Maximizing Efficiency in Financial Services: Innovative Strategies for Bank Statement Data Extraction

Financial data from bank statements helps banks and financial institutions make critical decisions. It provides accurate data for loan approvals and establishing trust in business partnerships. Bank statement verification is essential to cut down on risk. 

The volume of bank statements requiring verification grows as businesses expand. They come in varying formats and can be a bottleneck in the verification processes.

This article will explore the importance of verifying bank statements in financial services, explain the bank statement verification process, and discuss how to transform the way financial services companies handle it.

What is bank statement verification?

Bank statement verification involves reviewing and validating an organization's financial transactions. It enables financial services teams to ensure accuracy in financial reports. The process is mandatory to meet internal and regulatory compliance requirements. It aids in assessing a company's financial health and preventing fraud.

Financial services teams gather bank statements of all company accounts for verification. They extract data from the bank statements to verify the financial records. The critical data extracted includes account balances, payment history, and income sources. The extracted data is then compared with the company's financial reports. They cross-check the information from supporting documents such as invoices, vouchers, and receipts to help ensure consistency and accuracy.

Bank statement analysis serves the following essential purposes:

• Verify a company’s income sources for supporting credit applications or leasing negotiations. 
• Get a reliable record of the company’s financial stability before investing.
• Assess borrowers' creditworthiness before extending loans or approving mortgages.
• In-depth cash flow analysis to make informed business decisions 
• Simplify business financial management with regular insights

Why do financial services teams need to verify bank statements?

Bank statements provide a company’s earnings, interest accumulation, fees, and transactions. They offer a comprehensive view of the organization’s financial status and are a mandatory Know Your Customer (KYC) document. Reconciliation of bank statements in financial services is critical. It facilitates accurate reporting, budgeting, and strategic planning.

a. What do financial services teams look for in a company’s bank statements?

Bank statement verification helps identify discrepancies impacting a company's cash flow. It flags unexpected expenses or fraudulent activities for compliance with Anti-Money Laundering (AML) regulations. It also ensures that the company's financial reports align with regulatory requirements. Auditors flag unrecognized transactions for investigation.

Financial services teams look for the following details in a company’s bank statement:

• Proof of funds: Bank statements confirm the availability of enough funds in the company account. This helps assess the company's liquidity and decide whether it meets its financial obligations.
• Address verification or POA (Proof of Address): Bank statements are the primary document confirming an entity's address. It demonstrates the company's physical presence and location.
• Cash flow assessment: The company's cash balances help identify potential risks and opportunities. Accurate cash flow insights empower better decision-making for investors and stakeholders.
• Identity verification or POI (Proof of Identity): KYC and regulatory verifications need bank statements as the company’s identity proof. It ensures the legitimacy of the company and its operations.‍
• Tax compliance: Bank statements record all income and expenses for preparing accurate tax returns. It ensures companies are compliant with tax laws and regulations.‍
• Risk management: Verifying bank statements helps assess a business's financial risks. It flags any unusual or high-risk transactions impacting the company's financial stability.‍
• Fraud detection: Comparing bank statements with financial documents helps identify fraud and prevent potential losses. Bank transactions verify mismatched entries in financial records.‍
• Compliance requirements: Bank statements are evidence of legitimate income for complying with AML and KYC. It helps financial institutions detect and prevent money laundering activities.‍
• Audit preparation: Verifying bank statements is crucial during internal and external audits. Bank statements provide an accurate record of the company's financial transactions.‍
• Trust building: Bank statement verification assures the company’s financial information is reliable. It builds stronger relationships with investors, lenders, and other stakeholders.

b. How can financial services teams stay compliant with sank statement verification?

Businesses are vulnerable to deceptive practices, ranging from money laundering to identity theft, often masked by fraudulent documents and financial misstatements. This includes internal or external document fraud, where fake bank statements, employment letters, and invoices are used to cover up illicit transactions. 

Document fraud has severe legal consequences, damaged reputations, and financial losses. According to the ACFE, companies lose 5% of their annual revenues to fraud. It amounts to $4.7 trillion globally.

Compliance with regulatory standards is crucial for preventing financial crime. Fraud in bank statements is an ongoing threat, with instances on the rise. According to Kroll, over $800 billion is being laundered every year. The prominent channels are shell companies and trade-based laundering.

Financial services teams must stay vigilant to detect document fraud. Bank statement verification helps flag issues by identifying suspicious transactions. They prevent financial crimes like account misuse, fraudulent billing, and false expenses.

How do financial services companies verify bank statements?

Financial service teams may use manual review processes or leverage technology solutions. Here is a comparison of manual vs automated bank statement verification processes:

a. Manual Bank Statement Verification

The traditional method of verifying bank statements in financial services is manual. The labor-intensive process involves paper-based documentation. Auditors compare bank statements with financial documents to flag any inconsistencies.

The process is time-consuming, error-prone, and costly. It requires a significant allocation of human resources. The lengthy process impacts operational efficiency and customer experience. Manual analysis of large data volumes is challenging. So, the reports generated through it need to provide deeper insights. 

Most businesses have many bank accounts with a multitude of transactions each day. The sheer volume of bank statements for each bank account adds complexity to the process. Only complete, outdated, or fraudulent bank statements can be verified. As a result, financial service teams may need to pay attention to discrepancies or other fraudulent activities. Keeping up with changing regulatory requirements takes a lot of work. It leads to potential non-compliance risks. Manual bank statement verification needs to be more scalable and productive.

Manual processes allow the scope for workarounds due to human intervention. Unauthorized access to sensitive financial information increases the risk of data breaches. The approach needs a comprehensive audit trail. It is challenging to keep track of the verification process. Reports use the data from the documents available. Manual audit reports could be more reliable due to a lack of transparency and accountability.

b. Automated Bank Statement Verification

Financial services teams can leverage technology solutions for accurate verification of bank statements. Automated bank statement verification involves the use of data extraction tools. These tools use Optical Character Recognition (OCR) technology. They extract data from financial documents and bank statements for verification. 

AI-powered Intelligent Document Recognition (IDR) technology further streamlines the process. It classifies data from structured and unstructured bank statements and financial documents. The data is then compared and reviewed by custom-trained ML algorithms. It matches the extracted data with the company’s records to flag discrepancies. Auditors and company management can retrieve it for strategic purposes.

Automating bank statement verification Automating bank statement verification is a better choice for financial services companies. It helps save time, reduce costs, and mitigate risks associated with manual processes.

Hitachi Payment Services is a crucial example of successful automated bank statement reconciliation. The company reports time-saving of over 200 hours each month since adopting Docsumo. Automating their operational workflows with AI-based APIs allowed them to achieve 99% accuracy. It accelerated the processing of unstructured data from bank statements ten times. The swift and reliable processing enhances the productivity of their team.

How to automate bank statement verification for financial services?

Automated bank statement verification is valuable for financial services companies. It helps meet regulatory requirements and improve process efficiency. By adopting automation, companies save time, reduce errors, and free up resources.

The deployment must be a well-thought-out strategy to ensure effectiveness. Here is a simple process to automate bank statement verification for financial services:

• Choose a Reliable Automation Tool: Pick a reliable and secure tool. It must be compliant with industry standards. Fine-tune it for scanning bank statements and financial documents.
• Define the Automation Process: Define rules and exceptions to customize the verification workflow. Conduct thorough testing to ensure process accuracy and efficiency.
• Integrate with Existing Systems: Integrate the automation tool with your current infrastructure. It will reduce disruption and maximize efficiency.
• Employee Training: Provide comprehensive automation training to employees to adopt new methods.
• Maintain Human Oversight: Develop a review process that involves human approvals for exceptions. It will help identify any gaps in the automation process and ensure accuracy.
• Continuous Improvement: Commit to regular evaluations and updates of the automation process. Ensure it is compliant with industry standards for bank statement verification.

If you’re using Docsumo, the tool automates data extraction from bank statements using OCR and AI, with 99%+ precision. It offers an intuitive interface and processes bank statements in various formats, including PDFs, images, and spreadsheets. Features like auto-classify and auto-split facilitate touchless document processing, enhancing efficiency and accuracy. 

The benefits of bank statement verification automation in financial services

Bank statement verification is essential for operational efficiency and customer satisfaction. Docsumo's cutting-edge AI-powered OCR technology streamlines the process effortlessly. 

Offering pre-built AI models and advanced features, Docsumo stands out by automatically identifying and classifying bank statements based on layout, date, and format. It efficiently extracts key-value pairs and line items to match transactions, reducing verification time by 80%. 

Finance service teams can conveniently convert bank statements into Excel, CSV, or JSON formats, while robust security protocols ensure the safety of sensitive financial data.

Need a more efficient, cost-effective, and scalable bank statement verification approach? Try Docsumo to unlock operational excellence for your financial services company.

FAQs

1. What is a bank statement in finance?

A bank statement is a document summarizing transactions and account balances in finance. It contains information on deposits, withdrawals, interest earned or charged, and fees incurred. Bank statements help with financial reporting and analysis over a specific period.

2. What is a bank statement in business?

A bank statement in business is a document provided by a bank. It summarizes the transactions on an account for a specific period. It serves various purposes, such as budgeting, tax preparation, or verifying transactions.