A major UK bank reduces monthly risk exposure by £3.5m with a digital-first solution

Background

The client is one of the largest banks in the UK and provides commercial financing solutions to businesses, including factoring, invoice discounting, asset-based lending, asset financing and more. As a market leader in the commercial finance segment, the client has a 16% market share that translates to £3.7 billion.

The client faced challenges with carrying out due diligence on a regular basis with respect to monitoring ageing of invoices and contra-trading activities and reached out to Firstsource for its expertise.

Business challenge

  • The frequency of the check deposits ranged from monthly for high-risk clients to half-yearly for low-risk clients
  • 55% clients required a monthly contra check on a client base of 8000
  • Purchase and sales ledgers had unstructured data for e.g. names were represented differently for the same clients (in abbreviated forms, Ltd. as Limited, etc.) This required a thorough visual check to identify the correct matches and posed as a major impediment to automating the process.
  • Contra check could therefore be carried out on a sample basis of 40% i.e. 1800 out of 4500 clients due to process complexity
  • The financial exposure on the remaining 60% posed a major risk which could be addressed only by increasing penetration of contra checks to 100%

Firstsource solution

Firstsource provided a digital-first solution for two key products in the client’s invoice finance portfolio – invoice factoring and invoice discounting.

  •  Incorporated robotics with fuzzy logic to deliver 100% accuracy in the process
  • Included PDF to Excel conversion software to structure all forms of unstructured data
  • Used MS Access for database management

The automation solution generated far more accurate matches compared to a human, especially where business names would start with a number.

Business impact

Quantitative benefits

  • Contra check completion percentage increased from 40% in the pre-automation phase to 95% post automation. This ensured that all the clients that required a contra check were covered from a risk perspective.
  • Reduced risk exposure by £3.5m per month

Qualitative benefits

  • Timely completion of risk-monitoring measures for all the qualifying clients
  • An activity that took 30 minutes to complete per client, currently doesn’t require any manual intervention
  • Percentage of clients processed straight through increased from 86% in the first month to 95% in the third month once the solution was implemented

£3.5 million

Reduction in monthly risk exposure


100%

Increase in contra-check completion

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