AI in Banking: A Middle and Back Office Revolution For Now
The front office will have to wait about two years.
Any report about AI in banking that boldly proclaims that “the reality is nowhere close to the hype” is a winner! The authors’ candor should be celebrated!
This report does a great job of showing that AI is offering benefits to banks, but most are behind the scenes, not in the sexy client-focused areas advertised by consultants.
So far, AI’s biggest impact in banking is in middle- and back-office functions where manual processes, paperwork, and data-intensive tasks are perfect for AI.
The front office is still a problem, and the promise of radical AI customer-centricity is still a pipe dream because most banks don’t have the data or the ability to access it.
AI is impactful now, it's just that customer-facing AIs in banking will take longer than advertised to develop.
👉TAKEAWAYS
AI use cases that work NOW
🔹 TECH AND CODING: Leveraging GenAI to enhance engineering capacity. By using AI, financial services firms can automate code generation and documentation, create synthetic data, optimize algorithms and make software development more efficient.
🔹 HR TRAINING AND ONBOARDING: New employees can be brought up to speed with AI-powered onboarding tools that can provide quick access to relevant information, training modules and skill development resources. GenAI can also enhance training and upskilling for existing staff.
🔹 RISK AND COMPLIANCE: AI is proving useful in the field of fraud detection. ML models, for example, can analyze customer activity and transaction patterns, flagging any suspicious activity. This allows financial institutions to focus on genuine threats.
🔹 OPERATIONS AND PROCESS DOCUMENTATION Operations staff have long had to deal with extensive process documentation in the financial services sector. AI solutions provide easy and quick access to specific tasks, eliminating the need to review thousands of documents manually.
🔹 COMMERCIAL AND MARKETING: AI can turbocharge marketing and commercial campaigns for organizations. It can optimize email marketing by personalizing content, improving clickthrough rates and enhancing customer engagement.
👊STRAIGHT TALK👊
Yes, AI will transform banking, but given AI's numerous risks, it will migrate from the back office to the front and not the other way around.
Google Cloud’s recent global survey showed an astounding 6+% ROI for industries applying GenAI. A result that clearly supports GenAI adoption.
Interestingly, Google was less optimistic regarding banks, stating that regulated industries like financial services were the biggest GenAI laggards!
It makes perfect sense that heavily regulated banks will be slow to roll out AI to clients and this report shows how banks are acting cautiously.
I applaud banks’ caution because it is in all of our best interests that they get it right.
This report suggests that front office customer engagement AI’s are at least another two years away.
Given the astounding pace of AI development two years would seem a fair number.
GenAI will undoubtedly transform banking, just give it time and don’t buy into the hype.
Most bankers haven’t!
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