Banking, at its core, is a simple concept; however, today, it is a technological marvel. From business banking to consumer fintechs, it is awash in innovation. Artificial intelligence (AI), or its programmed and non-autonomous cousin, machine learning, are areas of particular promise.
AI is arguably the fourth-generation technology that holds the most promise for many industries. However, it is also the hardest to perfect, so it isn’t as prolific in our everyday lives as the Internet of Things (IoT). Yet, its potential is clear, and its use is not uncommon.
In fact, 80% of banks are highly aware of its potential, according to this OpenText survey of financial services professionals, with 75% of respondents with over $100 billion in assets, and 46% of banks with less than $100 billion in assets, saying they’re currently implementing AI. As with all businesses and industries, the pandemic accelerated banks’ transition to a digital-only service, encouraging the adoption of such new technologies.
AI can offer financial institutions real improvements in efficiency and accuracy. From improving the front-end, such as customer experience and personalised recommendations, to the technical tasks underpinning all functions, such as spotting new market opportunities, credit scoring, or identifying fraud.
This trend will not slow — and just as machine learning algorithms influence how we listen to music through streaming app recommendations, AI’s impact on banks and consumers’ financial activities will grow.
Institutional high street lenders will look to use AI to increase their agility — hoping to catch up with the myriad of digitally-native fintech providers that have been able to use technology to provide a more flexible service. However, the challenge lies: how can they radically transform while keeping and expanding the scale, security, and regulatory requirements essential to their place in this world?
Naturally, the biggest lenders on the high streets are vast behemoths with highly engrained and immovable yet fractured core technological systems. According to McKinsey, this is a necessity and makes the adoption of the newest tech that much slower — one reason the adoption of AI has been fragmented and sluggish.
Changing this attitude, or the structures that represent it, will not be easy. Still, it needs to happen if institutional high street banks want to keep up with the fintech startups and payment systems rapidly growing with a ‘technology-first’ approach.