Revolutionizing Financial Institutions with Document Digitization Software

20th November 2023

“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.”

George Westerman

Globally, financial institutions are embracing a new era of digitisation, with their digital transformation spending set to reach $3.4 trillion by 2026. Having realized the limitations of their operationally inefficient legacy systems that offer limited scalability, these organizations are adopting new digital tools to better respond to the evolving landscape and run more agile operations—document digitisation software is one such tool.

Given how integral documentation is to running streamlined workflows in financial organizations, swapping out thick paper stacks for sleeker document digitisation software makes ardent sense. Unlike their physical counterparts, which are hard to store and cumbersome to process, digital documents offer quick storage and retrieval and ease of analysis and shareability.

This article discusses the perks of deploying document digitisation software to transform the financial industry’s traditional workflows.

What is Document Digitization Software?

Document digitization software is a technological solution designed to translate paper documents, including photographs and handwritten texts, into machine-readable, structured digital formats, such as CSV, PDF, JSON, XML, XLS, and more.

It converts paper stacks into digital equivalents using several tools and techniques, like optical character recognition (OCR) technology. It also includes the conversion of analogue audio recordings into valuable digital assets. For instance, the software may extract invoice numbers, dates, amounts, and vendor names when digitizing invoices.

However, it isn’t merely limited to document scanning and goes beyond that by enabling the indexing, editing, and processing of digital data for further insights. So, by eliminating manual paperwork, which, in turn, improves operational speed and minimizes the margin for errors, this transformative technology helps streamline workflows, leading to colossal cost savings.

everal core principles underpin the process of document digitization

Scanning and Image Capture: High-quality scanners capture text from paper documents and photographs.

Optical Character Recognition (OCR): The scanned images are analyzed using Optical Character Recognition (OCR) and converted into machine-readable characters, which are editable and searchable. Other techniques like optical word recognition, intelligent word recognition, and intelligent character recognition may be used as well.

Data Extraction and Indexing: After OCR, the software identifies, extracts, and indexes specific data from the digitized documents, allowing for easy retrieval and organization.

Document Management Systems (DMS): All digital documents are securely stored in a central repository called DMS, whether on-site or cloud-based, for quick retrieval and access control. Such an organisation helps create audit trails necessary to showcase compliance.

The Role of Document Digitization in Financial Institutions

As financial organizations grapple with huge data volumes, introducing systematized document digitisation software is essential for collecting, arranging, managing, and processing the requisite information categorically. It serves the following purposes:

Enhanced Document Management: The software facilitates companies to meticulously organize and store their digital documents in a secure and accessible manner, eliminating the risk of misplacing documents. It helps tag and index the files, which makes retrieving them a quick process. Moreover, as it keeps track of all subsequent document edits, institutions retain version control, improving transparency and auditability—essential compliance elements.

Enabling Remote Access and Collaboration: Centralising document digitisation allows employees and customers to securely access files anytime, anywhere, on the go, on their own time. Such convenience enables real-time collaboration and communication among users, boosting productivity. This feature is especially useful during unforeseen disruptions like a pandemic or war when meeting physically is not feasible.

● Reduced Paper Dependence: As per some estimates, a business’ paper usage rises by 22% every year, doubling up in three years, substantially raising costs. By digitally storing documents, financial institutions eliminate the need for printing, scanning, and storing paper documents, thereby reducing their operating expenses. It also reflects a lower ecological footprint, touting them as socially responsible enterprises. Further, it gives a fillip to their digital transformation journey by encouraging the adoption of paperless workflows and processes.

The effects of document digitisation show up tangibly in various financial processes, ranging from onboarding and identity verification to loan origination and processing.

For instance, by capturing data from the submitted documents, including identity and address proofs, ITRs, and property documents, banks can quickly verify and validate data and reduce the turnaround times (TATs) on application processing. Consequently, opening new accounts, availing loans, mortgages, and insurance, or getting credit cards has become convenient for customers.

Moreover, as financial institutions can match and cross-verify customer information against established government databases, watchlists, and deny lists, they can successfully undertake KYC verification and minimize the risk of fraud and tax evasion.

Benefits of Document Digitization

The advantages of adopting document digitization software in financial institutions are manifold and are outlined as follows:

Improved Data Security

With document digitization software, financial companies can encrypt and protect digital files from unauthorized access, modification, or deletion, which is a prime concern for almost 78% of Indians. By further assigning granular security permissions to specified, trusted individuals, they can stem internal sensitive data breaches—suffered by nearly 59% of Indians. In addition to minimizing the likelihood of data loss, digitization ensures complete data security, integrity, and confidentiality during natural disasters, which is not possible with physical storage.

Better Customer Service

Document digitization software can improve customer experience and satisfaction by offering convenience, speed, and personalisation. As digital documents can be retrieved, validated, and shared at the click of a mouse, financial companies can swiftly process the application. This lowers their response time and helps establish seamless communication between the organization and its customers—a quality prized by over 85% of clients.

Enhanced Compliance

Translating physical papers into digital documents eases regulatory compliance, allowing for easier auditing and tracking. By law, financial institutions must adhere to several rules and standards, such as anti-money laundering (AML) norms, prevention of terrorist financing, data protection, and more, or risk being penalized, as has been the case for over 48 companies paying Rs. 73 crore to the RBI since 2020. Document digitization software can also help financial institutions monitor their transactions for anomalies or discrepancies.

Reduced Costs

As handling a sizable volume of documents entails major storage and administrative overheads, document digitization can help save on costs, improving bottom-line results. Moreover, it discounts the need for businesses to hire additional security specialists as they scale their operations to meet the burgeoning data validation needs. Further, quick data retrieval and analysis improve working efficiencies, redirecting resources toward gaining more business.

Better Workflows

With almost 46% of employees losing time due to paper-related workflow issues, adopting document digitization software is no longer optional. The ability to index, metatag, and catalog documents enables intelligent search and easy retrieval, streamlining the diverse banking processes and workflows involving several departments. Automating repetitive tasks enhances workflow efficiency and saves precious resources without aggravating errors.

The Future of Document Digitization

As technology advances and financial needs evolve, the way institutions undertake document digitization is bound to change. AI is already playing a pivotal role in the entire digitization lifecycle, from document classification to translation. Companies are deploying AI-powered processes to automate their workflows, including repetitive tasks such as document classification and data routing. Not only does it minimize manual errors and raise productivity gains, but it also helps archive timeworn documents without any data loss.

However, AI is projected to make its biggest contribution yet to data extraction. AI-powered document extraction will empower institutions to automate the identification and capture of critical information across diverse documents. This will improve data accuracy, simplify their organization in the DMS, and reduce TATs.

Another trend to keep an eye out for is the burgeoning use of machine learning (ML) algorithms. Unlike classic OCR approaches that offer poor results when translating handwritten text or uncommon font styles, ML-based OCR systems offer superior text conversion accuracy, significantly streamlining document processing. This is particularly useful for converting documents written in regional languages.

Moreover, over time, financial institutions may integrate their document digitization software with other digital systems like customer relationship management (CRM), enterprise resource planning (ERP), business intelligence (BI), and analytics. Such integration helps create a frictionless, holistic digital ecosystem, yielding significant economies.

Blockchain and user behavior analytics will also feature prominently, especially in processes dealing with sensitive customer data. By leveraging the ledger’s immutability, businesses can securely establish user credentials, protect and track non-public information, and prevent unauthorized access. Finally, financial institutions may adopt cloud-based systems, driven by their need to reduce maintenance costs, foster greater collaboration, and ensure easy scalability.

From Paper to Pixels: Transforming Operations with Document Digitization Software

By converting physical documents into machine-readable digital formats and structured data, document digitization enables financial institutions to unlock several benefits. It empowers institutions to process their documents for relevant information, requiring prompt action and heightening efficiency gains. It also helps reduce storage costs, fully secure documents, optimize workflows, and enhance compliance. Financial institutions must embrace these digital tools to better adapt to the evolving landscape as the future promises even more innovation and technological advances, including AI/ML, blockchain, cloud computing, and multiple-system integration.

About Perfios:

Perfios Software Solutions is India’s largest SaaS-based B2B fintech software company enabling 900+ FIs to take informed decisions in real-time. Headquartered in Bangalore, India, Perfios specializes in real-time credit decisioning, analytics, onboarding automation, due diligence, monitoring, litigation automation, and more.

Perfios’ core data platform has been built to aggregate and analyze both structured and unstructured data and provide vertical solutions combining both consented and public data for the BFSI space catering to their stringent Scale Performance, Security, and other SLA requirements.

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