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Why Have Regulated Industries Traditionally Been Behind the Tech Curve?

Compliance in Regulated Industries Software Development

Regulated industries have a lot to worry about. Not only do they need to meet or exceed customer expectations, grow revenue and strengthen their business, but they’re also controlled by government rules they must follow – from licensing, permitting and compliance matters, to following and adhering to national and international legislative and policy developments.

Given their extra responsibilities and the need for transparency, reporting, auditing and inspections, you would think that out of all types of firms, regulated industries would be the first to embrace digital transformation through automation, AI and other technologies. Yet, ironically, banks, health insurers and telecommunications firms, have traditionally been among the least progressive adopters. In fact, according to the ACORD Insurance Digital Maturity Study, “while just about every insurance company touts the importance of digitalization to improve the user experience, improve performance, and build business, fewer than 30% have truly digitized the value chain.”

While it’s clear that regulated industries have been held back from fully embracing digital transformation, the challenges of COVID-19 and other issues have thrust their digital limitations into the spotlight. Consider the following challenges brought on by the pandemic and other issues.

Loan Processing and Other Banking Constraints

Paycheck Protection Program (PPE) loans emerged as a way to support small businesses and keep their workforce employed during COVID-19. According to the Small Business Association (SBA), approximately 60,000 PPP loan applications submitted by nearly 3,000 lenders, for over $5 billion were approved between Jan. 11 and Jan 17, 2021 alone. Many banks have found it difficult to process these loans, since their current systems, along with the amount of staff needed, have been inadequate to keep pace with this kind of demand.

Leveraging Robotic Process Automation (RPA) and Intelligent Document Processing, many banks would be able to improve the efficiency and accuracy of this level of processing requirements, while providing the required documentation trail, and helping to identify fraudulent activity or errors in loan applications.

Aside from loan processing, many banks still rely on batch processing — often overnight – to process bank transactions for its customers, which often results in deposits that can take several days to appear on a customer’s bank statement. Yet, technology exists today, that would enable them to conduct real-time transactions. Providing this level of service is what will give banks a competitive advantage.

Health Insurance Claims Seeing a Surge in Demand

Surprisingly, health insurance claims have been down during COVID-19, as people put off elective surgeries, regular screenings and health visits. Yet, as the world begins to recover, these visits are being rescheduled and many health insurers are seeing a surge in claims, along with new processes, such as telehealth visits, which may not be recognized in legacy systems. The surge in claims requires more robust and flexible systems that can handle the sudden deluge, and the ability to be configured to adjust to new models of patient care.

In addition, as healthcare insurance becomes an increasingly competitive market, insurers are focused on retaining and growing their customer base and boosting the customer experience, new uses of AI can enable them to predict customer churn prior to enrollment periods, and take decisive action before then.

Telecommunications Requires Always-On, Instant Remediation

Because of the pandemic, more people are working and spending their time at home, which requires ever-growing usage of data, and new demands on the telecom industry. From customers flooding call centers to report internet outages, to incoming questions about billing statements, customers are inundating customer service with requests that need immediate attention.

To address a growing need for improved customer experience, cutting-edge telecom firms are leveraging chatbots to help answer questions, 24/7, freeing up technicians to focus on more difficult cases. They’re also just beginning to explore predictive analytics to anticipate weather conditions or aging components that will impact service in order to take action proactively. AI-driven analytics can leverage vast amounts of data collected from devices, networks, mobile applications, services usage and billing data to extract these actionable insights.

In addition, RPA can be used by telecom providers to more quickly and accurately handle back-office applications, such as billing, data entry, workforce management and order fulfillment,

Why Have Regulated Industries Been Behind the Tech Curve?

What’s Holding Them Back?

One reason that industries like insurance, banking and healthcare lag other industries in digital transformation is their reliance on legacy systems, which can be difficult to integrate with new systems and also block access to the vital data needed for AI and other technologies. And, given their history of needing to meet external requirements, regulated industries have carefully honed Standard Operating Procedures (SOPs) and rigid, structured processes in place which have also made them slow to embrace technologies that would completely disrupt their ways of working.

Another challenge they face is securing the IT talent need for major digital transformation projects. Many regulated industries rely on outsourced IT service providers but they’re limited to U.S. firms, since government regulations require that data remain within the U.S. and in very specific formats.

How To Jumpstart Digital Transformation

Digital transformation takes time in any type of a company, and more so in regulated industries. Below are three ways they can begin the journey:

  1. Make it a company-wide collaborative effort. Regulated organizations usually have complex internal structures, siloed within different departments, but this can impede collaboration and a culture that embraces change. As a first step, regulated companies should work to integrate teams, identify common pain points and worked together toward resolutions.
  2. Adopt a digital mindset. Adopting a digital mindset must come from the top of the company. The company CEO should embrace a digital mindset and communicate that thinking across the organization. Following the direction of leadership, all employees should be encouraged to speak about the current paint points and problem areas and take an active role in identifying digital solutions.
  3. Take an incremental approach. It’s not always necessary – or helpful – to undertake a massive digital transformation initiative without testing the waters and making sure you are heading in the right direction. A design sprint can help to determine if a specific form of digital transformation, such a new mobile app, a chatbot or predictive analytics solution, will be worth the effort. These sprints allow companies to design, prototype, and test ideas in a condensed timeframe before making a major investment.

Regulated industries have traditionally been slower to embrace digital transformation, but the tide is beginning to turn. As AI, the cloud and other technologies prove their worth in helping to boost customer experience, reduce costs and improve efficiency – especially among organizations sorely impacted by the challenges of COVID-19 – they’re realizing the imperative to adopt a digital-first culture and break out of dated ways of doing business.

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