As banks shift to Intelligent Banking: AI takes center stage

In the battle for best-in-class customer experience and innovation, incumbents still come up short compared with today’s agile new players. Banks are grappling with a bloated technology infrastructure that isn’t aging gracefully, creating mid- and back-office ineffectiveness.

With historically low proactive investment from banks in IT enhancements, many firms find it challenging to provide customers with the expected last-mile experience. Did you know that middle-office employees use around 80% of their time to gather data from systems, but use only 20% to analyze the data to make sound decisions?

In my view, these mid-office bottlenecks, coupled with pandemic setbacks and challenges to economic growth across the globe, are making banks’ digital transformation journey steep, yet imperative to serve customers well.

According to Capgemini COVID research, 57% of consumers turned to digital banking at the onset of the pandemic and say they will continue even after the crisis resolves.

While customers reach out to their primary banks and seek answers to fundamental questions around support, security, and ubiquitous banking, firms seem to have found a new direction – Intelligent banking with artificial intelligence (AI).

As firms realize the power of AI, they are prioritizing its use

Let us roll back the clock to the World War II-era when Alan Turing and Grey Walter laid the foundation for artificial intelligence. They could not have imagined that almost a century later, their vision would become a reality. Fast-forward and AI is being adopted even in fields such as financial services. Traditional banking players may have known about applied-AI’s experiential and economic benefits; however, their meaningful adoption of the technology has been low. Only 7% of banks polled during a 2019–2020 survey said they planned full-scale AI solution deployment, according to the Capgemini Research Institute.

However, within the current uncertainty, banking sector AI adoption plans have shot up exponentially; 85% of banking executives say AI and AI-powered automation will be among their top tech priorities through 2022.

Banks are also realizing cost benefits through strategic and focused application of AI-based solutions to business problems. The aggregate potential cost saving for banks may reach up to USD447 billion by deploying AI across the banking value chain, according to a 2019 report.

Banks are piloting AI use cases within customer-facing operations such as onboarding, KYC, fraud, loan applications, and mortgage services. What do they hope to achieve?

• Optimize operational excellence
• Enhance customer experience
• Mitigate risks.

More and more banks are looking towards AI to make them leaner, more efficient, customer centric, and resilient during turbulent times ‒ and, over the long-term ‒ sustainably competitive with a favorable cost/income ratio.

The Capgemini Research Institute found that 69% of executives believe banks could achieve up to 25% cost savings and productivity improvements by implementing AI. Similarly, 68% of executives said banks could realize up to 25% improvement in customer satisfaction and sales from AI implementation. They also believe that it could mitigate financial and operational risks (three in five said banks could improve their risk management capabilities by up to 25%.)

As the shift to adoption quickly ramps up, hurdles remain. AI deployment faces obstacles across four pillars – People, Technology, Business, and Finance. And now, future-focused banks are recalibrating their organizational capabilities.

I recommend a four-step AI implementation plan

1. Strategize a progressive digital transformation approach.
2. Set up a robust, overarching governance framework to modulate AI deployment effectively.
3. Map customer journeys and identify high-value pilot AI projects.
4. Scale these projects to enterprise capability.

At the same time, keep these focus areas in mind: data, governance, management, and modular architecture.

Success will be contingent upon a cohesive strategy that firmly plants AI at the digital transformation core rather than as a cherry on the top.

Want to learn more about artificial intelligence? Look for Capgemini’s Pioneering Intelligent Banking 2020 report (slated to publish in December 2020) for a holistic view of the state of AI in banking.

Or, if you are interested in AI-adoption, reach out to me on social media to find out how Capgemini partners with leading specialists to support our clients’ digital transformation initiatives.

Ame Stuart

Expert in Digital Banking, FinTech, Retail Banking

Ame leads the UK digital transformation practice for financial services, with a focus on supporting Retail Banks, Fintechs, and challenger banks.
Over 18 years’ experience of helping banks drive deeper consumer engagement through developing digital-first strategies for customer attraction, engagement, and development.
Driving change at pace through developing and launching our Digital Banking Accelerator, Rapid Start.