Towards an Architecture of Straight-Through Processing
Straight-through processing in financial services is a jigsaw puzzle. Some pieces are unique to your business, but there are many emerging architecture building blocks.
Straight-through processing (STP), the long sought-after ideal in business processes, occurs when clients’ interactions with a company are fulfilled speedily, accurately and automatically, without manual intervention.
When we do this, clients are delighted with our service levels, our processing costs are down, the majority of our interactions are automated, and we have our valuable people concentrating on the exceptions, with their expertise being applied where it is most important.
We are all busy with pieces of the puzzle – we are re-engineering our processes, extending our reach to the customer through digital channels, and modernising our systems to be part of a service-oriented architecture. Why then is straight-through processing such an elusive target?
Unpacking the pieces on the proverbial table, there are a number of problems, each of which compounds the overall situation. Many processes are still manual, and require physical documentation. There is still much human interaction required, including complex human decision-making. This is especially the case in our risk assessment processes, which keep our experts up to their elbows in mundane work. Our legacy systems inhibit us from orchestrating automated interactions as we’d like, and the quality of our data requires manual sense checking before actioning. Even our operational models are not set up for real-time collaborative interaction. And probably, above all, the complexity of our operating environments is the major inhibitor.
How do we simplify this unmanageable jumble so that we can even start to consider more automated interaction with our customers and fulfillment of their requests?
There are many articles that talk about STP – the imperative, the benefits and the challenges. There are even a few that talk about people who have started the journey. Not many give you the big picture. Here, we’d like to give you a view of the components involved, the obstacles that are standing in the way, and how people are successfully addressing these. Let’s start the journey towards an architecture of STP.
Sorting the Pieces
We believe there are a number of technologies and applications coming of age, the combination of which will really let us take a significant step towards straight-through processing.
These include innovative digital channels, a maturing business process management discipline, electronic document and content management, service-oriented architecture, business information and analytics, business rules engines, complex event processing and knowledge management.
We’ve seen these components before, and each is a piece of the puzzle. But we believe the whole is greater than the sum of the parts – working together, in the right architecture, they can make a significant difference to our straight-through processing landscape.
In a simple model of a typical financial services enterprise, the typical applications can be viewed in layers:
Systems of Engagement: This layer contains various ways that clients and partners communicate with the business. This is a space of much innovation as we introduce new ways that our customers can communicate with us. Mobile is all the rage, and social media and the Internet of Things wait in the wings.
Systems of Record: These systems keep the actual transactions and information about the business and are underpinned by a financial view of the events and actions in the business.
Systems of Insight: These systems give managers and stakeholders a crucial view into the operational health of the business.
STP most often walks a path through these layers. It starts with client engagement through a channel, proceeds through logic in the systems of record, engages again with partners, stores the results in systems of record, and closes the interaction back through a client channel. All the while, progress is monitored and controlled through systems of insight.
Many organisations are putting semi-automated processing in place, often initiated by a customer interaction. Processes such as online application submission and online claim initiation are using digital channels in innovative ways. But this is just a start. Most of these initiatives turn out to be just ways of initiating the same old manual processes, and don’t walk the whole path as described above.
Inhibitors and Enablers
As we see it, there are a number of inhibitors and enablers of STP, along this path. An inhibitor can be seen as an obstacle that makes it difficult to process client and partner requests speedily, accurately and automatically, whereas an enabler is the set of emerging products and practices that can be used to overcome this obstacle.
The table below contains examples of these inhibitors and their corresponding enablers.
|Manual interaction||Digital channels, Web2.0, electronic forms, electronic signatures, automated B2B services||Systems of Engagement|
|Human decision-making, manual processes||Business process automation, Complex event processing||Systems of Engagement & Record|
|Physical documents||Electronic documents & metadata, OCR, barcodes||Systems of Engagement|
|Data quality & dispersion||Master Data Management||Systems of Engagement & Record|
|Product complexity & variety||Flexible product configuration through business rules||Systems of Record|
|Manual risk assessment||Automated risk assessment systems using rules engines||Systems of Record|
|Flying blind operationally, difficulties in adhering to legislation and regulatory requirements||Business information & analytics||Systems of Insight|
|Legacy/COTS applications, systems integration challenges||Service-oriented architecture||All|
|Heavy capital investment required into platform, complex-to-manage platform||Platform-as-a-Service, Software-as-a-Service||Platform|
Building the Puzzle
Straight-through processing is more often a term of aspiration rather than of practice. But, we can make progress towards it. For some industries and companies this is easier, whilst others face a more difficult path.
There are solutions – increasingly viable and proven solutions, enablers of true STP. Each of these requires investment and will yield benefits in their own right. Strung together, though, they can achieve more than they do individually. A pragmatic way of starting the journey is to choose a particular business-value-producing path through your systems – a new product being launched, or making an existing process more effective – and to replace the inhibitors along that path with their enablers. Much like we would build a puzzle by constructing prominent features first, we can incrementally construct threads of STP. As we walk the paths through an increasing number of interaction scenarios, we will remove more and more of the obstacles to straight-through processing and bring us closer to speedy, accurate, automated fulfillment of all customer requests.
Alacrity Technologies is a privately held software company that provides services and crafts software solutions to fit a specific business and technology domain. For more than a decade, Alacrity has provided the South African financial services and retail industries with exceptional software solutions, strategic services and IT resources.
Dr Andrew Boake
CTO, Alacrity Technologies
(+27) 21 486 8800