Banking is on the cusp of an explainable AI revolution

Throughout the last half century, science fiction movies have been filled with the idea of an artificial intelligence (AI). Such films often portray a forthcoming dystopia where humanity is in conflict at the whim of the evolving technology. Today we find ourselves living in a new frontier defined by data and automation, however, rather than the enemy within, AI is central to this evolution and is playing a major role across many sectors.  

The latest survey on AI from Microsoft and EY found that an unsurprising “65% of organisations in Europe expect AI to have a high or a very high impact on the core business.” Within the financial services sector, AI has already improved the overall customer experience. For instance, significant steps have been taken using AI in credit risk, wealth management and even financial crime risk assessments. Future additional functionality is likely to include robo-advisory, intelligent pricing, product recommendation, investment services and debt-collection.

Throughout this pandemic, banks have faced immense pressure. The transition of their front and back office operations to comply with COVID-19 restrictions alone has caused great stress. The picture has been complicated further with a huge uptick in customers using digital banking tools, a trend driven by the closure of bank branches during lockdown.

To survive these shocks, banks have had to be incredibly agile by adapting to support the financial wellbeing of their customers and clients. They are required to rapidly scale up operations whilst developing new digital products and processes in highly compressed timeframes. Within the UK, the huge demand for the Government business loan schemes have forced lenders to provide streamlined digital self-service user journeys.

Banks must urgently deploy technology that can support greater automation and efficiency and improve productivity. This technology not only exists but is already successfully being used to solve problems.

In fact, the banking sector already recognises the importance of such technology. A report carried out on behalf of Temenos, the Economist Intelligence Unit (EIU) report, found that 77% of banking executives believe that winners and losers within the industry will be determined by how they embrace AI.

Why is AI transforming the industry? Well, AI will enable banks to significantly accelerate digital onboarding, conduct eligibility checks and process loan applications. The technology can be deployed to ensure decisions are based on bank-specified criteria, and policy rules are met. Such deployment would significantly reduce the requirement for manual intervention, which slows down the processing of huge volumes of loan applications. 

Whilst the rewards to AI adoption are extensive, it would be foolish to ignore its challenges. In a recent forecast, Forrester found that “45% of AI decision makers say trusting the AI system is either challenging or very challenging.” It is evident that the surge in AI usage has and will continue to lead to increased regulatory oversight. Technology models which offer limited visuality and fail to demonstrate its decision-making processes are likely to be regulated out. Transparency will be key.

However, the transparency required to explain how decisions are being made are not possible with traditional ‘Opaque box’ AI. True ‘Transparent box’ Explainable AI technologies allow merging data based and human expert knowledge to produce models that are fair, safe, unbiased and highly accurate. The data can be easily analysed, understood and augmented by the business users. Explainable AI models can explain, in human language, how an AI decision has been made. Critically, they do not solely rely on data, but can be elevated and augmented by human intelligence. This technology will be crucial in helping bank’s build trust with customers and regulators and identify issues as they arise.

The COVID outbreak has demonstrated how essential agile and scalable technology is to respond to a crisis. As the sector continues to face considerable pressure, the deployment of Explainable AI technologies will be vital for banks to continue to shield the financial wellbeing of its customers.