Technology continues to impact the banking industry, as more and more transactions move from physical to digital channels. The application of big data insights and advanced analytics (machine learning) has changed the internal operations, external experiences and competitive battlefield in financial services.With so much change, banks and credit unions are rethinking their business models for the future.
In a study from Accenture, it is proposed that the winners of the future will be characterized not only by technological capabilities, but also by the ability to use technology to empower people within the organization. According to the 28-page report, Technology Vision 2017, “It is that combination of people and technology that will truly create competitive advantage in the banking industry of the future.”
Nearly 90% of the banking executives participating in the survey agree that organizations must innovate at an increasingly rapid pace just to keep pace in the marketplace. As could be expected, most feel constrained by legacy systems and cost structures that put them at a disadvantage. Despite the need to innovate and support digital channels, less than half (47.8%) of bankers say they are investing adequately in digital as part of their overall strategy.
The Accenture report highlights five trends that underscore the importance of focusing on “Technology for People” to achieve digital success:
- AI Is the New UI – Artificial intelligence is being used to enhance the customer experience, simplify workflows and drive down costs.
- Ecosystem Power Plays – Companies will move beyond a platform strategy, to a rich and robust ecosystem approach in this new era of increased intelligence.
- Workforce Marketplace – Traditional workplace hierarchies are being replaced with ‘talent marketplaces’ that include large numbers of independent freelancers and part-timers.
- Design for Humans – Big data and advanced analytic technology is creating the expectation of not only knowing where people are today, but also where they want to be.
- The Unchartered – Looking beyond banking, organizations are entering entirely new digital industries that have yet to be defined.
The number one trend around artificial intelligence is underscored by the fact that bankers believe artificial intelligence (AI) will ‘revolutionize the way banks gather information and interact with customers.’ This is in line with the findings from other industries, where the application of big data and machine learning is expected to provide a better understanding of customer beliefs and intentions, enabling enhanced customer experiences and better competitive positioning.
The Technology Vision 2017 report states, “With advances in artificial intelligence, the Internet of Things and big data analytics, humans can now design technology that’s capable of learning to think more like people and to constantly align to and help advance their wants and needs. This human-centered technology approach pays off for businesses, as leading companies will transform relationships from provider to partner — simultaneously transforming internally.”
AI is the new UI
Artificial intelligence (AI) is not new in banking. Financial organizations have been using AI to solve problems both big and small, by making manual processes more simple, more accurate, faster and less costly.
Today, AI is moving beyond process improvement, becoming the new user interface (UI), underpinning the way financial organizations transact and interact with systems. Machine learning will adapt to data and interactions to improve areas like fraud detection, and will leverage AI-enabled tools (like digital assistants and chatbots) to create more contextual interactions with customers.
According to the Accenture research, AI will help usher in a new era in digital banking, both in the front- and back-office.
- 82% of U.S. bankers (79% of global bankers) believe that AI will revolutionize the way banks gather information and interact with customers.
- 82% of U.S. bankers (79% of global bankers) expect AI to accelerate technology adoption throughout the organization, providing their employees with the tools and resources to better serve consumers.
- 73% of U.S. bankers (78% of global bankers) believe that AI will enable simpler user interfaces that will help banks create a more human-like customer experience.
- 72% of U.S. bankers (76% of global bankers) believe that within 3 years banks will deploy AI as their primary method for interacting with customers.
- 29% believe it is extremely important to offer their products/services through centralized platforms/assistants or messaging bots.
AI Marketplace Examples
Two current AI examples include Capital One Bank, where a “skill” for the Amazon Echo’s Alexa allows people to check their accounts and pay credit card bills via the Echo voice-first device. Similarly, HSBC allows customers to connect with the bank’s virtual assistant, Olivia, to get answers about their credit cards or current accounts.
Other examples are sure to follow as AI solutions and voice technology capabilities increase. For instance, ‘Collette’ is an Accenture’s virtual mortgage adviser that is mentioned in the report. The solution “uses cognitive science, AI and user-centered design to provide tailored advice on complex mortgage applications — articulating its own thoughts, understanding the intentions and emotions of the customer, making recommendations, and, if necessary, referring the customer to a human assistant.”
According to Accenture, “AI is creating a new era of computing, rapidly moving from mobile-first to AI-first in the customer experience and moving staff to more judgment-based and higher value added roles.”
AI Use, Rationale and Challenges
Financial organizations are looking to leverage the benefits of artificial intelligence in both the back office as well as customer facing applications. Bankers stated an expectation to invest in the following capabilities ‘extensively’ over the next three years:
- Embedded AI solutions (40%)
- Computer Vision (40%)
- Machine Learning (38%)
- Natural Language Processing (37%)
- Robotic Process Automation (34%)
When asked to identify the top three reasons for embedding AI into user interfaces, financial services organizations cited “to gain data analysis and insights” (60%), “to increase productivity” (59%) and “cost benefit savings” (54%). Interestingly, 67% of U.S. bankers cited “cost benefits savings” as their number one reason to invest in AI.
The implementation of AI in banking isn’t without challenges, however. Financial services executives surveyed mentioned privacy issues (38%), compatibility issues with the current IT structure (36%) and the fact that users often prefer human interactions (33%).
Accenture believes there are three actions that need to be taken immediately to benefit from the potential of artificial intelligence.
- Ensure that there is a well-defined strategy for the use and application of data. Beyond an analysis of how data will be used, there needs to be an agreed upon understanding of the role AI tools can play to help build value for data for employees and customers.
- Explore the feasibility of developing an AI ‘Center of Excellence’ that can provide a central capability that can be applied across the organization. This may include external resources that can provide flexibility and agility.
- Create a scalable test-and-learn environment that can explore AI and cognitive processes, speeding up the innovation process.
“Consumers’ diverse needs and priorities are forcing financial services firms to redefine how they interact with them to determine the best products and services to meet individuals’ needs,” said Alan McIntyre, a senior managing director at Accenture and head of the company’s Banking practice. “AI-enabled tools can help banks identify consumer preferences and empower their workforces to react with insight and emotional intelligence, which is essential for the development of meaningful consumer relationships. The challenge will be how quickly banks can implement these new technologies, many of which are not compatible with their existing IT infrastructure.”
Artificial intelligence, digital ecosystems, on-demand labor platforms, design thinking and other key technologies will help financial organizations respond to an increasingly demanding customer base that is impacted by tech giants that are currently not direct competitors. The ability to give customers a reason to remain loyal will depend on how banking evolves to a digital-first business model.