How can banks encourage customers to trust AI?

26 October, 2023Paul Stallard

Implementing AI applications could save banks an estimated $447bn by the end of 2023, according to research from Autonomous Next. This figure alone illustrates why the technology is so important to the industry.

That said, within the spirit of Consumer Duty, banks cannot embrace AI just because it saves them a lot of money. They must make sure AI delivers significant benefits to their customers. But not all customers are happy with this new technology.

Do bank customers trust AI?

Computer data on a screen

Research by Mitek and YouGov in 2022 found that UK banking customers’ trust in technology remains low. Only half (52%) of UK bank customers feel that technology like AI and biometrics make a positive impact on their trust in banks, and only 5% would prefer all interactions to be with AI and automated systems when engaging with their bank.

There are several reasons why. Firstly, many customers simply do not understand how AI works, leading to uncertainty and mistrust. This can vary between groups. Different demographics may have varying levels of comfort with technology – and especially AI. Older customers, for example, might be less familiar with AI and more resistant to adopting it in their banking activities.

In addition to this, banking often involves quite sensitive and highly personal matters. Some customers value speaking to other human beings on a face-to-face basis in these circumstances, as they can empathise, understand nuanced situations, and provide personalised solutions.

Key issues with AI-based banking tools

The issues outlined above may become less significant over time – especially as new AI technologies become more commonplace, and businesses figure out the best mix of face-to-face service and AI support.

However, there are some concerns that warrant closer attention if customers are going to be able to truly place their trust in AI tools.

  • Transparency. AI systems can make decisions based on vast amounts of data and complex algorithms which means the decision-making process is not always transparent or easily explained.
  • Data privacy and security. High-profile data breaches in recent years have meant customers worry that their personal and financial data could be mishandled or compromised, leading to identity theft or unauthorized access to their money.
  • Bias and fairness. AI systems can inherit biases present in the data used in their development, potentially leading to unfair or discriminatory outcomes.
  • Mistakes and errors. There have been instances of AI making errors or providing inaccurate recommendations.
  • Loss of control. Using AI in banking may make customers feel like they are relinquishing control over their financial matters to machines.
  • Regulatory and legal concerns. The use of AI in finance is subject to various regulations to ensure fair and ethical practices. Some customers will question whether AI-powered systems comply with these regulations and whether they have legal recourse if something goes wrong.

The advantages of AI in personal banking

There’s no denying that there are legitimate customer concerns regarding the widespread use of AI tools in the banking sector. To facilitate the transition to more AI driven banking tools, senior management teams must demand proof from their product development teams that every type of customer is being considered when new technologies are being planned and implemented.

Product engineers and the teams around them must be equally effective in making and communicating products and services catering to all segments served by their organisation – and that communication must go some way to alleviating concerns or reservations customers may have regarding the use of AI in such products and services.

Banks need to ensure they take these steps and help customers to understand the advantages of modern technology in banking. Whilst there are valid reasons to hesitate in trusting it, there are just as many reasons why we can all benefit from the use of AI in banking:

  • enhanced security
  • faster, more accurate decision-making
  • 24/7 customer service provided by AI-powered chatbots and virtual assistants
  • personalized banking – AI can analyse customer data, preferences, behaviour, and needs, to create tailored products and personalized financial advice
  • improved fraud detection – AI can potentially spot suspicious behaviour patterns in large data sets that humans may miss
  • compliance – AI can assist banks to stay compliant with all regulations, laws and reduce human errors.

AI is a valuable tool but is still in its infancy. Ultimately, it has the potential to significantly enhance banking services and build trust between customers and financial institutions. But senior management teams need to do the legwork in ensuring that the benefits are accessible by all, and the advantages of AI must be effectively communicated.   

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