How AI & Customer Experience are Reshaping Banking Industry

| | 6 min read

The digital revolution has reached every walk of life, and every industry and sector is using some form of AI and automation to speed up processes and increase efficiency within their system. AI is extensively used by digital services providers to tailor customer experience and create a feedback-focused environment. Data collected is efficiently used to drive innovation and customer experience across industries.

One of the biggest and core industries when it comes to economies around the world is the Banking industry, and it is worth noting that while banking is one of the most traditional industries in the way the banking process works, their operations have been affected by the technological innovations driven by AI and the change in consumer consciousness with regards to digital services are making day-to-day life more manageable.

Customers are Driving Innovation

The digital age has changed how customers view services. Digital services have made things so much easier and faster than legacy industries like banking are now having to innovate banking services to meet the requirements of the modern customer. Digital transactions are constantly going up in volume. With customer behavior becoming increasingly digital, it is easier for service providers to use data mining and analytics to understand customer psyche and provide more integrated and streamlined services that are geared towards providing a better customer experience.

Digital platforms and digital services are now setting the standards for customer experience every day, and legacy institutions like banks are lagging other service industries in that regard. Traditional banking has come at odds with the demands of modern customers of a more streamlined, faster, and painless banking process wherein your banking needs are completed on the fly without having to wait for days or even weeks. The banking industry is increasingly being sidelined to the role of a utility rather than a service.

Customers want immediate service, and traditional banking processes take a long time. It is impertinent that banks realize that consumer behavior is now driven by choices available to them in the form of digital service, and to stay relevant in the face of newer and innovative fintech businesses, they need to stay in touch with the changing times. One way banks can do that is, by offering financial management services as banks have all the necessary data to make that reality. The only problem lies in the lack of structural integration that fintech has. There is a lack of data flow within banks which has led to huge amounts of data going to waste. Even using just enough data to provide services that can create value for the customers can see a huge rise in customer satisfaction and business for banks.

Relying solely on big companies and businesses to generate revenue is also losing feasibility as businesses are now operating on extremely tight schedules. Any delay in banking services now threatens business deals worth millions, and as such, client satisfaction and user experience have become the priority of the banking industry. Banking institutions need to learn from retail players on how to utilize the data better they must provide a complete and integrated banking experience and create value services for their customers.

Data flow thus becomes an essential challenge for banks. Whether it is within the bank itself or from the customer to the bank, or customer to the merchant, a smooth and uniform digital experience is necessary. Not just to improve customer experience but also to remove inconsistencies in the digital experience of the customers. A disjointed system wherein there is no one platform or method of communicating with your customer can lead to a lot of confusion. Fraudsters use these inconsistencies to impersonate banks and defraud customers. This causes huge monetary loss and loss of confidence in the institution itself from the customers.



What has Led to Digital Innovation in Banking?

Banks have been following the traditional way for a long time and only incorporating digital technologies back in the 90s to ensure they do not fall behind in computation abilities. The status quo has remained stagnant for so long, and banks have no real motivation for doing any innovation apart from being threatened by fintech companies and the innovations they bring to the table. With how fast some fintech companies are growing, banks run the risk of losing market solutions when it comes to banking solutions and financial management.

This has led to banks being aware of falling way behind others due to the legacy technology they use, which is neither scalable as per modern needs nor secure for the current digital age. Banking institutions are looking for ways to streamline their legacy technology and infrastructure and upgrade them to the modern benchmark. Banks really need to focus on creating services and processes that save time for the customers and create value out of those services. It is the expectations of the customers that are driving innovation as they are now benchmarked against other digital services like Amazon and Google in terms of ease of usage and faster delivery of services.

Banks can investigate integration platforms where they can partner up with e-commerce platforms. This can help provide a more streamlined online experience to their customers. It is no longer about just transforming the banking system within the banks but transforming customer experience alongside it.

Taking the Next Step

It is difficult for banks to upgrade all their legacy architecture and software to modern technology, and it is impossible to provide the customer experience that users get from other digital services through legacy technology. It will be far easier for banks to create entirely new banks based on modern technology and infrastructure geared towards scalability, data security, and customer experience and then migrate their customers to the new bank.

But even then, the right technology platform and architecture might not be enough to create a sustainable model. Traditional banks have relied on a sustainable model for generating revenue and keeping the industry going, and it is important that a sustainable model be implemented for the switch to modern technology and cater actively to customer experience.

Is AI the Answer?

AI has been taking over industries and digital services because of its powerful automation process and excellence in analysis and data mining. While there is the scope of AI usage in the banking industry, there are conditions that affect its implementation. 

Banking is not like other industries, and it directly affects the financial situation of an individual. What might be the logical step for an AI may not be what the customer wants. Even if banks were willing to use AI to analyze and find the most suitable investment or lending opportunities, the volatile nature of the market or a global disruption like the COVID-19 pandemic could throw all predictions out of the window. Customers feel more at ease when they get their banking needs met by actual humans and not automated processes where they do not have any say.

On the other hand, customers and banks are willing to work with passive AI systems that require their authorization to take action. Treasure management systems that prompt the best course of action and yet leave it to the discretion of the banks are more in demand. AI has the capability of understanding customer behavior and suggests the best possible way of improving customer experience and services, and banks are more comfortable with using AI in this way.

AI can also be used to create data flow and remove feedback inconsistencies within the bank. The various departments within the bank have communication gaps wherein data analyses and collected by one are not available or used by the others, and AI can overcome such limitations. So, while AI and automation are not actively required, they can be used for aiding decisions and mining data that can be analyzed to prompt suggestions and the best course of action.

It can thus be concluded that it is the customer experience that is reshaping the banking industry as banks are trying to ensure customer satisfaction and faster banking services by using modern technology but using automation in banking services has implications that are not yet accepted by retail and commercial customers, and as such, the role of AI becomes passive.