Understandig the Role of Decision Automation in Digital Banking

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For many years, financial companies have been digitalizing their business processes. They often fail at the same point: where complex decisions have to be made. We explain the role of decision automation in digital banking and show, how a new standard supports its implementation.

The Complex World of the Financial Industry

Everyone has seen the popular “Apply now” button on retail bank loan websites. Users quickly fill out the web form, submit their data, and wait for the result – only to be disappointed: “You will receive the documents by mail in a few days.” This is not a state-of-the-art, customer-oriented process, and certainly not a digital one. However, the bulk of bank and insurance company business processes are in a similar state. Why is the financial industry still struggling with truly digital end-to-end processes?

The answer is that certain process steps are simply too complex, business-critical, and risky for common methods of digital transformation. One example is the typical consumer-sector lending process, which can include hundreds of decision rules. These rules assess customer data and calculate credit default probabilities and interest rates while ensuring compliance with regulatory requirements. The bank client remains unaware of all these highly complex business decisions, which are made in the background, when he or she clicks a button on the bank’s website.

Why Conventional Approaches Fail

In many institutes, the complex, specialized decision-making logic is “digitized” by means of spreadsheets, in the form of application code or in BPMN models. A quick look at these methods reveals deficits.

  • Spreadsheets
    Spreadsheet tools like Microsoft Excel are widely used decision-making systems. They help to assess complex risks, calculate prices and conditions or simply serve as a “look-up table” in the process. However, they are not suitable for large transaction volumes and in particular for integration into an automated process.
  • Coding
    Decisions can be programmed directly into applications for automation. However, complex decisions usually require the inclusion of departments that are difficult to cope with the often confusing code constructs. Redundant implementations and different programming languages ​​increase overhead and make maintaining logic a cumbersome and error-prone process. Changes are therefore difficult and from a compliance perspective, the method is difficult to understand.
  • BPMN
    Simple, static decisions can be implemented with the Business Process Model and Notation (BPMN). However, for complex decisions and technical logic, the standard for business processes is not designed (but for process logic). A “misappropriation” usually leads to confusing, overpowering process models. This has also been recognized by the Object Management Group (OMG®). The consortium developing the BPMN standard has therefore launched a new standard: the Decision Model and Notation (DMN).

Digital Transformation Means Automation

With Decision Management and the DMN (Decision Model and Notation) standard, the Object Management Group has defined a new standard to address this gap. The DMN standard unifies and simplifies the modeling, implementation, and automation of decisions, enabling digital end-to-end processes. Instead of optimizing internal workflows, companies optimize and automate their decision-making. This allows them to focus on their customers who expect real-time responses in the digital world.

Digital transformation moves the focus from long-living workflows to real-time decisions.

Two Overarching Arguments Support the DMN Standard:

  1. DMN finally enables companies to bring transparency to their business decisions: What data flows into the decision-making processes? Where does this data come from? What decisions are interdependent, and who (or which system) is involved in making them? Are all regulatory requirements addressed in the decision?
  2. DMN allows institutions to introduce a consistent corporate-wide approach for decision modeling, documentation, and implementation, significantly reducing uncontrolled growth of methods in projects.
  3. The DMN standard helps companies drive digital business transformation. By specifying a standard for decision logic execution, DMN allows decision automation – a core enabler of digital business.

Implementing Centralized Decision Services

Technically, these business decisions are implemented and integrated as web services. The trend is a centralized approach to these “decision services” (White Paper). Decision models are stored and maintained in a central repository. From there, they are consistently deployed as decision services that can be used and re-used in any process, application, or channel. This allows companies to provide shared services, such as fraud detection services and compliance checks, across the organization and beyond.

Standards such as REST (Representational State Transfer) or SOAP (Simple Object Access Protocol) ensure seamless integration of decision services into the existing IT environment. Centralization simplifies maintenance and ensures consistency of decision services. Governance features in DMN tools also help securely manage decision models and services with their versions. This is important, for example, if different temporal, regional, technical, or regulatory validities come into play.

Examples of decision services are:

  • Pricing services used in various digital distribution channels.
  • Compliance Services performing regulatory reviews (e.g. age checks)
  • Risk services that estimate loan default probabilities
  • Fraud Services checking fraudulent online banking transactions
  • Claims Services, which support claims settlement in the insurance environment
  • Etc.

All of these services deliver real-time decisions. They can be used flexibly in internal processes or in digital customer communication via the web or app. If you have questions about “Real-Time Decision Management with Decision Services”, do not hesitate to contact us.

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Further informationen
White Paper: Business Agility through Central Decision Services

Optimize the management & automation of decisions with central decision services.

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