Autonomous Finance in 2023: Key Points & Benefits

Artificial intelligence (AI), machine learning (ML), and blockchain technology are leading digital transformation trends for all business functions. Autonomous finance is combining these and other emerging tech to automate financial operations and increasing the efficiency and effectiveness of the finance function.

Autonomous finance¹ redefines financial services by providing an enhanced user experience, thus enabling businesses to keep pace with the fast-evolving digital world. It eliminates:

• Inefficiencies in finance processes
• Inaccuracies in manual processes
• Inadequacies in tending to individual needs

The article first covers the issues of traditional finance. Then, it explores the importance of autonomous finance, tools for implementing autonomous finance, and its benefits. 

Challenges in traditional finance

Though traditional finance has its merits, it comes with its own set of challenges. To capture why is it crucial to implement autonomous finance solutions, let’s have a look at some of these challenges:

Inefficiency and errors

Traditional financial processes demand intensive manual work and consist of repetitive tasks. This makes them error-prone. 

For instance, reconciliation procedures involve heavy data transfers between accounts receivable and account payables, which can result in human errors. That is why financial closing solutions are growing in popularity because they reduce a process that used to last weeks to mere hours.

Slow decision-making

Decisions in traditional finance are frequently delayed and poor because manual data management is lengthy. This slows data-driven decision making, which then limits the company’s agility and dynamism.²

58% of medium-sized and large  businesses still use spreadsheets to plan and budget, but 41% of Excel users say spreadsheets can’t handle the amount of data they have.³

Another IBM report shows  that each year, planning data costs time and creativity. Without a central platform, organizations can: 

• Spend up to 20% of their “planning and analysis” time gathering data 

Dedicate up to 30% of that time making sure that data is correct.⁴

5 ways enabling an autonomous finance structure

Businesses can lead their organizations to autonomous finance from several paths:

A Shift in Mindset:

Gartner claims that one of the most important steps in the transition to autonomous finance is the mind shift, especially regarding CFOs. ⁵ Amongst the company’s proposals to achieve it, three key points step further:

• CFOs should be more open to experiment to harness benefits of autonomous finance in the future.
• CFOs should perceive technology not merely as a tool, but as something autonomous about executing and resolving complex cases without human involvement.
• CFOs should be one step ahead and guide their teams towards these benefits before they are experienced.

Robotic process automation (RPA)

According to a research, ⁶ 80% of finance directors have either deployed robotic process automation (rpa) in finance operations or intend to do so. One main reason behind this is RPA’s ability to automate routine tasks like: 

Artificial intelligence (AI) and machine learning (ML):

AI and ML can aid decision-making by detecting patterns and abnormalities in financial data and provide real-time queries.

• Predictive analytics: Machine learning (ML) can analyze massive volumes of financial data algorithms to forecast future trends, from the market’s general direction to specific credit risks. Financial organizations and individual investors can use this information to make better judgements.

For instance, companies like Amazon⁸ use and provide predictive analytics tools to forecast product demand and sales which helps in managing resources efficiently. 

• Chatbots and virtual assistants: AI-powered chatbots can carry out transactions, handle customer inquiries in real-time, and even offer financial advice.They can help new users open an account by explaining the different choices and getting the information they need (Figure 2).

Blockchain technology

Blockchain can bring transparency and security to financial transactions, reducing the risk of fraud and error (Figure 3).

• Decentralized finance (DeFi): By eliminating middlemen from financial transactions, DeFi improves efficiency. Users are able to trade, earn interest, lend, borrow, and more without the need for a central authority.
• Fraud prevention: The immutability and transparency of blockchain technology can increase the security and reduce the risk of fraud in financial systems. Security is increased considerably because every transaction is recorded on a decentralized ledger that cannot be changed retrospectively.
• Cross-border processes: Blockchain technology speeds up and reduces the cost of cross-border transactions. Traditional international transfers can be expensive and time-consuming, but blockchain technology can process them quickly and with no cost.

Cloud-based financial software

Cloud software enables the analysis of and accessibility to financial info in real time, which makes it easier to produce decisions. Cloud software uses API to connect and integrate different apps together to bring the data on a visible dashboard that transmits real-time information.

• Investment management: Cloud-powered “robo-advisors” can offer automated investment management services. They can suggest a portfolio based on the investor’s risk tolerance and financial goals and can automatically rebalance the portfolio as needed (Figure 4).
• Lending platforms: Cloud-based platforms can automate and expedite the lending process by instantly conducting due diligence on their riskiness, credit history, etc. Learn more about loan processing automation

Learn more about RPA use cases in treasury management. 

4 benefits and practices of autonomous finance

Implementing autonomous finance with the tools mentioned above result with several benefits:

Increased process efficiency

Autonomous finance can help streamline financial processes and make them faster and more efficient. For example, a business could use RPA to automate repetitive tasks like processing invoices or balancing accounts. This would give corporate finance teams more time to focus on other tasks, such as:

• Improving strategic planning and decision making
• Risk management and scenario analysis
• Relationships with clients

Example: A company might use RPA to automate its accounts payable process, reducing the time it takes to process invoices and make payments from several days to a few hours.

Improved accuracy

Autonomous finance can increase accuracy of financial processes by minimizing manual error possibility. Machine learning algorithms can automate matching activities to the right accounts in a company’s general ledger. This would reduce the chance of mistakes in financial reports.

Example: A bank might use machine learning to transaction verification, reducing the chance of errors that could lead to regulatory issues or financial losses.

Personalized services

Autonomous finance can give each person customized services based on their spending habits and financial goals. Robo-advisors can use AI and machine learning to give personalized investment advice that can effect business growth.

Example: Using a robo-advisor, an individual investor can manage their investment portfolio and receive customized advice and automatic adjustments. This can automatically change an investor’s investment portfolio based on the investor’s risk tolerance and financial planning.

Cost savings

As mentioned, autonomous finance can lead to cost savings by automating manual processes and reducing the need for human intervention. These cost savings can come from reduced labor costs, faster processing times, and fewer errors.

Example: Blockchain, AI, and machine learning could speed up loan application verification for financial firms. Blockchain’s transparency and immutability eliminate middlemen and reduce costs, saving money. This novel solution requires less human intervention, reducing transaction costs and application processing time.

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External links:

1. “What is Autonomous Finance?” Gartner. June 13, 2023. Retrieved on June, 10, 2023.
2. “The future of financial planning and analysis with digital transformation” IBM. June 13, 2023. Retrieved on June, 10, 2023.
3. “Spreadsheets are holding you back” IBM. June 13, 2023. Retrieved on June, 10, 2023.
4. “Modern Planning Platforms Drive Business Agility and Better Outcomes” IBM. June 13, 2023. Retrieved on June, 10, 2023.
5. 3 CFO Mindset Shifts for Autonomous Finance, With Emily Connelly. June 13, 2023. Retrieved on June, 10, 2023.
6. Robotic Process Automation (RPA) in Finance, Gartner, June 13, 2023. Retrieved on June, 10, 2023.
7. ”https://www.mdpi.com/2079-9292/12/4/986” June 13, 2023. Retrieved on June, 10, 2023
8. “Analytics on AWS” Amazon. June 13, 2023. Retrieved on June, 10, 2023.
9. “https://www.haptik.ai/blog/best-chatbots-in-financial-industry#form” June 13, 2023. Retrieved on June, 10, 2023.
10. “https://www.researchgate.net/figure/Money-transfer-using-blockchain_fig2_360932956” June 13, 2023. Retrieved on June, 10, 2023.
11. ”https://www.sciencedirect.com/science/article/abs/pii/S0040162520312476” June 13, 2023. Retrieved on June, 10, 2023.