AI And Big Data Set To Transform Banking In 2019
Does your bank help you reflect on spending habits and help you make wiser decisions? Did it detect that it wasn’t you who made that last purchase? As a matter of fact, it should. By combining the powers of big data, artificial intelligence, and machine learning, banks can do much more than keep your money and pay you a nominal interest rate.
“Banking is necessary, banks are not.” That’s something Bill Gates said way back in the 90s, but the true weight of that short sentence is being felt today. With the triumphant rise of Fintech startups, mobile wallets and other digital alternatives, traditional banks have seen a steep decline in traffic. The financial crisis of 2008 also caused consumers to look for options other than traditional banking. Today, banks absolutely need to up the ante if they wish to retain the business of customers who have been pampered by tech giants like Amazon, Uber, and PayPal. Banks need to offer the ease and personalization that customers have grown accustomed to.
And that is exactly what big data and AI can enable banks to do. Today, banks have to do a few things in order to remain a figure of authority in the financial world and for customers to trust them with their hard earned money.
- They need to get with the tech and make banking easier and more convenient for customers.
- They need to not just store the customers’ money but help them manage their wealth.
- They need to win customer trust by thinking about them before thinking about the bank’s profit.
- Most importantly, they need to unmistakably improve their customer service and be more accessible and accountable to the customers’ every query or complaint.
Big data and artificial intelligence can not only help banks achieve these goals but also improve their internal management and reduce operational costs, becoming more efficient and profitable organizations. Here are some of the key ways AI and big data will transform banking in 2019:
1. Fraud Detection and Cybersecurity
At the end of every conventional cyber attack is your money. Understandably, your bank should be the glass topper in cybersecurity. Banks have always tried to be that, no doubt. But cyber criminals are just too competitive today, and some of them are quite prodigious too. Banks certainly need all the help they can get.
Systems are being developed that with the help of AI and machine learning, can detect fraudulent transactions. By studying the usual spending patterns of individual customers over a period of time, systems can identify what kind of transaction is unlikely of that customer and if it was possibly done by someone else. It is again up to the advancement of AI to make sure that the accuracy of these detections is high so that customers aren’t inconvenienced by flagging every other transaction.
2. Preventing Inconvenient Charges to Customers
Overdraft fees, penalties, and other such charges are a huge disappointment to customers, often souring their experiences with a bank. AI and data can help banks prevent such charges and hence deepen the bank-customer relationship. Using solutions like data-driven awareness, aggregated account data, and forward cash flow predictions, banks can automatically review an account’s status and alert the customer before an overdraft occurs. They can alert the customer to do a top-up if the account is low before a due payment. Banks can even alert the customer at the time of spending that a particular transaction may cause their account to be low for the next upcoming payment.
In fact, many banks like Metro Bank have already made efforts in that direction by launching an in-app money management tool called Insights. This tool issues instant alerts to customers if their account balance is running low or if they are likely to incur a charge. Such systems can also be used to flag certain instances such as a customer accidentally getting billed twice for the same item, or if any unusual charge showed up on their statement.
3. Wealth Management Advice
Banks can develop immensely stronger relationships with customers if they show genuine concern about helping the customers save and grow money. The rising popularity of track-your-spending type of apps reinforces the need for this. Customers need a credible advisor to help them manage their money better.
A survey by JD Power found that 78% of customers desire financial advice from their banks but only 28% of them feel that they receive it. Interestingly, customers most crave advice on issues such as investment, retirement, saving and tracking expenses.
AI systems can help do this. They can monitor expenses and observe spending patterns to identify saving opportunities. They can give customers weekly or monthly reports of expenses they could have avoided or places they could have saved money. Have you ever received those discount vouchers or offers that have confusing terms and conditions? AI systems can help you use them in the right places.
Many banks have made commendable forays into personalized wealth management advice. Here’s a video showing how Wells Fargo helps customers take control of their money:
Royal Bank of Canada has taken similar initiatives and has even been awarded for it.
4. Improving Customer Service
Negotiating your way through a bank’s customer service is probably one of the hardest things to do. Getting the right person on the phone seems impossible. Even if you do find someone, there seems to be no concept of personalization. If you visit the branch, the experience can be particularly intimidating. Banks seem to be designed for the bank’s convenience as opposed to that of the customers.
Big data, machine learning, and AI can help change that. From automating repetitive tasks and freeing up executives, to creating smarter systems for self-service, banks can leverage AI in incredible ways to improve customer experiences. Needless to say, this will phenomenally improve people’s relationships with their banks and lead to overall growth in the financial services ecosystem.
In an age where Netflix accurately predicts what we’d like to watch next and where Dominos knows the pizza we’d like on a Friday night, consumers have come to expect the same level of alacrity from their banks. Through 2019, banks will leverage AI, big data and machine learning in a big way to provide such a level of personalization and convenience to their customers in a big way.