Artificial Intelligence or AI is transforming the banking sector by creating more personalized customer experiences, enhancing decision-making, bolstering security and compliance, and improving operational efficiency.
According to independent reports, AI will save the banking industry an estimated US$1 trillion and by 2030 traditional financial institutions will be able to enjoy a 22 percent reduction in operating expenses due to AI across front, middle and back-end operations, enabling greater focus on high value-added activities.
The banking industry in the region is starting to invest in AI as a means to testing new technologies and understanding the opportunities that AI can offer, in a drive towards greater customer engagement and efficiencies. In fact, the banking sector has been at the forefront of AI globally and has implemented a number of innovative solutions in recent times centered on customer experience.
JP Morgan Chase & Co has implemented a program called COIN (Contract Intelligence) that is powered by machine learning and analyzes legal documents. The program has already helped the bank substantially decrease the number of mistakes in relation to loan-servicing. What would typically take hours to review, can now be completed in a matter of a few seconds. Similarly, U.S. Bank has invested in Innovation Group to develop machine learning and AI practices to augment its human workforce.
AI is almost a natural progression for banks; digital and mobile banking is paving the way for more sophisticated technologies revolving around machine learning, deep learning, data mining and analytics that can identify patterns and irregularities, in an effort to create much needed step improvements in areas such anti-money laundering and fraud management.
Globally, there has been double-digit growth in investments in AI and in the region too, large banks have started to set up their own AI divisions or departments to leverage new technology. AI and machine learning is helping banks leverage volumes of unstructured data to profile customers, analyze behavior patterns and automate an increasing numbers of tasks.
However, it is not just about investing in technology. The key success factor for a bank is how effectively it is able to implement AI. This means using the right combination of tools and algorithms to enhance the customer experience. But, equally, it means having a strong internal framework of governance embedded into the bank’s own DNA to drive the AI vision.
Shaping the future of banking: Chatbots
Digital banking is the first step to building a robust AI framework, and the main entry points to-date have been chatbots or virtual personal assistants that answer customer queries, and provide a low cost way for banks to improve their services.
Internationally, HSBC Holdings, Standard Chartered, and Hang Seng Bank are some of the leading banks that announced the launch of chatbots to serve customers. Chatbots are being hailed as the next big thing because they are not just reducing operating costs for banks, but speeding up service and changing the conversation with customers.
According to research conducted by Juniper Research, chatbots will help save global banks more than US$8 billion per year by 2022, as chatbot enquiries save around four minutes compared to traditional call centres.
Well-designed chatbots provide an instant response to customer queries, recall customer preferences and are able to learn and predict customer behavior. They are also available round the clock and are able to improvise to provide the correct solution to a problem.
In addition to that, as some chatbots use advanced machine learning and Natural Language Processing (NLP) capabilities, banks are able to mine huge amounts of data and provide highly targeted and personalized experiences for customers.
In the UAE for example, Mashreq Bank has introduced its chatbot to initiate an intelligent conversation with users. Customers can use the chatbot to browse Mashreq products and perform card-less cash transactions, low ticket local transfers and enquire about balance and recent transactions on an account, thus making it much easier to perform banking tasks.
Blending AI with the human experience
So while chatbots and virtual personal assistants are heralding a new era of personalization in the banking industry, are customers ready for AI? And are banks effectively combining the strengths of their human workforce with machine intelligence and AI?
Investing in AI will certainly set winning banks apart from the rest, but banks must have a pragmatic approach to AI for it to be successful in the long-term. They must look at reskilling their workforce so that employees have the right skillsets and are ready to collaborate with existing AI. This will speed up the shift from a more ‘factory line’ approach to a more fluid approach and enhance creativity and innovation.
As the UAE harnesses AI to drive growth in many different sectors, combining machine intelligence with human intelligence will help build a more stable framework for the future. For example, the banking sector is increasingly relying on the consumer-facing applications of AI, such as Emirates NBD’s virtual assistant EVA, to enhance offerings.
But even with AI being used to improve customer service, human interaction is still be needed an in fact highly valued at various touchpoints. AI solutions can be leveraged to augment human interaction in banking and other sectors, but not fully replace it.
Looking ahead, we foresee that over the next 10 years, AI will transform the experience for the customer through even more customized offerings and holistic services. We will also see governments and institutions in the region investing in robust frameworks to strengthen and encourage greater investments in AI.
Central Banks in the region have launched regulatory sandboxes over recent years, which are helping banks pilot new financial technology and applications in a safe environment. These are further supporting banks and other financial institutions in the region that are looking to leverage AI, enabling them to experiment with and refine products, services, platforms and business models before launch.
AI is clearly the future technology of the present, and the banking system has been one of its earliest adopters. However, we are still only at the tip of the iceberg, and tremendous progress remains to be made for banks in the MENA region to build the appropriate skills, adopt the right tools, establish governance, and reform cultures to reorient themselves to use data and AI as primary engines.
-By Charles Habak, Vice President at Booz Allen Hamilton, Head of Finance and Investments
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