By Hani Hargras, Chief Science Officer, Temenos
During the second half of the twentieth century, Artificial Intelligence (AI) was an idea that only featured in science fiction movies. Such films often depicted a future dystopia where humanity struggles at the whim of advancing technology. However, today we find ourselves living in a new frontier defined by data and automation. Central to this is AI, which is playing a major role across many sectors.
A report from Microsoft and EY analysing the outlook for AI in 2019 and beyond, stated that “65% of organisations in Europe expect AI to have a high or a very high impact on the core business.” In the banking and financial services industries, AI has already begun to vastly improve the customer experience. Important actions are being undertaken using AI on credit risk, wealth management and even financial crime risk assessments. Other applications include robo-advisory, intelligent pricing, product recommendation, investment services and debt-collection.
The latest Economist Intelligence Unit (EIU) report carried out on the behalf of Temenos, found that 77% of banking executives believe that winners and losers within the industry will be determined by how they embrace AI.
Rarely, if ever, will banks have faced the kind of immense strain than during this pandemic. They were already under pressure transitioning their operations to be compliant with social distancing guidelines and are now having to cope with record levels of demand from their customers. Online banking has seen a huge spike in activity following the closure of bank branches during lockdown and banks are also having to lend in unusual circumstances, requiring them to manage the twin pressures of increasing arrears and political pressure not to trigger defaults.
Banks must have the ability to adapt in order to deliver whatever is required to support the financial health of their customers. They need to quickly scale up operations and develop new digital products and processes in highly compressed timeframes. To cope with the huge demand for Bounce Back Loans in the UK, lenders need to provide simplified digital self-service user journeys.
To do this, they must urgently deploy technology that can support greater automation and efficiency and improve productivity. This technology not only exists but is already successfully being used to solve problems.
AI will enable banks to significantly accelerate digital onboarding, conduct eligibility checks and process loan applications. AI can centralise and enforce policy rules to ensure decisions are based on bank-specified criteria. This consistency in decision-making is hugely important in the current context as it reduces the need for manual intervention, which can slow down the processing of the huge volumes of loan applications. This technology can also play a key role in rapidly accelerating the onboarding of customers to digital banking services.
However, it must be recognised that the adoption of AI across business sectors has not come without its challenges. In a recent forecast, Forrester predicted a rising demand for transparent and easily understandable AI models, stating that “45% of AI decision makers say trusting the AI system is either challenging or very challenging.”
With the surge in AI usage will come much greater regulatory oversight. Transparency must be a key tenet of AI regulation and models that offer limited visibility and that don’t protect against bias should be regulated out.
Just as it’s important to be able to look under the hood of a car and understand how it works, so should banks be able to look at how decisions are made and understand how they are reached. Yet, transparency is not possible with traditional ‘Opaque box’ AI.
True ‘Transparent box’ explainable AI systems enable merging data based and human expert knowledge to generate models that are fair, safe, unbiased and highly accurate. XAI systems are highly transparent models, which could be easily analysed, understood and augmented by the business users. The XAI models can explain, in human language, how an AI decision has been made. Crucially, they do not solely rely on data, but can be elevated and augmented by human intelligence. This technology will be crucial in helping bank’s build trust with customers and regulators and identify issues as they arise.
The global pandemic is once in a century event and has demonstrated how indispensable agile and scalable technology is in responding to a crisis. With pressure mounting on the sector, the deployment of XAI technologies is key to enabling banks to help secure the financial wellbeing of its customers. This is a once-in-a-lifetime opportunity for banks to make the difference between a huge number of businesses staying afloat or going under
