For the past 60 years, the deployment of artificial intelligence (AI) solutions has delivered significant benefits for banks and their customers. Paul Stallard looks at how financial services use AI and what customers can expect in the future.
The core purpose of the Financial Conduct Authority’s (FCA’s) new principle of Consumer Duty, is to require firms to deliver good outcomes for retail consumers. Perhaps in that context, it’s timely to think about what AI can do for customers.
How banks use AI now
As the roboticist, Rodney Brooks once said, “Artificial intelligence is a tool, not a threat.”
Banks are using this tool – AI applications – to deliver benefits at a scale not seen before, including:
- ·natural language processing
- robotics
- expert systems
- speech recognition
- machine learning and
- deep learning.
Most financial services companies use AI to manage risk and generate revenue. AI also helps banks combat fraud and adhere to ever-increasing compliance requirements.
Above all, however, AI is helping banks cut costs. Research from Nexus Frontiertech shows the total potential cost savings from AI applications could be $447billion by 2023.
Consumer expectations
So AI is a great tool for banks. But what about customers?
Thanks to the media, most consumers are aware of the development and application of technologies as well as requirements such as Consumer Duty. So, retail consumers have high expectations of what AI can deliver.
Chatbots are currently the most commonly used AI-driven communication application, enabling customers to carry out basic tasks, such as:
- searching FAQs
- making profile changes
- making balance enquiries
- transferring funds.
Every customer interaction is a learning opportunity but it’s also a way to help consumers achieve their financial objectives. Customers will expect banks to analyse transactional and behavioural data and create new product or service offerings on that basis.
When a customer is presented with a new product or service, they should immediately understand why.
If a bank doesn’t use AI to identify untapped sales, cross-selling or up-selling opportunities, there’s something wrong. The bank either has a major analytical challenge or is trying to sell what it wishes to sell, not want consumers want to buy.
Using AI for analysis can also help banks:
- suggest operational improvements
- demonstrate value for money for products and services to customers.
All of this will save customers money and boost bank revenue.
How AI can support bank lending
Over the years regulators, incumbents and entrepreneurs have succeeded in creating a robust and highly competitive lending market.
AI helps lenders build loan application management systems that save time and money.
It’s also made it possible to create measures of creditworthiness for many different types of customers. Improved credit-scoring models are better able to help people with challenging credit histories, whose applications would have been turned down only few years ago.
How AI can support money management
Many customers know their bank holds a life-time’s worth of their data and some have questioned why their bank doesn’t do more with it.
Self-learning algorithms allow banks to create personalised financial profiles and highly customised recommendations based on a customer’s:
- background
- previous behaviour, and
- financial circumstances at any point in time.
AI creates an opportunity for automation to take over boring tasks such as the many calculations required for budget planning.
It can also create and monitor other business systems and react to circumstances as they arise. For example, mobile apps can now monitor and predict the future of a customer’s finances. By taking into account the rocketing cost of living, the rise in inflation and interest rates, these apps can help identify customer opportunities and solutions.
So yes, AI is a tool – one that can benefit both banks and their customers long into the future.
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