For the first English blog post of 2015, I would like to begin with a subtle but evident trend that could have major implications for the financial industry in the future.
The media has been abuzz with reports of Toppan Printing’s plan to introduce an electronic system to facilitate the sale of home loans. In light of this, in this edition we want to consider straight through processing and its possibilities and implications in the financial services industry.
The proliferation of bank ATMs has largely driven cash transactions from banks, bank branches, and cashier windows. Meanwhile, as banking services have migrated online, online banking and online trading have resulted in small-value, high-frequency financial transactions becoming increasingly self-service in nature.
Similarly, the Internet has and continues to transform the insurance industry. Online insurance premiums payment and online requests for insurance materials have already become the norm. However, documentation and message formats particular to an industry or specific to individual financial institutions are a challenge. Today the technology is still a far cry from being able to automate business processes for complex products. As such, this inability—in addition to administrative costs and financial transaction risk—has also become a major obstacle to sales channel diversification.
Bank home loans could be called the poster child for products that have fallen behind the digitization and STP curve. However, if digital technology could be used to handle financial products—in this case home loans—that need to be processed manually, then it would be possible to recommend and compare products so that consumers can obtain the optimal loan product at the right time and place. Banks are the companies that create financial products—home loans; homebuilders and house manufacturers are the companies that market or sell these products. Digital technology is driving the decoupling of product creation from product sale, and profoundly transforming this business model.
A glimmer of this and things to come appeared on in the December 22 edition of Nikkei (1). This glimmer was an article reporting on a new initiative by Toppan Printing, in conjunction with realtor Tokyu Livable and four banks—the Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Trust Bank, Sony Bank, and Mitsubishi UFJ Trust and Banking Corporation.
Today the proliferation of digital technology is spurring the automation of business processes. Digitization is a key technological development that promises to bring improvements and advancements in many areas. Indeed, processes that cannot be digitized are likely either extremely high value-added or, perhaps, should be eliminated.
(1) The Toppan-developed system will be set up at Tokyu Livable’s network of real estate offices. It is designed to streamline the home loan application process by allowing customers to use a tablet computer to apply for a mortgage from any of the four banks, and to as many as three at once.