Banking has significantly evolved since its establishment nearly 4000 years ago when it was based on a simplistic barter system. In that time, the banking industry has gone through major transitions, from the introduction of standard currencies to now the digitization of finances. However, the deployment of artificial intelligence (AI) financial services may be the most significant revolution for banking since shifting to paper money from silver and gold coins. This is because it has the ability to completely upend the traditional conventions of our financial services.
Data Centric instead of Asset Focused
For decades, the banking system has been mainly focused on its assets, such as cash, government securities, interest-earning loans, and physical store locations. But just as with nearly every other industry, data is becoming one of the most valuable currencies. And the data that banks have on its customers and their buying habits might be some of the most insightful and useful data, more powerful than that of social media platforms. When combined with successful deployment of AI this data can help to drive and grow a bank’s business, thus transforming banking to be centered around data instead of its assets.
Tailored Experiences instead of Mass Communication
Currently, banks offer services that fit the needs of pre-segmented customer groups. The services and communication around them are designed to fit the general target audiences, but are not specifically created to be a perfect match for any individual customer. Through AI deployment, all banking services can be specifically tailored for a target group of one. This applies to all areas of banking, from customer facing in the front office and anti-fraud and risk in the middle office to underwriting and collections in the back office. Once integrated into the business processes, AI can help to improve client personalization in fraud detection, individualized support, and even wealth planning or portfolio management. This means that the current banking model of concentrating on VIP relationships will transition to optimizing service customization.
Immediate, Interactive Response instead of Slow Turnaround
Typically the turnaround time for open issues to be resolved by banks are longer than in other areas of life. This is true for simple inquiries and spans all the way to more complex requests, such as ID verification, credit card checks, and loan approvals. By deploying AI financial services into all of these business processes, the time to resolution can be greatly shortened. Voice assistance, email classification, Q&A, and biometric identification can employ AI technology to accelerate the response time for less complex inquiries. While for the more complicated processes, AI can be leveraged not only to speed up the turnaround time, but also improve the accuracy.
360° Digital Presence instead of Physical Entity
From cold-hard cash to buildings, everything about banking is going digital. Moving away from the brick-and-mortar business strategy, in which bank and ATM locations were key to attracting and maintaining customers, the digital presence and capabilities of banks is becoming the most important factor in providing customer service and staying ahead of the competition. Customers want to seamlessly manage all of their finances, including purchases, in a digital form. To keep up with customer demand, banks will need to leverage AI financial services to help them transition to a complete digital offering.
Reducing Servicing Costs towards Improving Benefits
With profit margins of banks being thin, especially since the 2008 global financial crisis, cost reduction has become an important measure for survival and competitiveness. But cost reduction doesn’t come without consequences. In particular, these type of initiatives can hurt the customer experience and eliminate important service offerings. With AI financial services being deployed in banks, the focus is shifting from cost reduction to improving the customer experience with expanded offerings that provide true value to individual customers.
High Retention Benefits instead of High Switching Costs
Banks in general have been considered to have a strong degree of stickiness. The logistics and bureaucracy involved in changing banks is often too cumbersome for customers to easily switch banks. The high switching costs for customers has allowed banks to focus on cost reduction strategies instead of providing attractive and competitive services. However, digital banking will lose the stickiness of traditional banks and will force the banking industry to offer value-added services that help with customer retention. By deploying AI financial services, banks will have the ability to transition to a customer-centric approach.
As AI continues to be deployed throughout all departments of banking, the financial world will be transformed into a more efficient, customer-centric business.
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