Open banking has set a new normal for how banks operate. Banks, financial institutions, fintechs and other third-party providers can now seamlessly and securely transfer data amongst each other. But, open banking is more than a tool to exchange data across the financial services ecosystem. With increased visibility into how consumers manage their finances and their preferences in doing so, banks can create enhanced banking experiences and more personalized recommendations that drive growth. 

Most banks understand the benefits of open banking beyond data access but, according to Sopra Steria and Sopra Banking Software (SBS)'s Digital Banking Experience (DBX) Report, 75% of them say they aren't ready for it.

And the pressure is building for banks to ready themselves between rising customer expectations and new regulations, including the proposed CFPB's Personal Financial Data Rights. The answer? AI. 

The third annual DBX Report features responses from more than 850 senior decision makers at global banks and over 11,000 global bank customers to understand the key drivers behind banks’ AI adoption. 

Here are three areas where AI will make the biggest impact on banks and customers’ banking experience:

1. AI transforms partner relationships between fintechs and banks.

Data sharing through open banking creates new opportunities for AI innovations that allow banks to use the latest data they can access. However, the data is only as good as the value-added insights it provides.

Banks see collaboration with fintechs as vital to the future. Seventy-four percent (74%) of global banks and 66% of U.S. banks say collaboration with fintechs is "critical" to their future. 

AI allows banks to derive insights from sharing data across banks and fintechs in seconds. This gives banks access to customer information that they would not be able to access otherwise without significant investment. Access to new data also means endless possibilities for new products and services. As a result, banks can cut down their go-to-market timelines for new offerings, while still offering the experiences and level of security that customers expect.

2.  Increase personalization in customers’ banking experiences.

Consumers trust their banks, but over time, they have come to expect more. In their daily lives, customers are used to hyper-personalized experiences. Take music streaming, for instance. Spotify recommends hundreds of custom-made playlists for each user, depending on a listener’s mood, the time of day, and their recently frequented songs. Consumers are growing to expect this same level of personalization from their banks. 

Specifically, consumers want personalized advice on how to manage their finances, but 40% of them say they haven't received it. As consumers debate if they have the budget to make a big purchase or go through big life events like getting married, they expect their bank to make personalized financial recommendations. Only 27% of customers feel like their bank is offering them personalized advice for these kinds of situations. 

Banks must consider these evolving needs from their customers as they approach internal digital transformation initiatives. Otherwise, they risk losing customers. In fact, 19% of bank customers say that a bank's level of personalization can cause them to change banks altogether.

The data sharing enabled by open banking allows banks to use AI in a way that brings heightened personalization to the market. Thanks to open banking, banks have a more holistic picture of each customer and their financials by aggregating data across different financial institutions. AI allows banks to rapidly analyze these large swaths of data to provide the personalized recommendations customers seek, such as short-term savings goals to meet their financial goals or investments to make to support long-term goals.

Previously, banks were limited to working customers based on the services they used with the bank. Now, open banking and AI are shifting the paradigm to offer banks a holistic look at consumers, their finances and their financial needs to exceed personalization expectations and, ultimately, grow market share through strengthened customer satisfaction and trust. 

3. Enhance security across the enterprise.

Heightened data sharing is leaving many banks and consumers alike weary of the security implications. This is understandable, though, as 22% of consumers have fallen victim to a phishing attempt, and 20% have experienced an identity theft attempt. 

But AI provides banks with another layer of security to prevent these attacks. With AI, banks can quickly identify and neutralize cyber attacks from  Trojans, viruses, and rootkits - protecting sensitive data from malicious actors. Banks can also use AI to analyze data from previous attack attempts to learn takeaways, identify vulnerabilities, and implement the necessary remediations to protect them going forward. AI's ability to recognize patterns and anomalies in data also allows banks to detect abnormalities in network traffic, system access, and user activities to identify potential threats and automate their response.

As cyber criminals continually evolve their tactics, banks must proactively shift their defense strategies to stay a step ahead. AI provides a largely untapped toolkit for banks, empowering them to ensure their customers' sensitive data remains secure. 

AI holds immense potential for banks to increase operational efficiency, fend off cyberattacks, and better meet customer expectations, ultimately leading to increased revenue. With the turn towards open banking, new possibilities for products and services offer a new frontier of innovative and hyper-personalized customer experiences.