AI Will Fuel the Financial-Services Revolution. Here’s What to Know.
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It’s no secret that artificial intelligence (AI) is already changing the way we deal with money, and it has the potential to revolutionize banking as we know it.
AI is already a common tool used for some up-and-coming fintechs, whether that’s a robo-advisor or an automated-savings tool. Traditional banks are also recognizing its potential to offer a more personalized service for customers amid branch closures — HSBC and Wells Fargo offer an AI experience that mimics a real-life assistant.
However, while there’s certainly an interest in and understanding of the technology‘s potential, the process so far has been slow, complex and difficult. Banks wishing to adopt AI to make a real change are faced with regulation, risk management and limitations within their own organizations.
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What is AI?
Even today, many people still think of AI as a robot with a mind of its own. But AI simply enables machines to make decisions based on data — something banks have in spades but don’t always take advantage of.
AI leads to higher automation, can help control risks and can improve the speed and accuracy of decision-making. According to McKinsey, AI could potentially unlock $1 trillion of incremental value for banks every year.
The adoption challenge
The ability of some of the largest banks in the world to adopt AI remains limited and has thus far been characterized by high failure rates and long times to market. Often, it can take so long to adopt a new solution that by the time it goes to market, customer expectation has shifted once more.
Implementing something new across a bank with thousands of people handling billions of dollars worth of cash is often likened to turning an oil tanker. Banks face limitations with everything from an inexperienced internal team, fear of change within the organization and, of course, the issue of trust. The adoption of any new solution depends on the comfort levels of stakeholders, especially customers, and with AI in banking involving sensitive customer data, privacy issues will remain a challenge until AI is better understood.
In 2021, we should be able to overcome some of these problems by implementing the right systems: investing in platforms and systems, building trust to take the fear out of AI and managing change by reassuring staff that humans and machines can work together.
Related: 8 Ways Digital Banking Will Evolve Over the Next 5 Years
The financial-services revolution
The financial-services landscape is changing fast, and AI is already having an impact — but how does it factor into our long and complicated journey?
As we know, the 2008 economic crash prompted a sea change in many aspects of financial services, and it was from that crisis that some of today’s biggest fintechs emerged, hoping to uncover a “better” way to bank.
Back then, it was fairly uncommon to manage money on a smartphone — but fast forward to 2021, and a reported 25 million people in the UK use mobile banking in some form, with 14 million (over one in four) having opened a digital-only bank account. By the end of this year, digital transactions across the world are expected to reach an annual value of $6685.1 trillion.
This is a somewhat natural progression in the current “fourth industrial revolution,” which involves data, digitalization, automation and AI in all their different forms. The potential for banking is not only to make internal operations more efficient, but also to enable customers to interact remotely — even opening a bank account safely in the comfort of their own home.
I believe we can trace the fourth industrial revolution back to the 1970s, with the foundation of…
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