Artificial Intelligence in Banking: Boon or Bane?

artificial intelligence banking - tdb

Tech titans Elon Musk of Tesla Motors and Jack Ma of Alibaba recently had a clash of opinions about Artificial Intelligence (AI), the latter being a staunch advocate, while the former, strongly opposing its inevitable arrival and integration into our lives.

When it comes to AI in banking, Jack Ma finds an ally in the financial services industry where discussions, articles, and reports about the huge opportunity that AI presents abound. After all, the aggregate potential cost savings using AI applications is estimated to reach $447 billion by 2023, $416 billion of which will go to front and middle office accounting.

The aggregate potential cost savings using AI applications is estimated to reach $447 billion by 2023

How AI gets to the core of banking services

While tech giants usually get the lion’s share of attention when it comes to cutting-edge technology, it is now the banking industry that slowly steals the limelight for its various endeavours involving AI. From stories about automation and how it would cut jobs, to start-up acquisitions, to how banks are now using AI to transform the customer experience with frictionless, 24/7 customer interactions.

Case in point: In 2016, DBS launched digibank, India’s first mobile-only bank. Breaking away from conventional banking norms, digibank is a completely paperless, signatureless and branchless bank. In order to provide customer support 24×7 on a full digital bank, DBS leverages futuristic AI technology to deliver hassle-free banking via conversational technology. Aptly named digibot, the AI-driven chatbot interfaces with its customers, allowing the bank to onboard new customers and manage ever-increasing service demands.

Another great example is UnionBank of the Philippines’ (UBP) chatbot service named @TalktoRafa, the first and most powerful chatbot service in the Philippine banking space.  It has the most relevant features and skills attuned to customer needs.  It is aimed to deliver witty, personal and accurate solutions to their most common needs.

While tech giants usually get the lion’s share of attention when it comes to cutting-edge technology, it is now the banking industry that slowly steals the limelight for its various endeavours involving AI.

ai in banking - tdb

Innovations in Machine Learning

Beyond chatbots, machine learning is another big area of innovation.

Taipei Fubon Bank has 4.11 million regular account holders and around 390,000 wealth management customers. Every year, some 1% of regular deposit customers get “promoted” to wealth management status through various methods and gain access to the services afforded to wealth management customers. To come up with a more efficient and scientific method to identify the potential value of customers and boost their activity with the bank (leading to higher status), Taipei Fubon Bank resorted to machine learning technology to predict customer value.

Because the value of customers has been underestimated, many customers were not cultivated by the wealth management team and only had access to the services and experiences made available to regular account holders, focused primarily on online services such as online banking and mobile banking. They did not receive personalised wealth management services or investment recommendations.

After the value of customers was identified more accurately, the customers who were promoted to wealth management status received priority treatment in offline (branches) and online channels. Offline, they were offered exclusive financial planning services supported by dedicated financial consultants, received invitations to VIP events, and receive gifts when visiting a branch. Online, they were sent regular newsletters with the latest investing, product and market information. They also received personalised product recommendations, wealth management perks and special offers. These multitude of online and offline activities and benefits forged a powerful omni-channel VIP experience for customers.

Similarly, Taishin Bank has also launched its Machine Learning initiative. For Taishin, relying only on traditional, structured customer data, from demographics to transaction history, has reached its limits for enhancing customer engagement. Unstructured conversation data from call centre reveal opportunistic life transitions, such as starting a family and buying a house, are defining moments of human experience that would complete the whole personalised customer journey. Taishin needed new supporting infrastructure and motivating use cases to maximise the value of hybrid data and drive business innovation.

While still in its relative infancy, AI is already changing the way traditional banks operate. Banks and customers alike will become winners with AI.

Beginning as a cross-business-unit collaboration, Taishin was the first bank in Taiwan to develop and apply speech-to-text and text-mining technologies across business units, from call centre to business intelligence development, digital banking, payment services, and information technology. It leveraged speech-to-text and text-mining technologies to create the hybrid data source, composed of static and dynamic, structured and unstructured data. Collectively, it increased the work efficiency at the customer call centre through the automation of call type labelling. It also enhanced the customer experience of Taishin’s web and mobile applications by resolving trending issues in customer calls. Furthermore, monetisation of its hybrid data is increasing due to life storytelling marketing strategies employed by the bank. What they do is to proactively reach out to each customer at the point of their life transitions.

The evolution of AI in banking

While still in its relative infancy, AI is already changing the way traditional banks operate. Few years from now, the face of traditional banking would completely change as we usher in a revolutionary new age of FinTech. As banks aim to achieve high-level understanding of AI, this will unlock a myriad of innovative services such as customer-service automation, personalisation, enhanced security, process optimisation and pattern recognition. Banks and customers alike will become winners with AI.

 

>> To read more about this story and other exclusive features about the digital banking landscape, download the latest issue of The Digital Banker Magazine HERE.

scroll to top