Remember Blockbuster video stores, Nokia mobile phones, the Palm Pilot, and Polaroid cameras? All were once dominant in their respective fields, but no longer. The reason? They were all overtaken by technological advancements that rendered them irrelevant or obsolete in the eyes of their customer base.
And something similar is happening in the banking industry. The days of queuing at the counter and having a chat with the bank clerk when your turn comes appear numbered. Many banks are reducing their physical presence on high streets driven partly by economic realities and, to an ever-growing extent, because of changes in customer demographics, behaviors and expectations in an increasingly online world. And, of course, the situation is compounded by the rise of the fintechs and others, which offer their clients a faster, cheaper and more convenient ways of conducting their business.
The Future Is Virtually Here
The first contact many customers now have with a bank is via a chatbot or digital assistant that utilizes the power of artificial intelligence (AI), which is revolutionizing how banks interact with their clients and collect information. Chatbots can answer simple customer queries and, unlike traditional bankers, are available around the clock. Robo advisors take things a step further. They can provide digital asset management services, investing capital on an automated basis according to a customer`s pre-agreed investment strategy. And this is delivered at a lower cost than traditional asset managers and without the risk of irrational decisions and human error.
Accenture’s 2017 Retail Banking Trends and Predictions report on AI in the finance sector identified that the top trends were removing friction from the customer journey, and the use of big data, AI, analytics and cognitive computing. By 2020, the report says, this will shape the primary way banks interact with their customers. Too optimistic? Maybe, but if financial services providers get the balance right between using AI and big data analytics, they can deliver more personal automated interactions and thus stay even closer to their clients.
While some people may feel uncomfortable about AI, it is a natural next step. Many of us already interact with our bank through online banking or smartphone apps, which are impersonal in the extreme. AI uses a voice, albeit an artificial one, which is often more appealing than just tapping on a screen. And banks will be able to use AI to provide us with advice on things like loans, mortgages and investments tailored to our unique circumstances far more efficiently. It’s a win-win, right?
Whether we are aware of it or not, AI, in one form or another, has been around for years in the banking industry. For instance, banks have used algorithms to assess customers for loans and credit cards with very little human interaction or discretion involved in the process. But the early iterations of the technology have not always lived up to the hype. Think of the fatal accidents in driverless cars powered by AI. But there has been considerable progress made in areas such as e-commerce and customer support. And, according to a recent SAP survey, people are starting to accept the changes. For example, while only around 20% currently make use of chatbots, for example, 95% believe they will be using them more in the future.
But there are still challenges that need to be resolved for widespread adoption to become a reality. The first is security. Any online public system has vulnerabilities, and banks need to ensure a customer’s financial details cannot be revealed to someone imitating a voice. Advances in voice-based AI systems such as speech-driven voice biometrics may provide a solution by recognizing and verifying a customer by the pitch, tone, and timbre of their voice and not just by repeating a pre-set phrase or password.
The next issues are accuracy and empathy. As mentioned above, and despite all the hype, AI-based on machine learning, neural networks, and natural language processing is just not quite there yet. As with self-driving cars, even when digital assistants can work at 90% capacity, getting them to 100% is where improvement is needed. And in the case of the financial services industry, which is highly regulated, accuracy is paramount. And as regards empathy, the advantages AI offers can be negated if a customer is all too aware that they are dealing with a robot and not a human. So, work needs to focus on instilling some acceptable digital empathy. We are still humans after all.
These are just a few of the issues the banking sector and others will have to face in terms of wider acceptance of AI. While a lot has been achieved there is still much to do. And while established banks certainly have the resources, they perhaps lack the resourcefulness to truly adapt to and adopt what their clients demand. Too often they are hampered by legacy processes and ways of thinking, and this is where new fintechs come in. These new players have the opportunity to transform not just products and services but also to build a truly customer-centric culture. New banks that can use technology to personalize like never before will be tomorrow’s success story.