Automation in Mexican Banking Sector Essay Example

In the modern world, the desire to introduce new cost efficiencies, faster transactions well as improving digitization has resulted in the adoption of robotic process automation (RPA). The RPA allows employees in an organization to configure a robot or computer software in a way that can capture and interpret applications to manipulate data, communicate with other digital systems, trigger responses and process transactions (Aggarwal, 2017). The use of RPA is rapidly spreading, for instance, Mexico has witnessed the entry of RPA in its banking sector. Some reasons facilitate the introduction of new technology in a particular industry. Hence, this paper will examine the demand conditions of Porter's Diamond that have led to the introduction of RPA in the Mexican banking sector.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

The Porter Diamond Theory of National Advantage model is designed to assist individuals to understand the competitive advantage of various groups or nations by explaining specific factors, for instance, there are situations where the government can act as a catalyst to enhance a country's position in a globally competitive economic environment (Recklies, 2015). According to Porter, countries can create advantageous factors like robust technology, government support of an economy or skilled labor. Further, Porter argues that four conditions act as the deciding factor of a country's comparative economic advantage; one of these factors is the demand conditions.

Demand conditions may be defined as the nature and the size of the customer base for products; this drives product improvement and innovation (Recklies, 2015). Porter argues that the more sophisticated and demanding domestic customers tend to be, the more competitive the firms are likely to be. Therefore, Porter's demand conditions can be used to explain the reasons behind the entry of RPA in the Mexican banking sector.

One of the sustaining and gaining characteristics of competitive advantage in the global market is a domestic market that is more demanding and trend-setting. More so, if the local market is adequately robust and significant, then it can pressurize firms to come up with the right technology and provide more advanced and better services at affordable prices compared to competitors. The aggregate demand for banking services describes the Mexican economy. The demand in the country is primarily affected by competition and market consolidation; this affects the availability of credit to various sectors of the economy.

In the Mexican banking industry, the accessibility to financial services is the primary indicator of demand. In the past two decades, there have been significant changes in the banking industry, for instance, the ease by which credit is obtained has resulted in overall demand conditions and consumers' bargaining power. The leading indicators of demand conditions in the country include financing in the private and public sector, local credit provided by the banking sector as well as the bank credit to the private sector (Doyran, 2013).

A few years ago, Mexico opened its financial system to the global market (Doyran, 2013). The substantial influx through the promotion of offerings as well as diverse products and services has resulted in the greater consolidation of banking markets. Eventually, the improvement in the banking sectors has led to the growth of business and consumer confidence; hence boosting demand for financial and credit services. Therefore, to maintain customers, the domestic banks have resulted in adopting new technology like the RPA. The banks have realized that reliable technology is the key to success in the banking industry. More so, to gain a competitive advantage over the foreign banks, most of the banks in the country are looking for ways to be a notch higher about technology. At any given time, the more reliability and automation a bank brings into customer experience, the better.

According to Porter, the home demand conditions rely on three main characteristics, i.e., tools that transmit domestic preferences to foreign markets, customers' needs and wants as well as their growth rate and scope (Recklies, 2015). Therefore, a country can only achieve a national advantage in any industry, if its domestic market provides an earlier and clearer indication of demand trends to resident suppliers than to foreign rivals. More so, domestic markets have a greater impact on an organization's capacity to identify the customers' needs more than foreign markets (Recklies, 2015). This explains the scenario in the Mexican banking sector, where a majority of the banks have realized the need to introduce the robotic automation process.

Various demand conditions have facilitated the entry of the RPA in Mexico. Today, customers are not entirely satisfied with the number of services offered via the mobile device platform. Customers' expectations are gradually outpacing the technology improvements in that they expect technology to perform numerous functions on one device. Therefore, banks have to respond in a way that balances their functionality as well as launching new features and communicating the benefits to customers (DISYS, n.d). Furthermore, banks aim at satisfying customers' needs.

On the other hand, most banks in Mexico are under pressure to seek alternatives for lowering costs to improve profits and at the same time focus on long-term growth. Therefore, to remain relevant, the banks have opted to take advantage of the rapid changes in technology as one way of gaining a competitive edge; thus adopted RPA. Typically, banks use large-scale labor forces. Hence, robotic process automation can boost their capabilities and save money.

The idea behind the RPA is that any grants any work process that is repeatable and definable, the ability to design a business process and assign a software robot to handle the execution of the process (Banco Bilbao Vizcaya Argentaria, 2018). The RPA technology enables the banks to implement the technology more effectively without changing the existing systems and infrastructures. Also, through the RPA banks can access years of data related to products, customer opinions, branch activities, and sales; this increases leadership ability to make informed decisions. Hence, the adoption of RPA would play an essential role in meeting Porter's demand conditions for gaining a competitive advantage.

Lastly, over the years, the Mexican economy has experienced moments of inflation and poor performance; this took a heavy toll on the banking industry (Federal reserve bank of Dallas, 1999). However, following financial liberalization from the devaluation of the currency, the Mexican banking sector has strengthened. A good economy serves as a significant boost for mortgage and consumer lending. Nonetheless, the domestic banks in Mexico have been forced to adopt new technology to compete with foreign banks. Hence the entry of RPA in the country's banking sector.

Conclusion

This paper has examined the entry of robotic process automation in the Mexican banking industry by employing Porter's Diamond demand conditions. According to Porter, various states determine competitive advantage in a country or why some industries are more competitive. Nonetheless, organizations aim at satisfying the consumer needs and wants; this facilitates the introduction of innovation and technology. The same case applies to Mexico, where banks are willing to adopt robotic process automation to gain competitive advantage. The RPA can enable the bank not only to save money and increase profits but also to improve the mode of service delivery. A customer will always be loyal to any company that offers the maximum satisfaction. Therefore, retaining a customer is one way of gaining competitive over rival companies.

References

Aggarwal, N. (2017, February 22). How robots are changing the face of banking. Retrieved from The Asian Banker: http://www.theasianbanker.com/updates-and-articles/how-robots-are-changing-the-face-of-banking

Banco Bilbao Vizcaya Argentaria. (2018, July 31). Everything you need to know about RPA software. Retrieved from BBVA: https://www.bbva.com/en/everything-you-need-know-rpa-software/

DISYS. (n.d.). Robotics process automation: Optimizing today's banking workforce. Banking and financial services, 1-7.

Doyran, M. A. (2013). Mexico's financial industry structure: Trends, challenges and opportunities. Proceedings of ASBBS, 500-508.

Federal reserve bank of Dallas. (1999). Mexico's economy in 1998 and 1999. EL Paso Business Frontier, 1-8.

Recklies, D. (2015, January 29). Porters Diamond- Determining factors of national advantage. Retrieved from Themanager.Org: https://www.themanager.org/2015/01/porters-diamond-national-advantage/