Discover more from Cashless: Central Bank Digital Currency and China in Perspective
SPECIAL EDITION: GENERATIVE AI IN BANKING
Special video on what it looks like that shows that the future is now!
PART 1: The Future of Digital Bancassurance Sales.
PART 2: AI is killing “omnichannel" and bringing personalized “integrated channels.”
PART 3: The ChatGPT of personal finance makes your “money talk.”
Part 4: “Gen AI is this banking’s “golden moment” or the hour of its collective doom?
Today’s art: Special Edition logo by Dall-E. Dall-E is brilliant at Art but really doesn’t like to spell “bank” or “AI”.
PART 1: “The Future of Digital Bancassurance Sales.”
First up is an excellent read by @Arthur D. Little on the “Future of Digital Bancassurance Sales,” which shows how AI and digital will change financial service sales and whom digital services should target.
I loved ADL’s take on the “who” should be targeted since it's not enough to make digital services better with generative AI without knowing the target:
1. Engaged customers — identified based on their recurring interactions with their bank, typically their main one.
2. Dormant customers — have limited interactions or none at all with their bank, which is typically their secondary bank.
3. Non-customers — are not part of a bank’s customer base but might be interested in buying insurance.
The overall strategy where “personalization” is key:
🔹 A consistent, real-time user experience (across all channels, including web, mobile, and in-person) which is cohesive, easy to navigate, and ensures that customer data is shared across channels and accessible for any interaction, giving the customer the opportunity to switch between channels/ devices.
🔹 The use of data analytics and artificial intelligence (AI) to provide personalized product recommendations, promotions, and offers across all digital channels.
🔹 The application of AI as a game-changer for automation and simplification, which improves support and interaction and upgrades underwriting tasks, making them more efficient and accurate.
“The bancassurance business must reinvent itself:”
1. Taking advantage of current customer interactions to heighten customer experience and sales performance levels.
2. Creating an omnichannel presence for an integrated customer experience.
3. Using data analytics, AI, automation, and subscription simplification to build a consistent, real-time user experience personalized to meet customer needs.
4. Understanding the three types of digital customers: engaged, dormant, and non-customers. Each group
is unique; the strategy for approaching each customer type and making insurance offers will vary.
—It's not enough to say, “We need better digital services or personalization.”
— Use GenAI to target specific groups, “engaged, dormant and non-customers,” is smart!
—AI is critical, but only if you know your target.
—Tomorrow, we go beyond “omnichannel” into “Integrated channels.”
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PART 2: AI is killing “omnichannel" and to bring personalized “integrated channels.”
Mckinsey urges financial services to go beyond “omnichannel” into the brave new world of “integrated channels!”
In an omnichannel world, “banks connect processes and data across channels to make customer journeys as seamless as possible,” In contrast, in an Integrated channel world, “banks use their app to orchestrate human and digital interactions and differentiate their customer experience.”
At first, this distinction may seem artificial, but I assure you it isn’t.
For years banks have been told to “go where the customer is” and be on whatever channel they’re on. That’s all well and good, but with AI its not just about being there but being relevant and personal.
To achieve this, Mckinsey goes “all-in” on mobile bank apps. To hell with “channels,” bring them onto an AI-boosted app that provides a personalized experience.
🔥McKinsey is right! It's quality over quantity.🔥
Mckinsey’s message is one of quality over quantity and AI is behind this transformation: “AI, smart data, and predictive models power the app and enable bankers to develop targeted campaigns and offer customers personalized interactions, insights, and suggestions."
So what changes with "integrated channels?"
–Shift 1: Make the mobile app the core customer interface for everything:
Double down on in-app service and sales excellence. Customers should be able to resolve any query, satisfy any service need, and simply buy any product using the app.
–Shift 2: Rethink human interactions, bankers’ roles, and physical locations:
Repurpose human channels by powering them with digital elements to enhance proactive advisory and drive growth.
Humans will work with digital tech and AI as a copilot! All bankers will have one system and work across voice, video, in-person advisory services and a wide range of products.
–Shift 3: Embrace smart data enablement:
Cultivate a smart “brain” by building a central data-modeling and AI capability to predict needs, fuel the app and bankers with customer insights and leads, inform smart routing, and match customers with bankers.
–Shift 4: Adopt a customer-centered operating model:
Drastically simplify the bank’s operating model. (Easier said than done.)
—Omnichannel is dead and AI-boosted "integrated channels" is the new “gold standard” for digital banking.
—Putting the bank app first and turning it into a sales channel. Sounds like Alipay!
—Humans at the bank will have AI copilots.
—And tomorrow, what this will likely look like!
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PART 3: The ChatGPT of personal finance, "Parthean" makes your “money talk.”
In this third installment of this 4 part series on AI in financial services, we tie my two prior posts together to show what a personalized AI assistant really looks like!
Parthean shows us what our AI future will look like. AI makes “money talk.”
Parthean is live now and gives new meaning to the old expression “money talks.” With Parthean you can really talk to your money, and I’m not joking.
First, let me acknowledge Linas Beliūnas' Substack newsletter which was the first to turn me onto Parthean! Thank Linas! I subscribe to Linas’s newsletter here on substack and you should too!
Parthean bills itself as the “the world's most powerful financial coach - powered by AI.” To their credit, it likely is.
Most important to our discussion is that Parthean is a great example of the personalized AI systems of the future that are coming to your bank!
Parthean founder Arman Hezarkhani won’t have this market segment to himself for long and every big bank out there is working on similar systems. But Parthean likely sets the standard for what these systems will look like and what you can do with them for now.
I’ve mixed together Parthean’s videos with a video of the app itself on my phone to give you a flavor of what this future will look like. To be fair I did not connect my accounts to Parthean so the advice I received was rather generic, but sound. Give it data access, and I think it will astound.
What is key is that rather than analyze your finances with a series of analytic graphs that have become “de rigeur” for financial apps you simply ask Parthean a question:
• How much can I afford to spend on this trip to Aspen?
• What do I need to do to retire at 60 if my income stays the same?
• What have you noticed about my finances that needs improving?
• How is my portfolio currently diversified?
• What would be an appropriate emergency fund number for me?
Data access is via Stripe showing once again how Stripe’s API is the cornerstone of our fintech future.
Still, the big question is whether users want to give Parthean access to their accounts?
It's much easier for this system to exist within a bank that already has the data than from a 3rd party vendor.
I expect Parthean has banks begging it for its services already and you’ll be using it sooner than you think!
—AI will disrupt personal finance by making AI coaching the “new normal.”
—Parthean is a great example of what this will look like.
—Banks will have their own versions in the next 6-12 months
—The AI future is now and it's bright!
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Part 4: “Generative AI is this banking’s “golden moment” or the hour of its collective doom?
Accenture declares that “Banks have a golden moment on their hands.” This may be true for some, but a more likely scenario is that the digital divide will widen, leaving the digital “have-nots” to die a slow death by takeover.
There is no doubt that the banking industry is in a state of flux with the irresistible forces of rising rates and breakthrough technology converging to create either opportunity or disaster.
While generative AI has enormous potential to revolutionize and personalize customer experience (see Part 3 above for an example), it’s not at all clear that banks will adopt the technology and the necessary internal changes required to harness it.
Banks slow tech adoption makes many “toast”
The best indicator is banks move to the cloud and un-siloed data, both prerequisites for gen AI use. Banks' slow transition to these foundational technologies tells me that many banks are simply going to be “toast.” Data silos are still the norm at most banks, and gen AI simply doesn’t work well on siloed data.
So whether banks will use the tech to enhance their offerings is the question. Accenture gently claims that many likely won’t: “The revenue boost from higher interest rates may induce complacency.”
I think the situation is much more severe. What CEO confronted with a revenue boost from interest rates, or worst case as we saw with SVB, a shortfall in assets, will give a damn about generative AI beyond "Innovation Theater?"
Bank clients aren’t happy
Meanwhile, the state of banking is best viewed through the eyes of the clients, and the level of dissatisfaction is clear:
🔹30% of respondents rate their main bank’s customer service as excellent.
🔹23% rate their main bank highly for its range of products and services and for the competency of its tailored financial advice
🔹🔥 59% recently acquired a financial services product from a provider other than their main bank 🔥
So yes, banks “can strengthen fraying customer connections with life-centric solutions and better engagement across digital and physical channels” with generative AI.
But will they?
—This is either a “golden moment” for banks or the beginning of the end for many.
—Banking “digital have-nots” will be merger targets sooner rather than later.
—CEOs aren’t going to buy into generative AI if they have other “more important” problems like asset shortfalls.
—Draw your own conclusions, but this is certainly a defining moment for banks, and 59% of clients are looking elsewhere!
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is number 4 on Onalytica's prestigious Top 50 Fintech Influencer list and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
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