The banking and financial services sector has been adopting new technologies such as artificial intelligence (AI) to enhance its offerings in recent years. Due to the increasing applications of AI in financial services, more technology is being sought by CIOs for their businesses, improving the levels of efficiency and automation in digital banking.
However, in a survey conducted by IBM, 43% of respondents felt that the banking sector had stagnated in its innovations. Consumers are unimpressed. They are looking for more intelligent AI in banking that is capable of solving problems effectively.
Faced with the lack of radical innovation and increasing demand by consumers, banks are looking to deliver more personalized unique experiences with the help of artificial intelligence.
Artificial intelligence as a boost to banks
Cognitive computing is a branch of artificial intelligence that uses large amounts of knowledge to mimic the functioning of a human brain.
It is an innovative self-learning technology that makes use of big data, predictive analytics, and natural language processing to guide employees and customers. Machine learning, robotization, natural language processing, and other cognitive tools reduce human interaction and streamline work paths.
As the machine achieves greater knowledge, it becomes more efficient, resulting in higher efficiency standards and an optimal client experience. This technology is improving the financial sector, offering innovative services.
Nowadays, cognitive computing, with its dynamic configuration, is crucial for problem-solving and decision-making. Unlike traditional computing systems based on algorithms and rules, cognitive computing can solve situations automatically.
Optimizing the banking industry with AI
The financial services sector continues their digitization efforts to adapt to new customer demands. With the impact of Covid-19, customers expect faster, improved and personalized services from banks.
The great potential of cognitive computing in banking is that it uses machine learning, speech, vision, NLP, and human-computer interfaces to mimic the human brain’s processing.
This technology aims to respond faster and more efficiently to queries, improve face-to-face service, deliver products without delays, and use customer data to make personalized customer decisions.
Thus, banks incorporating cognitive solutions into their decision-making, transaction execution, and customer experience will gain a competitive advantage.
Customers are not opposed to the robotization of banks, but they do expect them to be more effective than human interaction. This means answering customer questions, solving issues, and offering alternatives promptly.
According to CAPCO, cognitive computing will impact four areas in financial services.
Cognitive banking will allow users to have virtual assistants at their disposal with more comprehensive capabilities than human assistants. With the financial information these machines have, they can help users with their queries, transactions, and banking incidents much faster.
The solutions provided by cognitive development in banking would include providing users with account information, showing spending patterns, or carrying out transactions. But these assistants would go a step beyond human bankers as they can make recommendations for savings or investments and warn users of excessive spending, offering greater personalization and more individual attention to customers.
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Another use for cognitive banking can be to collect customer information from social networks or any other source (as per customer’s consent), to learn about the user’s lifestyle and offer a portfolio of services according to their habits.
Cognitive banking can automate operations and save time from having to go through different departments to obtain this information.
Digitalization in banking and other sectors would also help wealth managers. Despite Robo advice and online financial advisors capable of assisting clients with investments, these tools are not enough to resolve complex queries or justify recommendations efficiently.
Cognitive computing, combined with artificial intelligence, can offer a virtual assistant who operates the same way as a human financial advisor. A bot with sufficient knowledge to simulate a human brain would function as a human professional but operate faster and more efficiently.
These bots are trained to meet clients’ investment requirements by advising them based on what they want and the returns and yields offered by those investments.
Thanks to cognitive banking, users could have financial advisors available 24 hours a day to guide them on the decisions they need to make.
Due to cognitive banking, customers who need a loan will be able to receive the services most closely aligned with their solvency levels.
Cognitive banking allows each customer to be studied individually based on the financial information received. Banks can then decide whether or not they are eligible for a loan.
In addition, this will help to foresee possible loan defaults earlier.
The cognitive bank: its dimensions of success
Cognitive computing is capable of transforming the way organizations operate. It complements employees by generating new knowledge and quick solutions to provide better services to customers. It offers an opportunity to improve financial services across three dimensions:
- Improvement of engagement
Cognitive banking offers greater personalization due to increased customer knowledge and constant learning, offering an enhanced user experience provided by a virtual assistant that interacts directly with the customer at any time of the day, via web or mobile, responding to all their requests.
A bank in Asia that developed a cognitive software to collect customers’ information based on their interactions, learning from their actions, expressions, and language. Thanks to this software, the bank learned their preferences and offered tailored services.
The use of cognitive computing to improve engagement reduces waiting times, improves customer satisfaction, and reduces operating costs.
- New analytical insights
Cooperation between employees and cognitive technologies enables better decision-making by applying more profound customer knowledge.
In this way, banks can better understand each user’s profile and improve their service. The reduction of response times also offers a higher conversion rate.
Another benefit of accessing new analytical insights is that it allows internal and external data to be filtered to provide information on emerging trends, financial performance and strategic intent. This offers new value opportunities and mitigates market risks.
Other benefits include faster incident resolution, reduced training costs, and better use of resources.
- The transformation of organizations
Cognitive banking can align advanced customer information and knowledge of all existing banking regulations. In this way, it can offer greater visibility of business challenges, align policies and procedures in the company, and carry out inspections or monitor risk.
With cognitive banking, banks can benefit from greater transparency, better data and document management, regulatory compliance, and a dynamic view of the changing regulatory environment.
In conclusion, new generations increasingly demand digitization of financial services and a more personalized user experience when receiving banking services or managing their finances. Therefore, banks must constantly modernize and introduce new technologies to avoid losing potential customers. Banks that are able to adapt to these new technologies will gain a competitive advantage.
The use of cognitive solutions to make decisions or execute transactions, coupled with greater customer insight and optimization of time and resources, will make a difference in the financial sector. This technology will enable customers to have all the information and attention they need 24 hours a day on their mobile devices, dramatically improving their user experience. With the adoption of cognitive banking, the banking sector is poised to make a significant change from the way it is today.