Banking on digital: AI’s impact on the future of financial services

Today, around 46 million UK adults (86% of the country’s adult population) use a form of online or remote banking. As branches and physical are phased out, banks must now differentiate themselves through a strong digital customer experience. Here, AI technology looks set to form a key part of the future.

Research from The Economist found that “77% of bankers believe that unlocking value from AI will be the differentiator between winning and losing banks”. And if generative AI use cases are fully implemented, McKinsey predicts that the banking industry could uncover “value equal to an additional $200 billion to $340 billion annually.” Simply, banks may no longer have a choice. Embracing and implementing AI from both a customer and internal perspective must form a considerable part of their future digital strategies.

In a service industry like banking, many features and products can feel commoditised. However, AI can be the breakthrough that helps to change this staticity. Banks that use the technology to offer consumers tailored support will be best placed to grow their customer base. So, from personalised financial advice to ultra-accurate fraud detection, let’s explore AI’s banking potential in a little more detail.

Immediate AI-powered improvements

There are many practical ways in which AI technology can be used today to instantly improve user experiences. In the past, routine customer enquiries like address changes could take days to manually verify and complete, but modern technology can be leveraged to complete them in minutes. Programming AI to take on these simple tasks can then free up call centre staff to handle more complicated customer issues, which will not only reduce overhead costs but also improve efficiencies and customer satisfaction.

However, AI shouldn’t solely be restricted to tackling basic tasks. Banks must also use it to provide a deeper, richer conversational banking experience for customers. It can act as a single touchpoint that handles new customer onboarding, loan origination processes, credit advice, and much more. It also negates the need for customers to have multiple conversations with multiple staff members, in which they have to repeat the same information to get to the bottom of an issue—the very definition of a poor experience. And AI’s benefits don’t stop there.

Harnessing data to upgrade customer experiences  

Banks sit on a wealth of customer data, a lot of which is unintelligible to the human eye. However, this ‘dark’ data could contain huge amounts of untapped insights. Could AI help banks to scour this information and unlock new insights that bolster the financial wellbeing of their account holders? Absolutely.

Every transaction in an account provides a small window into a customer’s life. Whether that’s knowing when they may be away from home, when their annual home insurance premium leaves their account, or even what day they typically top up their car with petrol. By harnessing the power of AI, banks can use these insights to offer better deals to their customers that go far beyond traditional banking services.

For example, banks can see when someone may be planning a holiday and offer them deals on travel insurance. They can recognise when their annual insurance policy may be due for renewal and make unique recommendations about new policies that could save them money. They can even spot when customers tend to fill the tanks of their cars and provide live information about the cheapest fuel prices closest to home.

AI will be critical to developing such services, which not only add value but can simultaneously promote the financial wellbeing of customers, particularly amidst the cost-of-living crisis. It’s these types of offerings that can, in the eyes of customers, transform banks from a relatively insignificant, indifferent commodity into a genuine, long-term ‘partner’ that has a tangibly positive impact on their lives. But first, banks must overcome AI’s complex installation.

The remaining obstacles to AI

AI’s banking sector integration is an exciting development, but hurdles will remain along the way. For example, the safeguarding of customer data may prove tougher than ever. So, banks will need to make sure the AI interfaces they use are committed to protecting sensitive information.

An added challenge will be convincing customers to adopt AI services. They may take time to trust this new way of banking—so, banks should prioritise approachable interfaces that are simple and intuitive to use, backed up by credibility and security at every level.

If used correctly, AI could transform the banking industry forever. Banks can harness previously unavailable data to revolutionise customer experiences, operations, and profits. So, how they approach AI may make or break their future in the sector. Those who frame the technology as a customer advantage are likely to emerge as industry leaders in this next era of banking.