The impact of AI on the customer experience in financial services

Artificial intelligence (AI) is altering financial services and disrupting the traditional ways of doing business and interacting with customers. Technology is opening the door to new operating models, while introducing competitive dynamics that will reward forward-thinking institutions and punish those that are not able to keep pace.

For the western economy, AI looks promising. The UK’s GDP will be 10 percent higher in 2030, at £232 billion. AI will be one of the main contributors to this uplift.

And yet, 40 percent of leading organisations in UK say their most senior personnel do not fully understand digital and 65 percent say that business stakeholders do not have the skills for managing AI. Furthermore, 86 percent believe AI will make business more effective but don’t yet know how to implement it, with more than 92 percent agreeing they need to evolve from their existing business models. Evidently, there appears to be a gap.

I have recently executed research with the London School of Economics regarding the potential AI may have on the customer in financial services. I interviewed 19 executives to get their views on their challenges and opportunities.

In the interviews, the top theme cited was automation adding value to their business, which is meant to aid processes that help the enhance the customer experience.

“The biggest opportunity with AI is reducing the number of operational decisions and processes. As soon as we can start to move away from there, we can start to minimise risks of errors being made. Minimise time, minimise costs and explicitly or implicitly affect the customer journey. Aim is to reduce time so we can reinvest more to enhance client services. It’s about taking out operational processes that are unnecessary today.”

– Consumer Insights Vice Presidents at an International Bank

Chatbots in the financial industry

Another theme that was top of mind among the financial services c-suite was chatbots. Today Microsoft’s Cortana already aids the customer experience changing path to purchase strategies, with banks also testing the early days with ‘automated attendants’.

However, the real future is in messaging, which has more monthly active users than social networking apps, with the top three―WhatsApp, WeChat and Viber―having nearly three billion users combined.

According to research conducted by Credence Research, chatbots have the potential to leapfrog mobile apps to become a major medium for digital communication. The global chatbot market is driven by technology developments such as natural language processing, customer intelligence, and integration with enterprise systems.

In the financial services sector, technology is proactively assisting financial advisors with investment bots used by banks to reduce costs and eliminate potential human errors. This means that purchasing decisions will increasingly be made by computers.

Some forecast that the introduction of robo-advisors almost eliminates financial advisors from the investment process. Predictions are that customer engagement with bots will only continue to increase given that people fell more comfortable to disclose financial information when speaking to a bot in confidentiality.

But is this correct route to take? According to some industry leaders, not necessarily. “Maybe the world doesn’t want robo-advisors. Just because you can do something doesn’t mean you should,” says a Strategy Lead at a European Bank.

Enhancing the customer experience

With increased connectivity, financial services are impacting client journeys from multiple touch points. Capitalising on these moments requires the shift from simply understanding which offer and which channel performs the best to understanding the context of a customer’s interaction.

This example below shows customer intent and the touch points at which data is collected:

There are numerous opportunities to enhance the customer experience. Personalised financial planning, fraud detection, anti-money laundering, and automation of customer operations presents opportunities to enhance the customer experience.

According to the Technology Vice President at a US Bank: “AI allows us to understand your money better – can we categorise your transactions, can we play back that to you in insightful way, can we predict what’s going to happen in the next few days for maximum long-term value?”

Fundamentally, this requires tailoring services, preferences and customisation of offers. This includes aspects such as the appropriate credit limit and interest rate for a given customer or purchase. The ultimate goal is to scale personalised offers with the use of technology, and although it’s early days, the results look promising.

“Even with small data sets, we’ve seen 20 percent uplift of the credit risk model when you overlay it with some constraints. Once we actually operationalise this, we’ll have:

1. Better fraud detection
2. Better ability to extend credit to people where traditional models would say no.

We need to scale this which will take some time. But it will mean better customer service, better lending decisions, and therefore better products.”

– Cloud Lead, International Bank

The more we adapt AI and technology in banking, the closer we are to self-drive finance, which automates much of customers’ financial lives and improves their financial outcomes.

As we move closer towards this era, banks are working on transforming their infrastructures to support this change with a seamless experience by migrating to the cloud. This allows institutions to treat their entire product portfolio as a single balance sheet and enabling dynamic customisation.

“The next level is hyper-personalised products. Right now, you can play with variables such as interest rates but we’re playing around with too few. Where it’s headed is multitude of variables and personalised products on an individual level. What variables are we allowed to change and what is the impact of these products on our credit risk profile?”

– Consumer Insights Vice President, International Bank

Although we are still in early days of fully experiencing benefits of AI, it will impact the customer in many positive ways. Benefits such as personal financial plan enhancements, easier payments transactions, improved credit loans, and fraud detection are just some of the many benefits we are yet to experience.

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About the author

Marina Arnaout has been successfully helping businesses embrace innovative strategies that enhance digital investments. She’s previously held roles of Customer Success Director at Marin Software working with clients across EMEA, and Regional Head of Digital at SAS Software, spearheading the analytics leader’s global digital strategy, which won her recognition in Marketing Magazine’s annual 30 Under 30 in 2016. Currently she is part of UK Strategic Sales at Microsoft working with top tier clients in helping develop digital strategies across Microsoft advertising properties, and is a masters candidate at London School of Economics, focusing her academic research on the impact AI has on the customer within financial services.