Banks and insurers are seeking for ways to respond to their most urgent strategic priorities: cutting costs and enhancing the digital experience of customers. In this article I will elaborate on how banks and insurers can utilize AI as a leverage to respond to these priorities.
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AI is an important technology to leverage by banks & insurers seeking for ways to respond to their most urgent strategic priorities in 2017. Whether your unique selling point is price, product or service, all banks & insurers can optimize their value chain across their front-, middle- and back-office by leveraging AI technologies. In order to do so, banks & insurers should have set new targets and reassessed their priorities for 2017 (have you?). The Financial brand has published an overview of the top ten strategic priorities for banks in 2017 as indicated by their respondents.
Before plunging into the deep end of the pool, it’s important to differentiate between a number of concepts, for those who do not regularly follow my blog. Artificial intelligence is human intelligence and behavior mimicked by a machine. This is realized by the machine abilities to self-sufficiently learn how to respond to different types of problems or situations. An instance of AI (a computer or robot exhibiting characteristics of artificial intelligence) is supported by algorithms which allows it to learn on its own. This is called machine learning i.e. " the ability to learn without being explicitly programmed" (Arthur Samuel, 1959). Deep learning is an advanced form of machine learning based on artificial neural networks. These neural networks process data in a similar fashion as the human brain analyzes information to uncover patterns Deep learning allows for a more accurate prediction and a higher chance of achieving the ‘right’ result than traditional models.
Top Strategic Priorities for Financial Institutions in 2017:
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How to Leverage AI for Strategic Opportunities
Leveraging AI can help you achieve a plethora of strategic opportunities ranging from enhancing the digital experience to meeting regulatory requirements. I will discuss the 4 opportunities in detail below.
1. Enhancing the Digital Experience With AI
Enhancing the digital experience is the number one priority for 71% of respondents (Marous, 2016). Leveraging AI in the front end of your organization will enable you to enhance the digital experience you can offer your customers. Let’s take an example from my experience at Accenture: Colette is an intelligent chatbot already able fulfill up to 80% of the traditional role of the mortgage advisor - 24 hours a day, 7 days per a week, 365 days a year. Colette does not merely follow a script but can actively engage in a conversation with the mortgage applicant. Chatbots can do much more than sell mortgages; chatbots can onboard clients and provide immediate assistance to customers needing help. Chatbots are even able to assess emotions and adjust their behavior and style of communication accordingly. Furthermore, if chatbots get stuck, they can seamlessly handover the discussion to an agent and provide a relevant summary of the preceding conversation. Artificially intelligent chatbots have the power and the analytics at their disposal to offer an affordable, scalable and personalized digital experience to the customer at the time and place of their choosing.
2. Investing in Deep Learning Capabilities
Similarly, investing in deep learning capabilities will enhance your ability to generate additional customer insights is considered a top 3 priority by half of the respondents (Marous, 2016). These insights are not only helpful in determining client needs, but also in making lending decisions, evaluating your risk exposure and determining fraud. Insights could even be used to identify cross selling opportunities. PayPal, a large (mobile) payment processor, leverages AI to ensure its network is the most secure in the world. Although it is essential to have the right data (which sounds easier than it is), applying AI technologies will almost always improve your predictive power.
3. How to Cut Costs
Moving on, 41% of respondents indicate that finding ways to cut costs is a top 3 priority for 2017 (Marous, 2016). The cost pressures facing banks & insurers are here to stay. Facing continually tough economic times, banks & insurers are forced to cut costs across the board. AI technologies can help cut costs by (a) reducing risk and (b) reducing operating expenses. Within insurance for example, AI can reduce risk by improving the underwriting process thereby identifying the customers you want to attain/retain and those who you would rather not serve. Furthermore, AI can reduce your operating expenses by improving fraud detection and supplementing your customer care center with chatbots. ‘Outsourcing’ the mundane tasks to an AI will allow your employees to spend time adding true value to the organization and will, according to a recent Accenture report, actually increase their job satisfaction. Furthermore, chatbots are platform independent and have access to the entire spectrum of systems usually accessed by the human colleague. This ensures increased rates of straight through processing (STP).
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“The time has come where banks and insurers no longer chase the facts, but instead, set the standard in service and profitability"
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4. Meeting Regulatory and Compliance Standards
Closing the list, meeting regulatory and compliance standards is a top 3 strategic priority as indicated by over 20% of respondents (Marous, 2016). Meeting regulator demands is a costly process. Leveraging AI technologies can help you reduce the cost of compliance while also increasing the power. Previously, a robot would execute 100% of the KYC evidence gathering for onboarding new clients, and a human would do the rest. With AI, we can let the AI do 95% of the work from evidence gathering to scoring the client. A small role may remain for an optional enhanced due diligence for certain sensitive or borderline cases.
Employing AI within your organization can go a long way towards achieving your strategic priorities for 2017. AI has the potential too:
- Provide customers with higher levels of service availability and personalized experience
- Increase regulatory compliance through more (cost) effective control procedures (e.g. KYC)
- Cut costs required to run the business and identify new sales
- Extract additional value from the mountain of data stored by the bank or insurer
The time has come where banks and insurers no longer chase the facts, but instead, set the standard in service and profitability across all industries worldwide. Although AI has not reached maturity levels of technologies such as robotic process automation, it is picking up pace. We have looked at the possible benefits to banks and insurers in achieving their strategic priorities for 2017. We have seen that the benefits of AI are wide and diverse. Despite (AI) being in the spotlight for some time already, few banks or insurers have made it a priority to explore the possibilities of employing AI technologies within their organization. For the rest, it’s time to wake up and smell the pot of freshly brewed coffee, it’s the future and it’s just around the corner.