In order to accelerate the application of artificial intelligence, it is very important to establish the ecosystem of partners. It is no secret that artificial intelligence (AI) has changed the way we deal with money. And, as we know, it could revolutionize the banking industry. Artificial intelligence has become a common tool for some emerging financial technology companies, whether it is a robot consultant or an automatic savings tool.
However, although people do understand the technology and are interested in its potential, so far, the process has been slow, complex and difficult. Banks that want to achieve real change through artificial intelligence face internal supervision, risk management and their own limitations.
What is AI?
Even today, many people still think that artificial intelligence is a robot with its own ideas. But AI just lets machines make decisions based on data – banks certainly have this ability, but they can’t always take advantage of it. Artificial intelligence brings a higher degree of automation, which can help control risks and improve the speed and accuracy of decision-making. McKinsey claims that artificial intelligence is expected to add $1 trillion to the value of banks every year.
The ability of some of the world’s largest banks to adopt artificial intelligence is still limited. So far, it is characterized by high failure rate and long time to market. Usually, it may take a long time to adopt a new solution, so that when it enters the market, the customer’s expectations change again.
The implementation of new measures in a bank with thousands of people handling billions of dollars in cash is often compared to changing the course of oil tankers. Banks face various constraints, inexperienced internal teams, fear of changes within the organization, and of course, trust. The adoption of any new solution depends on the adaptability of stakeholders, especially customers. The use of artificial intelligence in banking involves sensitive customer data. Privacy will still be a major challenge before a more comprehensive understanding of artificial intelligence.
In 2021, we should be able to overcome some of these problems by adopting the right systems: investing in platforms and systems, building trust to eliminate the fear of artificial intelligence, and managing change by making employees believe that humans can work with machines.
Financial Services Revolution
The pattern of financial services is changing rapidly, and artificial intelligence has begun to have an impact – but how does it affect our long and complex process? As we know, the economic crisis in 2008 has led to earth shaking changes in financial services in many aspects. It is in this crisis that some of today’s largest financial technology companies came into being, hoping to find a “better” way of banking operation.
At that time, it was very rare to manage funds on smart phones – but by 2021, it was reported that 25 million people in the UK used mobile banking in some form, of which 14 million (more than a quarter) opened pure digital bank accounts. By the end of this year, the transaction amount of the world digital bank is expected to reach US $6685.1 trillion.
To some extent, this is the natural continuation of the current “fourth industrial revolution”, which involves various forms of data, digitization, automation and artificial intelligence. The potential of banking business lies not only in improving internal operation efficiency, but also in enabling customers to interact remotely – even safely open bank accounts in their comfortable home.
I believe that the fourth industrial revolution can be traced back to the 1970s, when the birth of commercial software such as Microsoft, Oracle and SAP laid the foundation for large-scale innovation of enterprises. By the beginning of the 21st century and the Internet age, billions of people can use data, and the popularization of data continues.
In 2012, we saw that deep neural network – modern artificial intelligence – is widely used in the world, among which the most well-known is face recognition technology, which is the real beginning of artificial intelligence. A few years later, the technology was widely adopted by technology giants such as Google, Facebook and Amazon.
Today, deep learning is the driving force behind the development of many industries, including search, social media and e-commerce. We are beginning to see this progress in financial services – but how this tanker turns remains a challenge.
It is reported that only more than half of medium to large financial services (FS) organizations have adopted artificial intelligence. However, it is worth noting that banks are very good at paying attention to the development trend and success or failure of the industry, so I have a hunch that there is a lot of innovation ready to go.
The future of financial services
Banking, financial services and insurance (bfsi) industry is the most strictly regulated industry in the world. Legislation that keeps pace with the times ensures that the industry continues to innovate and protect customers. “Slow and stable” is the foundation of the banking industry – frustrating for innovators, but essential to maintaining trust. We are in another crisis, but this time people turn to banks for support, such as mortgage freeze and small business loans, which gives the banking industry the opportunity to rebuild the trust damaged a decade ago.
Over the past 11 years, we have seen that the digital transformation has led to a seemingly “healthier” system, which is regaining the trust of consumers, but technologies such as artificial intelligence will be the key to the continued prosperity of the industry.
The banking industry needs artificial intelligence, just as we can’t do without software. In the past few years, banks have a huge demand for data related talents. Most well-known banks are building centres of excellence in artificial intelligence and data science. Other banks are actively developing financial technology and technology start-ups, developing incubators and catalysts to seek ideas that banks can use in the future.
Benefits of cooperation
In order to promote application, a strong partner ecosystem is very important. As banks finally shift to the concept of “buy rather than build”, suppliers are working with financial institutions to provide artificial intelligence development to help them better manage data.
However, even with the internal innovation program, the problems of trust, compliance and rapid market entry still exist. Often, a potential partner will come up with an idea and sell it to the bank, resulting in the termination of the transaction due to compliance issues. All this may take years to bear fruit – by then, the world has often changed and the start-ups with the solution may have closed down.
Caution is important, but banks should consider the benefits of accelerating innovation through cooperation. Even if there are risks associated with artificial intelligence, its competitive advantage should not be underestimated.
Regulation will play a key role in the adoption of artificial intelligence by banks. It is important that large companies in the industry cooperate with start-ups and regulators to ensure that this goal is truly achieved. In the past year, we have seen that changes within institutions usually take several years to happen, and can change overnight when needed. Therefore, I hope that the application of artificial intelligence can be accelerated this year, because banks will focus on how many reliable off the shelf artificial intelligence solutions can be adopted.