In the past several years, enterprises around the world have adopted digital transformation projects on various scales. According to the International Data Corporation (IDC), worldwide budgets on technology and services that facilitate digital transformation is predicted to reach 2.3 trillion USD by 2023. In fact, transformative tech is the fastest growing sector worldwide.
The report goes to mention that some of the largest use cases for digital transformation is autonomic operations, robotic manufacturing, self-healing assets, automated maintenance, and 360° customer experiences.
For all these use cases, artificial intelligence will play a key role.
AI-driven digital disruption in banks
The concept of open banking has unlocked doors for innovative, easy-to-use solutions.
Of all industries adopting AI solutions, the finance industry will see the fastest growth overall.
With AI, FinTech startups can develop state-of-the-art tech that will allow financial institutions to improve the quality and experience for customers across domains – in banking, insurance and security and investments. AI will add more than $1.2 trillion in value to the financial industry by 2035, according to Accenture.
Countries in Asia and the Middle East were quick to adopt AI in FinTech and have seen the most transformation in their financial services. On the other hand, parts of Europe and the Oceania region, including New Zealand and Australia, have seen slow progress in terms of AI disruption in finance. While there has been some disruption by smaller FinTech firms, nothing of great consequence seems to have occurred.
However, folks from the region are not entirely opposed to the idea of AI in banking. The concept of open banking has unlocked doors for innovative, easy-to-use solutions. In fact, New Zealand in particular, has seen a high uptake of digital banking and payments platforms. 83% prefer e-payment methods. Four of the biggest banks in the region are exploring how AI can improve business operations and services.
How AI can improve the financial industry
Banks have an abundance of customer data. With the help of machine learning, they can use that data to personalize customer engagement and analyze customer behavior to identify their preferences.
While chatbots are the most common and most visible AI solutions, artificial intelligence can do much more for banks.
For example, AI can improve back-office operations product delivery, risk management, marketing, and security. Machine learning algorithms can be used to complete simple tasks like data entry, processing and validation and risk evaluation. This helps clear up hours of employee time, leaving room for more innovation.
Even smaller banks can completely change their work processes by simply automating certain systems. These could include, documentation, ledger reconciliations, IT maintenance and regulation.
AI can also help banks drive revenue. Banks have an abundance of customer data. With the help of machine learning, they can use that data to personalize customer engagement and analyze customer behavior to identify their preferences. They can then use this information to create meaningful, personalized services and experiences. Analysts predict that by 2030, such applications could increase revenues for banks by 34%.
Some other areas where AI can drive transformation include, real-time detection of fraud, automated threat intelligence and prevention systems, conversational and voice-driven banking services.
The challenges of adopting AI-led solutions
Banks and FinTech startups must partner with experienced, global companies, to build an AI-banking ecosystem and drive transformation.
While the adoption of AI by banks in the Oceania region has been steady, there are still certain challenges. The biggest concern is cost, followed by governance and regulatory implications.
A lot of the new AI-based FinTech solutions, like personalized customer experiences, need customer data in order to be effective. However, countries in Europe and the Oceania are extremely data privacy sensitive. A customer survey by KPMG found that most people in the region are wary of banks. 47% do not trust their banks and only 35% feel that they have their best interests at heart.
The solution to this could be that banks and financial institutions collaborate with AI-platforms like maya.ai, who provide personalization services without the need for personal identifiable information (PII).
Another challenge that financial institutions in the region face, is the lack of AI experts, leaders and collaborators. AI talent is hard and expensive to find. Banks and FinTech startups must partner with experienced, global companies, to build an AI-banking ecosystem and drive transformation.
On the fast track to digital transformation
Despite the challenges that the finance sector in Oceania faces, AI is well on its way to being an integral part of every banks’ operations and services.
While digital transformation projects on their own are long and difficult to undertake, AI can help banks quicken the process. It empowers organizations to make the most of both human and machine learning capabilities. Banks can optimize operations and costs and deliver unique personalized customer experiences. While at the same time, do away with competition from other FinTech players.