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CONVERSATIONAL BANKING: MOVING BEYOND AUTOMATION
Published
4 years agoon
By
admin
By Martin Linstrom, Managing Director UK&I, IPsoft
Automating business processes is a cost-efficient way to ensure smooth customer service. But there’s a substantial difference between quickly fixing a single problem, and consistently providing an optimal customer experience.
A personal banking concierge
With conversational Artificial Intelligence (AI), banks are starting to evolve customer service processes without having to invest in additional resource. It’s no longer just about automating the troubleshooting of tasks, or helping customers reset their passwords. In reality, the bank is giving every single customer a digital concierge that can help them find new products, research account and loyalty programme options, and even handle high-value tasks such as mortgage application processing or assisting the internal HR team with employee benefits selection.
Routine transactions that require manual completion by bank staff cost businesses 20 times more than transactions handled by customers online, according to Bain & Company. Rather than dedicating staff (and 20 times the resources) to handling rote processes, banks should be focusing workers on only the most important tasks. However, a critical distinction exists between what’s defined as automation and what qualifies as an AI-based solution. In other words: How you choose to automate your customer service tasks matters a great deal.
Chatbots won’t provide all the answers

When customers have a question pertaining to basic account changes, they will typically go on their banking app or to the website seeking an answer. Some of these questions may be simple: How do I transfer funds? How do I add my partner to my account? Companies often makes it easy for customers to search and find these answers within the existing content of their website. But what happens when customers are ready to take action on the basic information they’ve received? Many companies have adopted simple chatbots that can automate rules-based processes. If a customer asks Question A, the chatbot helps her complete Process A. This has served banks moderately well for the past five years. Unfortunately, if you’re one of the companies that has deployed a chatbot, your customers have likely encountered frustrating limitations that negatively impact user experience.
One of the critical drawbacks to working with a chatbot is its reliance on sequence to automate basic service needs. Customers may only visit a website with a single query, but they may also come to it with five distinct questions or think of additional things to ask during the course of their visit. Within the standard and scripted processes followed by chatbots, each question and its associated automation must be handled individually and within its own strict context. Deviation from or interruption within that context often leads to a dead end.
Automated multi-tasking
For example: A customer comes to a site and types to a chatbot, “I’d like to check my loyalty point balance, but I noticed someone just put a fraudulent charge on my account. I’d like to cancel my credit card and order a new one.” Within this single message there are five distinct business intents that must be automated. A chatbot that by design follows a strict sequence will not take into account any urgency to these requests (the fraudulent charge) and it will not find the most logical resolution path. Instead, a scripted chatbot will handle the first intent, and reports the customer’s loyalty point balance. Only then will the chatbot proceed to checking for a fraudulent charge. Clearly, the customer would view their priorities a bit differently.
Learning to prioritise
A digital colleague doesn’t need to accept information in a strict sequence in order to automate tasks. Although a digital colleague’s brain doesn’t entirely replicate human thought processes, it’s more nuanced than a scripted chatbot in how it processes information to make decisions – and it certainly provides more than automated processes. With the aforementioned fraudulent charge use case, a digital colleague will process all of the intents within the sentence (loyalty points, fraudulent charges, account cancellation and a new card request) and determine that pausing the customer’s account to prevent additional fraudulent charges is the obvious first step. Only after the digital colleague has handled the more important processes will it move onto simpler tasks, such as loyalty point balance checks.
The more complex the sequence of intents, the less capable a basic chatbot will be. This is particularly problematic when dealing with high-value tasks such as processing mortgage applications or helping customers book travel arrangements. If your conversational digital colleague is forced to follow strict sequences in order provide support, they will never be able to assist with and complete processes that require dozens or even hundreds of steps – some of which will need to be revisited multiple times within a single conversation – leading to undue time and effort on the part of a customer.
Don’t confuse automation with conversational AI. Basic automation delivered by
chatbots makes simple processes easy for software to repeat, but that’s where
the benefits end. Conversational AI from a digital colleague allows your
business to automate at scale the nuanced, intelligent service provided by your
best human employee, going ‘off-script’ to answer more complex queries and
carry-out lengthy requests like mortgage applications. Ultimately, this means banks
can deliver a positive customer experience for every single interaction,
without the oft-encountered frustration seen when customers can’t get what they
want from a chatbot. Banks that want to ensure consumer loyalty, higher
customer satisfaction and continue driving a healthy bottom line should look to
conversational AI as their next big initiative.
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Banking
Digital Acceleration – the next buzzword in banking tech? Or a new era for the industry?
Published
16 hours agoon
June 2, 2023By
admin
Ove Kreison, CTO at Tuum
McKinsey’s latest report on banking found that traditional banks are spending a whopping 85% of their tech budgets on maintaining legacy solutions, with just 15% going towards building anything new for customers.
‘Digital transformation’ has been the buzzword in banking technology for years, but the figures suggest there’s still a lot of ‘transforming’ left to be desired. Now we’re beginning to see the term ‘digital acceleration’ come to the fore, what does that mean for the state of banking technology? What is the difference between acceleration and transformation, and what should banks and other financial services players do to remain competitive?
Digital transformation – the second machine age which has taken an age!
The idea of ‘digital transformation’ didn’t come out of the blue. Banking – like most other industries post-WW2 – has been experiencing the ‘second machine age’ for decades, exploring how technology can digitize processes and services to make cost, operational and organisational efficiencies. All the while, this process has also made it far easier for companies to be more competitive with new digital products that are slicker, quicker and more user-friendly.
Banks have benefited from wherever they have had digital transformation to date – but it is the digital transformation of core technology stacks that is having the most impact and making banks realise operational efficiencies while making them nimbler to adapt to changing customer needs and remain relevant and competitive in a highly disrupted market. Digital transformation to the core gives banks the ability to launch new offerings to market quicker, renovate and modernize business models, leverage and analyse data from multiple systems taking innovation of the more exciting front-end and customer centric offerings to the next level. Faster speed to market, highly personalised offerings, more agile, more scalable.
Success and progress to date, however, has been slow. Traditional banks especially are lumbered with highly complex and costly core technology stacks. Digital transformation and upgrading these core stacks still remains a priority, but the next wave of digital acceleration is now an urgent priority on the c-suite agenda to ensure banks compete and survive in a rapidly evolving industry.
Digital Acceleration vs Digital Transformation
Digital transformation at its core takes the existing ways companies have run their business and applies new technologies to digitize them – for example, taking a paper-based application process and making it online.
Digital acceleration is different. Here, digital becomes the very core of the business model, creating further new digital processes. It gives the power to not just make existing processes digital but to reimagine how those processes impact and improve the business. Some of the most forward-thinking banks are already doing this. BBVA, the second biggest bank in Spain, is actively and openly seeking to become a software company in the future and has digital at the heart of its offering. It embraced open innovation and new technologies to better serve its customers – for example, it launched an app-based money transfer offering, Tuyyo, in 2017. It’s also exploring how technologies like blockchain can be used to transform fundamental banking services such as loan origination, with the aim of improving the way it runs its businesses.
Co-Value Creation – Going it Alone isn’t an Option
A core facet of digital acceleration – especially in a highly mature and saturated market like banking – will be how banks, fintechs, enterprises and others collaborate to mobilise these more diverse capabilities and expertise, bringing mutual benefits to all parties.
The pace of technological change is so hypercompetitive to the point now where organisations cannot always sustain their competitive advantage or ‘do it all’. Constantly updating your offering to maintain market share and react to new demands has become a necessity for banks, but it is exhausting. More and more banks and FS providers are realising that the strategic resources and capabilities needed to deliver these innovative services lie outside of their business, and given the fast pace of change, developing everything in-house is unrealistic given the skills gap, time and cost constraints. Moreover, tech advances around integration and APIs mean collaborating with third-party experts has never been easier or more effective to bring capabilities that, combined with their own core offerings and customer data, provide an important competitive advantage and valuable proposition for customers.
One brilliant example of this is ING. Recognising the struggles associated with traditionally manual and paper-intensive trade finance processes, it launched a blockchain-based commodities financing platfrom Komgo in 2018 with a consortium of other banks and corporates like Société Général, Citi, and Mercuria. In an age of hypercompetition – mutually beneficial collaboration is the answer.
Transform, accelerate, create
Ultimately, banks can continue to digitally transform while also looking to digitally accelerate. In fact, the two go hand in hand; in order to reap the benefits and be able to consider platform co-creation and digital acceleration, banks need to transform their tech stacks from the core to have the capability and agility to think beyond the realms of their own core business and their own technology. Those that get it right by driving innovation from the core, are reimagining their business models for the digital age, tapping into new revenue streams and becoming more customer-centric are not only more relevant now but future proofed for digital acceleration of the future.
Finance
Regulations, RegTech and CBDCs – Fintech’s Next Chapter
Published
22 hours agoon
June 2, 2023By
admin
Teresa Cameron, Finance Director at Clear Junction
Over the last decade, the UK has embraced the fintech revolution with open arms. The remarkable growth and innovation in recent years has transformed the way financial services are delivered and accessed. In the UK, fintech accounts for around half of venture capital in the UK, and as we race to meet consumer demand, we’re seeing the development of new services flood the market: from digital wallets to AI chatbots, biometrics and touch IDs.
London is recognised globally as a crucial hub for fintech innovation, yet with this great power comes great responsibility. Both the FTX and SVB collapses dented trust in fintech, and this has translated into a dip in venture capital investment in the industry, which declined globally by 30%.
2022 was called fintech’s year of reckoning, but 2023 stands as the year to rebuild and we need to recognise that regulation is not a scary word. Now is our chance to be part of the next evolution in fintech, that will solidify it as an accredited and stable industry. By leading the charge now, we can make sure we have a say on what the future of fintech will look like.
Sustainable practices = sustainable growth
The Financial Conduct Authority (FCA) is set to implement its Consumer Duty in the upcoming months. Whereas before, the FCA has broadly been reactive, this will be the first time that the FCA will be formally setting out regulation and will have a proactively structured programme.
One of the most important aspects is to make sure that financial services put the interests of their customers at the heart of their business operations. This means a higher standard of protection across the industry and providing consumers with transparent information, as well as making sure that staff are trained and held accountable.
This is a huge step to regain trust in the industry right now and help raise the bar in what we can offer consumers. Change begins from the inside and by closely working with regulators and adhering to their guidelines, fintechs in the UK can benefit from the increased trust and confidence in the digital currency ecosystem. This approach not only protects consumers and investors but also means that we can bolster the legitimacy and viability of digital currencies as an alternative to traditional financial systems.
Regtech Revolution
It’s estimated that globally $2trillion is laundered annually, and the threat of financial criminals continues to rise as they become more sophisticated and utilise new technology, either through payments, open banking, or crypto. This, twinned with new global regulations and increasing compliance costs, means the need for innovative solutions in the regtech industry has never been greater.
We’ve seen an explosion in AI and machine learning (ML) tech to help better protect customers, and they have completely transformed the regtech space. These technologies can be used to analyse vast amounts of data and identify patterns that may indicate fraudulent activities. The algorithms can detect anomalies, flag suspicious transactions, and continuously learn from new data to improve fraud detection capabilities over time. That’s not to say that its completely fool proof. Continuous monitoring, regular updates, and staying abreast of emerging fraud trends will also be crucial.
At the same time, as the regulatory landscape becomes more complex and we see new rules develop over time, this tech will help fintechs mitigate risk management practices and maintain compliance in an efficient and cost-effective manner.
CBDCs and decentralized finance
Central bank digital currencies (CBDC) have been a hot topic of conversation, with pilot initiatives underway globally. Most recently the European Central Bank is currently said to start with proposed legislation in the next several weeks and here in the UK the Bank of England is also blueprinting plans for the ‘Britcoin.’
Digital currency backed by a central bank has been heralded to be a safe and stable means of payment and less volatile than crypto. However, some are concerned over privacy and anonymity surrounding a state-owned currency.
Tom Mutton, who is leading the Britcoin charge, has stated that the BoE never sought to make the digital pound anonymous, and that privacy will be a top priority. Under the Bank’s proposals, consumers would engage with the digital pound through private sector providers. With the increasing integration of digital currencies into mainstream operations, in the UK and abroad, both the government and financial institutions are showing growing interest in making sure there is a stable foundation of regulation as it develops.
Following regulations can pave the way for digital currency companies to tap into traditional banking services, which is crucial for their growth and overall success. Banks tend to be cautious about partnering with digital currency companies due to perceived risks associated with the industry. However, when these companies demonstrate compliance with regulations, it helps alleviate those concerns and makes banks more willing to collaborate.
We are at the beginning of a new age in the fintech space, and it’s an exciting place to be. We, as financial intuitions, have an opportunity to help write the next chapter. It is a long road to map out ahead, but we need to look for sustainable, long-term practices because, ultimately, that equals sustainable long-term growth, and fundamentally means survival for the industry.
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