Bank Statement Extraction: Everything You Need to Know

The manual process of extracting and organizing data from bank statements can be tedious and error-prone. Inefficient conversion methods can lead to reconciliation delays, inaccurate financial reporting, and wasted time.

Businesses are turning to bank statement converter software to address this pain point. These tools automate the conversion process, making it faster, more accurate, and less labor-intensive. 

In this article, we will explore everything you need to know about bank statement extraction, from its working to different types of software available in the market to highlighting its features and benefits. Moreover, we will also help you understand and decide how software solutions like Docsumo can help your business’s financial operations. 

So, let’s start with the basics and move on to more important things. 

What Are Bank Statements?

Bank statements offer an overview of the customer’s financial transactions, and their online versions often come in PDF format and are secured by a passcode. Finance managers skim through these statements to gain insights into spending patterns, identify potential cost savings areas, analyze cash flows, and monitor account balances.

Underwriters use it to assess an applicant's financial health, verify income and expense levels, and evaluate creditworthiness.

Banking and finance organizations use bank statements to identify spending patterns, improve tax reports, validate large transactions, conduct reconciliations, and highlight cash outflows. 

To streamline the management of these critical financial documents, many businesses rely on a specialized tool: bank statement converter software. Let’s see what are bank statement converter software in the next section of the blog. 

What is Bank Statement Converter Software?

A bank statement converter tool converts bank statements into Excel, CSV, JSON, or other preferred formats and extracts and processes data from structured, unstructured, and semi-structured documents. 

The following two stages require human intervention: 

1. Uploading the bank statements

2. Final review of the converted data

The software streamlines data extraction and data processing for businesses by handling these repetitive manual tasks. 

To fully appreciate the benefits of bank statement converter software, let's examine the challenges associated with manual bank statement processing.

Limitations of Manual Bank Statement Processing

The traditional notion of 'human touch' serving as the final seal of approval is no longer trustworthy - at least in accountancy. Not only does manual processing eat up precious time in today's fast-paced world, but it also comes accompanied by a whole bag of other limitations as well:-

1. Inaccuracy

The monotonous, mundane task of number crunching plays tricks on the human mind, leaving room for errors and mistakes in processing bank statements manually. Errors can occur in:

• Reading bank statements
• Extracting the numbers manually to feed to digital formats
• Manual categorization of data based on its financial attribute

An error in even a single digit or decimal tends to create a snowball event where all subsequent processes take the hit. Moreover, it becomes nearly impossible to pinpoint the error location to fix inaccuracies.

2. Document frauds

While bank fraud prevention laws and protocols are very well put together, the legacy of manual bank statement processing, unfortunately, has still left behind a trail of fraudulent practices that garner a bad name:-

• Changing variable information - If you remember the legendary Ponzi Scheme, where Bernie Madoff swindled nearly 5,000 clients of almost $65 billion (yes), you'd realize he did it by using forged bank statements. A clever underwriter will know how to forge a bank statement, and this is where the problems with manual processing arise.
• Inserting real pages from another document - Manually augmenting a bank statement with additional lines of debit or credit work to fake a business's profitability/credibility. 
• Removing pages or specific information - It counts as fraud to manually remove information from bank statements - because it generates fake financial reports for the firm, changing its tax and loan liabilities and eligibility, respectively.
• Applying false stamps or watermarks - Document forgery happens only where there is manual intervention in bank statement processing.
• Digitally altering or adding information to an image of an original document - Certain software solutions exist in the market that assist a person in redacting specific areas of an image or a document and changing the entries on it.

3. Slower processing time

Today, there is a need for speed in all tasks and operations of a business in order to stay at the top of the game. Manually importing bank statements to Excel is an agonizingly slow process riddled with compromises and errors. Data labeling also takes up precious man-hours that can be utilized effectively elsewhere.

4. Added Costs

Setting an exclusive budget for a dedicated team to process your bank statements puts a dent in your finances - and this is just the direct cost of manual operations. Bearing in mind the errors and inaccuracies that could occur down the pipeline and subsequently lead to consequential costs. According to estimates, manual document processing can cost somewhere between 170% to 20 times the automated document processing costs. 

5. Data Security

Manual intervention in bank statement processing allows data leaks to occur, which are risky in the world of business - where the competition can do anything to get ahead. Sensitive financial data must never be allowed to leave your offices.

Given the significant drawbacks of manual processing, it's clear that bank statement converter software offers numerous benefits for businesses of all sizes. Let's examine these benefits in more detail.

Benefits of using bank statement converter software

a. Reduces the processing time from days to 30-60 seconds 

Investing in an automation tool for converting bank statements can be time-saving. For example, financial professionals who help clients with tax filing at the end of the financial year have limited time. The situation gets tough with multiple clients. 

Depending only on humans to convert bank statements in Excel formats is prone to errors and time-consuming. Using a tool with humans in the loop can save time. Instead of spending days or weeks manually inputting this data, the bank statement converter processes documents in 30-60 seconds. 

b. Converts data with 99%+ accuracy

Distractions from the work environment and boredom due to monotonous tasks might lead to manual data conversion errors. 

Automated data extraction offers more than 99% accuracy in data conversion. Hence, your team can verify the extracted data and flag discrepancies to reduce data errors and fraudulent changes.  

c. Adaptability

Bank statement formats may vary bank-wise. Though humans adapt to different formats and types of bank statements, extracting data from a different format is time-consuming. They must understand the documents, locate the information, and convert them. 

On the other hand, the bank statement converter extracts data from different formats and information within seconds. 

d. Reduces operational costs by 60-70% 

Document-heavy businesses require significant human resources for data processing. Document processing software operates 24/7 to extract data, regardless of document volume. This reduces operational costs by 60-70%. The ROI increases, and the staff can focus on more strategic tasks. 

e. Versatility 

Bank statement converters are versatile tools that go beyond conversion. They integrate with various applications, facilitating real-time data flow and reducing errors. They support multiple file formats, ensuring compatibility with accounting software. 

f. Improve customer satisfaction

A bank converter solution extracts data and processes information faster than manual efforts. 

For example, automated document processing using IDP (Intelligent Document Processing) in the lending industry helps process documents faster, allowing the loan officer to get faster loan approvals. Customers can immediately hear back about their loan application, thus improving the overall customer experience.   

To further understand the impact of bank statement converter software, let's explore some specific use cases that demonstrate its value across different industries.

Use cases for bank statements converter Software 

Lending institutions

Lending institutions receive bank statements from thousands of borrowers for loan applications. They can convert PDF bank statements into Excel formats to easily access the borrowers' income, check the accuracy of data, and reduce the turnaround time for loan approval. 

Financial auditors

Auditors must reconcile bank statements, analyze taxes, and scrutinize their client's finances. Under a tight deadline, converting PDF bank statements into JSON formats helps them verify the data quickly to file taxes for their clients.  

Business owners 

Business owners must track income, expenses, and payroll to manage finances effectively. Bank statement converters streamline this process by digitizing statements, enabling easy reconciliation, tracking cash flow, and integrating accounting software.

To ensure the most accurate and efficient data extraction, proper preparation of your PDF bank statements is crucial. Let’s learn about it in the next section of the blog.

Preparing PDF bank statements for data extraction 

Despite the inherent complexities associated with financial data extraction from PDF bank statements, there are effective strategies to overcome common obstacles. 

Here’s how data is extracted from bank statements. 

Clean up the PDF Files

Intelligent document processing software uses advanced image recognition software to deskew the images, reduce noise, and convert the file into grayscale to prevent colors from interfering with the data extraction. 

• Deskewing: Deskewing straightens the documents using AI to remove any inclines and awkward angles. It makes the documents more readable. 

• Denoising: Denoising involves removing unnecessary marks, printing spots, and uneven contrasts from PDF documents. 

• Grayscale conversion: Also known as binarization, converts PDF documents into a grayscale format to prevent colors from impeding the data capture process. 

Make the PDF Machine-readable and Searchable 

Most automated data capture tools come with either rule-based or ML-based solutions.

• Rule-based extraction: In rule-based extraction, the software first uses OCR (optical character recognition) technology to convert these images into machine-readable and searchable texts. OCR is typically used to extract field-specific information from fixed template documents like PDF documents and images to accelerate the rate of approval for loans and new account applications. 

• AI/ML-based data extraction: Similar to rule-based extraction, AI/ML-based data extraction uses OCR to convert PDF formats into machine-readable formats. The automated data extraction software uses MultiModal learning and artificial intelligence to extract valuable data from these bank statements. 

Despite careful preparation, certain challenges can arise during the data extraction process from PDF bank statements. Let’s evaluate them. 

Common issues associated with data extraction from PDF bank statements

The most common issues that plague the data capture process for PDF bank statements are: 

Password protection

PDF bank statements are often encrypted with passwords to ensure data security. However, this can hinder data extraction efforts. Prior to extraction, it is essential to have the necessary credentials to unlock password-protected PDFs or obtain unencrypted versions for seamless data extraction.

PDF table extraction 

In addition to images, text, and figures, PDF bank statements contain tables, wherein lies important information. A PDF converter processes the entire document without providing an option to limit the data extraction to specific sections in the PDF, such as specific columns and rows. 

Data extraction process with Docsumo: Configuring bank statement processing 

Docsumo’s advanced AI/ML algorithm and OCR technology help financial institutions effortlessly convert bank statements into actionable findings. Here’s a breakdown of how easy it is to extract data from bank statements using this intelligent platform:-

Step 1-  Uploading PDF bank statements to the Docsumo platform

Upload the unencrypted PDF bank statement to the Docsumo platform. The pre-trained APIs identify key information, like account numbers, transaction IDs, summary tables, and transaction amounts. 

Step 2 -  Initiating the extraction process

Docsumo's advanced data capture algorithms, powered by AI and OCR, start the extraction process. The key information is intelligently extracted from the statements.

Step 3  - Data validation & reviewing extracted data

The extracted data from the bank statements is sent to the relevant department for thorough review and approval. Docsumo's API ensures 99% data accuracy throughout the process. It also highlights mismatched entries, allowing the authorities to validate the information with ease.

Step 4 -  Handling exceptions and improving future extraction results

Any exceptions or unforeseen errors are immediately flagged, and the platform automatically notifies the respective personnel for the manual verification of the extracted data. The ML algorithm records these adjustments and uses them to refine its future processes. 

To further understand the impact of Docsumo's bank statement processing solution, let's explore a real-world example. 

Case Study: Hitachi Streamlines Bank Statement Reconciliation using Docsumo

Hitachi, a white-label ATM provider, was overburdened with the volume of monthly bank statements sent to them by their ATM operators. It had become challenging for them to manually process over 3000+ bank statements every month. This is where Docsumo intervened and streamlined its processes. So, what were the challenges, and how did Docsumo alleviate their reconciliation concerns?

Challenges:-

• Manually scanning bank statements with 50+ different formats and structures.
• A dedicated team of underwriters and data entry operators extracted information from 3000+ bank statements every month. 
• Absence of data validation processes.
• Double manual entry was mandated for all documents. 

The solutions introduced by Docsumo:-

• Automatic data capture using pre-trained, AI-based APIs with 99% accuracy.
• The team only had to review exceptions.
• ML-based smart data extraction API could process more than 50+ bank statement formats and structures with ease.
• Docsumo’s custom rule-based approach auto-classifies letters and validates bank statements in real time. 
• 95% STP helped Hitachi reduce their bank statement processing time to less than 30 minutes. 

This real-world example highlights the significant benefits of implementing a robust bank statement converter solution. Now, let's explore how to select the best software for your organization.

How to choose the right bank statement converter software?

The key things to look for in bank statement converter software are: 

• Conversion accuracy - The accuracy rate at which the tool converts the data is critical. Ideally, a software solution must convert data with more than 95% accuracy, and an advanced data extraction software has more than 99% accuracy. 
• User interface and ease of use: Look for a bank statement converter with a manageable learning curve for maximum user adoption. 
• Compatibility with different bank statement formats - Choose software that can read, scan, and extract data from multiple bank statement formats. The tool must also be able to convert statements into Excel, CSV, and JSON formats. 

• The technology used -  Optical Character Recognition (OCR) technology finds wide-ranging use in converting bank statements. But there's a catch. A template-based OCR technology can convert only a specific type of bank statement. Your team would need to create templates constantly to convert different types of statements. 

This process can get time-intensive. So, invest in an automation tool that integrates OCR with artificial intelligence (AI) or uses IDP technology to learn and adapt to different modifications of bank statements by itself.  

• Integrations - Ensure your bank statement converter software integrates with other departments' third-party software. 
• Security and data privacy compliance - Does the document AI software offer enterprise-grade security, considering bank statements are highly confidential sources of customer information? Look for features such as role-based access and cloud storage. Also, the system should comply with national, industry-specific, and international regulations, such as GDPR, to avoid regulatory fines.  
• Customer support and software maintenance services - Downtimes can affect business continuity. Your bank converter software should offer 24/7 customer support, backup, and maintenance for downtime. 
• Pricing models - If you’re starting with bank statement conversion, a fixed price may not be the best option. Also, look for scalable pricing (such as pay-as-you-go) to suit your business needs. 

Conclusion 

Docsumo streamlines data extraction from bank statements and simplifies the workflows for financial institutions, mortgage lenders, and insurance companies. What sets Docsumo apart from the rest of bank statements data capture platforms is-

• 99% data extraction accuracy 
• 95% STP rate increases the overall efficiency of your workflows
• Docsumo reduces document processing times from hours to minutes 
• Automatic validation and verification of the extracted data

If you’re looking for a reliable platform to distill the important information from bank statements, sign up for a 14-day free trial.