The smart money is on bank bots.

Artificial intelligence will help banks to identify fraud, replace branch assistants and become our personal advisors

Under continuous pressure to cut costs and increase profits as challenger banks hit them broadside, traditional retail banks are investing and partnering with artificial intelligence (AI) companies. They are hoping the move will help them stand out from the crowd, introduce innovative services and tackle the growing problem of fraud and money-laundering, which equates to billions of lost dollars every year.

A recent study by not-for-profit retail banking association EFMA on disruptive technologies found that banks saw their biggest threats coming from technology companies and challenger banks – 48 percent and 47 percent respectively. To hit back, banks are responding with more investment in innovation and technologies such as AI, which is viewed as one of the key forces in change. To access these technologies and get a head start, 74 percent of banks said that working with innovative start-ups, suppliers or partners was high on the agenda.

AI technologies will enable banks to automate large volume, repetitive tasks, such as regulatory, compliance and financial reports, enabling them to cut costs. They can then focus their attention on using AI for high-value services, such as personalizing the customer experience. Eventually, for example, AI will be able to predict customers’ sales and service inquiries.

Several big-name banks have already made progress with the technology. Wells Fargo has set up an AI research team and The Royal Bank of Canada (RBC) has established a research lab into machine learning. RBC Chief Executive Dave McKay maintains artificial intelligence is the most transformative technology in banking. “There is a lot of investment discussion about AI creating new capabilities. And it is a tool that we are very excited about harnessing within our own organization,” says McKay.

Deutsche Bank has opened a lab in New York to explore AI and its opportunities. It has also set up a “Digital Factory” in Frankfurt and teamed with the Massachusetts Institute of Technology (MIT) to develop products. “We don't want to be driven by digitalization; we want to be in the driver's seat. The number of successful players in the banking industry will fall. Only the fastest among them will gain market share,” says Christian Sewing, member of the Management Board of Deutsche Bank and Head of Private, Wealth & Commercial Clients Corporate Division.

Smart banking

Banks see a host of applications for AI coming down the pipeline. They range from identifying odd behavior patterns that could flag up fraud, money laundering or misconduct by employees, to creating innovative personal services for customers, centered on areas such as personal recommendations for financial products and services.

Chatbots powered by AI are already appearing. Bank of America, for example, has announced ‘Erica’, which is scheduled to go live later this year. The chatbot, available via voice or text, will act as a virtual financial coach, answering queries and helping the bank’s 21 million mobile app users make smarter decisions about spending and saving. It will also prompt users to check out financial advice videos and regularly view their credit score. Capital One is trialing a chatbot dubbed Eno capable of answering questions on everything from account balances and recent transactions to credit limits.

This is just the beginning: banks are looking to develop chatbots that will act as personal, automated financial assistants, capable of paying bills, keeping track of budgets and advising on investments. Orange has unveiled Djingo, a virtual assistant for French homes, which will be able to act as a virtual advisor to Orange Bank as well as control Orange TV, amongst other capabilities. 

On a larger scale, AI humanoid robots could eventually replace branch assistants in the future. Last year, City Union Bank unveiled its robot Lakshmi to deal with customer queries. It is based on IBM’s Watson AI engine and can interact with customers on over 100 topics, including interest rates and loans. Sensitive information is displayed on a screen. HDFC Bank in India has teamed with AI company Asimov Robotics to create a robot to help the welcome desk give directions to customers. HDFC is analyzing customer feedback and may add other services to its bot which it plans to roll out to its branches.

AI and security

AI is helping banks to meet the growing security challenges that the connected world is bringing. For example, the Nilson Report estimates card fraud alone will hit a staggering $35 billion in 2020.

Some of the largest credit card issuers, such as HSBC Bank, have been using AI to analyze the way cardholders use their cards. Any irregularities are immediately flagged up so that decisive action can be taken. Others are also looking to AI to combat fraud. The Bank of England, for example, has teamed with AI start-up Mindbridge to pilot analyzing desensitized regulatory data to help highlight financial anomalies.

The power of AI is that it can learn behavior patterns and sift through huge amounts of data, spotting any inconsistencies, more thoroughly and quickly than humans can.

Bank of tomorrow

So, what will the bank of the future look like? Consultants KPMG believes that the future bank will be invisible to the customers thanks to AI. This will all be made possible by what KPMG calls EVA (Enlightened Virtual Assistant), who will collect data from our connected lives and run our financial affairs for us. But, with KPMG estimating that banks are only 10 percent through their digital transformation, we may have quite a wait for EVA’s banking services. 

In the increasingly competitive financial services market, it is vital to offer innovative products to gain new customers and boost loyalty. Read more about how Orange Business can help you here.