in particularly is rapidly expanding due to the advent of automation, and with swift growth comes increased investment. According to Accenture’s analysis of data from CB Insights, global investment in FinTech reached an all-time high in 2017, with alternative finance companies receiving the biggest chunk of this capital.

These alternative finance firms give hope to many of the UK’s start-ups. They have come to replace traditional bank loans and have identified a very real void in the market. In some firms, negotiations between clients and bank managers are now no longer necessary with the arrival of automated credit checks and online applications. Robotic process automation (RPA) is now replicating the human process which means companies can reduce employee numbers if needed and adopt a digital Backoffice.

In theory, these AI functions seem like economically savvy solutions for companies. Humans will be replaced by machines that require no constant remuneration and at most, these technologies may need a human to service them once or twice a year, but in that time, they are able to replicate processes at a considerably faster pace.

Japanese firm, Fukoku Mutual Life Insurance, reportedly replaced 34 human insurance claim workers with “IBM Watson Explorer,” in January 2017. The switchover, in theory, meant a saving of roughly $1.1 million per year on employee salaries by using the IBM software, meaning it hopes to see a return on the investment in less than two years.

In practice, however, these disruptive technologies if adopted at front of house in alternative finance are increasingly reducing human interaction with customers. When business in the SME sector is largely considered a business of relationships, how effective can full automation truly be? Even in this era of digital growth, clients expect a personalised service. When the inevitability of something going wrong occurs (because this is the nature of business), the last thing a customer with an issue wants to do is seek help from a robot.

If a digitised front office is adopted as a sole process, you run the risk of displaying a lack of concern and empathy for your client’s needs. In the end, no matter if your business is tech-driven, your customers need communication with human, emotional and cognitive functions. According to Bain & Company, it costs a company 6-7 times more to acquire a new customer than retain an existing one, so when it comes to looking after your bottom line, be aware that this means looking after your existing customers, as well as acquiring new ones.

In the world of alternative business lending, incremented algorithms alone pose difficulties. Business owners who don’t have enough in filed accounts that are seeking out a loan can be left without the chance to explain, justify or negotiate their credit request if they are faced with automated systems which simply accept or reject their application. This unnecessarily sacrifices financial gain for both parties for the sake of efficiency. So, though economical in some cases, losses are potentially suffered as a result.

For these firms hoping to replace the role of the big banks and help the UK’s SMEs, automation should be adopted as a filter provision during the initial phases of application only and business owners should ensure that designated case managers are assigned to every potential client to offer a human touch. By being attentive and empathetic to each case, alternative lenders can maintain positive customer interaction, guarantee subsequent client retention and give their customers something the big banks cannot.

This is the strategy Tuvey implements within his AltFi firmFleximize, which to date has lent almost £80m to SMEs throughout the UK. In 2017, it saw a massive 132% increase in total capital lent, balancing both a consumer and automated process to clients seeking a loan.

Author: Peter Tuvey, co-founder of alternative finance provider Fleximize