Artificial intelligence is a critical technology for small and midsize banks
The use of artificial intelligence and machine learning (AI/ML) in retail banking is rapidly accelerating. Early-adopter banks are establishing themselves as industry leaders and are redefining the experience and expectations for all banking
Customers are responding positively to the ease of use, accessibility, and personalization delivered by an AI/ML-powered experience. It is vital that banks modernize their customer experience (CX) using these new techniques or risk losing
their customers to banks that do.
Senior leadership inside banks are acknowledging the critical importance that AI/ML plays within their organizations. Many are asking their technology leadership for a specific AI/ML plan.
Larger banks have been using AI/ML for over a decade. Small and midsized banks are still in the early days of adopting these technologies, and regulatory compliance and risk management challenges have limited their use in banks. As these
challenges are overcome, their growing adoption is inevitable.
David Tomljenovic MBA LL.M CIM
Head Of Financial Services Industry Research
Info-Tech Research Group
Banks are aggressively adopting AI/ML, but yours hasn’t started yet. AI/ML are all the industry talks about, but you aren’t sure where to begin.
There are concerns about the use of AI/ML, but other banks are moving forward. What are the challenges and how have others overcome them?
Senior leadership wants a plan for AI/ML but even they are not sure exactly what these are or how to use them. They look to IT for leadership and insight.
You aren’t sure of the right use cases for AI/ML. Selecting the right use case for such technology is a critical early step. Do you choose internal or client facing use cases first?
You aren’t sure about regulatory and privacy issues. Banking has tight regulatory and privacy requirements, and you don’t know what impact AI/ML will have in these areas.
You don’t know how to implement AI/ML. Do you choose an AI/ML provider first? What about data? How does this fit into your existing infrastructure?
Apply the six core benefits that AI/ML can deliver to your CX to help determine where you can best deploy the technology within your bank.
Understand the six capabilities that AI/ML can bring to your bank’s internal operations to maximize your return on investment (ROI).
Mature your AI/ML approach, combining customer-facing (external) and internal (business) benefits to achieve exponential outcomes and returns.
Use our AI/ML scorecard tool to evaluate your use case suitability.
Your bank’s investment into customer-facing AI/ML capabilities will positively impact your internal operations. Using
the six-part external and internal framework will provide a holistic view of AI/ML within your bank. As your AI/ML
maturity grows and you can connect external and internal AI/ML benefits, your bank will achieve an exponential ROI.
Banks are rapidly adopting AI/ML
Customer expectations are evolving quickly to include these new capabilities.
AI is important to financial institutions
77% of financial services organizations expect AI to possess high or very high business importance within two years.1
Financial institutions are implementing AI
60% of banks said they had implemented at least one AI capability.2
AI will power future interactions
95% of interaction between businesses and customers will be AI-powered by 2025.3
Banks and financial service companies will rapidly adopt new AI capabilities to differentiate themselves and improve
operational efficiencies. Those left behind will struggle to catch up.
AI has already had a dramatic impact on CX in banking, and the use cases are rapidly developing. Six components are being affected by AI:
Deploying complex logic
Senior leaders may be more interested in AI/ML’s internal impact beyond external benefits such as higher revenues and lower costs. Six internal AI/ML benefits are derived from:
New business models
Customer and internal benefits build on each other
Exponential benefits can be achieved when customer-facing and business benefits are strategically planned and implemented.
Source: “Generative AI in Banking,” Master of Code, 2022
AI has significant CX potential
Customer-facing AI benefits for retail banking
Provides intuitive and simplified customer engagement
Ability to target and service multiple languages
Ability to enable/enforce complex business rules
Deliver consistent service regardless of the time or day
Implementation can be delivered through all channels
Enhanced customer accessibility
Source: “Generative AI in Banking,” Master of Code, 2023
Banks are accelerating internal AI/ML adoption
It’s driving higher productivity and revenues while reducing costs
AI is expected to increase productivity
Banks who adopt AI/ML expect to achieve a 74% productivity increase.
AI is increasing bank revenues
67% of banks that have adopted AI/ML have reported an increase in revenues.
AI is decreasing costs
79% have reported a decrease in costs due to AI/ML adoption.
AI/ML is driving net income after taxes (NIAT) growth through improved CX processes and more streamlined operations.
Source: “Unveiling the Risks,” Master of Code, 2023
Internal AI benefits for retail banking
There is broad internal applicability throughout banks
Large data-handling abilities can identify new fraud patterns
Advanced data-driven intelligence can help reduce false positives
Reduction in manual/repetitive effort can save time/costs
Multivariable, iterative models can drive deeper insight/value
Transforms almost all elements of the CX
Low-cost, high-volume, insight-driven CX can drive new models
Source: Software Group, 2023
Customer-facing and internal AI should work together
An integrated AI approach should deliver exponential benefits to banks
Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.
We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.
What Is a Blueprint?
A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.
Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.