The following is a guest post from Mohammed Kafil, Senior Product Manager, Kissflow.

The banking and financial services industry is severely affected by the global financial crises. They are in a state of flux due to regulatory confinements and the market’s increasing demands. For the past few years, the banking and financial services sector has been under intense pressure to meet market expectations while complying with strict regulations. This pressure is expected to increase in the foreseeable future. Banks and financial institutions must adopt new strategies to sustain and compete in this environment. Automation is an inevitable change that banks and financial institutions must adapt to sustain.

Leading banks and financial institutions are growing sustainably even in this environment by reducing costs, managing risk, and achieving transparency through procurement automation. Read on to understand why procurement automation is necessary for banks and financial institutions.

The Need for Procurement Automation

Procurement is the process of sourcing or buying goods or services for a business. Procurement automation is the process of automating the periodic steps involved in the procurement process. It automates significant procurement stages such as digital purchase and requisition forms, routing to suppliers and approvers, record-keeping of purchases, and the labor-intensive tasks of procurement, saving valuable time for the procurement team.

Benefits of procurement automation in banking and financial services

Improved visibility

Since the financial crisis, the banking industry has been scrutinized more closely by the public. The corporate spending habits of banks have piqued the curiosity of the media. As a result, the need for transparency, traceability, and compliance in a bank’s procurement operations has never been more critical. Increased regulatory pressure from governments and administrative agencies has also prompted the sector to adapt. Many banks are now taking concrete steps to better integrate risk management, compliance, and purchasing ethics into their culture.

Using procurement systems that support this process is the most effective way to assure visibility and compliance in purchasing activities. Banks can limit the approval levels of purchase managers by implementing end-to-end procurement technology solutions, ensuring that spend commitments closely reflect their procurement strategy. From managing approvals to reporting and spend tracking, procurement automation solves all these challenges and acts as a single source of truth to the organization.

Reduced costs

Banks are primarily service-based corporations. The great majority of their spend (approximately 40%) goes to management consultants and temporary workers in the professional services category. The next two largest spend areas, information technology and facilities management, each contribute to nearly 20% of the overall spending. For a service-based industry like banking, spending on services has historically been more difficult to assess, comprehend, and manage than spending on products. Leading banks, on the other hand, are successfully tackling these issues by automating their procurement processes.

Through automation, buyers can acquire a granular grasp of exactly what they are getting and what degree of service they can expect from the purchase by producing more detailed, automated rate cards. Further, the cost spent on employee expenditures can be significantly saved, as it accounts for 64 percent of a bank’s total costs, according to the banking sector spend report.

Risk mitigation & enhanced supplier collaboration

Implementing the appropriate technologies is critical not just for centralizing procurement policies and processes, but also for risk management. Due to the necessity to assure regulatory compliance, supplier performance, and risk mitigation have become significantly more important. Because of the high level of regulation in the financial services industry, procurement is under pressure to reduce risk from executive teams and other business stakeholders, who are more involved in supplier management than in other industries.

Even for companies with fully dedicated risk-management teams, gaining insight and control over supplier and third-party risk can be difficult. Financial services firms can use procurement technology to gain visibility into supplier operations and risk, allowing them to develop a complete picture of what’s going on in the supply chain. These technologies have collaborative data management features that allow internal stakeholders to gather and centralize supplier data from around the organization and share insights with senior management.

It also gives vendors access to a platform where they may post and update data. This contains certification information, financial disclosures, remittance and contract details, products, services, and other data required for risk factor calculations. With all of this data in one location, financial services companies can track and manage risk more effectively throughout the supply chain.

Banks and the financial services industry benefit greatly from procurement automation. Despite an increasingly turbulent and competitive sector, it guarantees that organizations remain competitive by managing compliance, addressing risk, and maximizing profit.

Mohammed Kafil is a certified procurement consultant who has been coaching companies to establish resilient digital procurement operating models for over a decade now. With Kissflow Procurement Cloud, a flexible procurement software that streamlines end-to-end procure-to-pay, and also eventually the vendor management process, Kafil helps medium and large enterprises with their digital transformation projects.