by Babak Hodjat, VP of Evolutionary AI at Cognizant
Many banks and other financial services institutions (FIs) are beginning to recognise the benefits of AI-driven solutions as a way to get ahead in the market and challenge the competition. Amongst many other benefits, the technology enables organisations to offer hyper-personalised customer experience, dramatically improve internal decision making, and drive operational efficiency. However, many businesses are struggling to move beyond the experimental phase and reach actual AI deployment. It is those organisations that are at risk of being left behind.
The financial world has already been transformed by AI, and this transformation is continuous. A new breed of AI, known as ‘evolutionary AI’ has begun to further accelerate innovation. It is capable of automatically designing itself with little need for explicit programming by humans – innovatively creating complex AI models, and optimising decisions considering multiple scenarios.
This technology is revolutionary for industries across the world, but in particular it is set to transform the financial services sector. Enabling businesses to spot novel strategies that would never have been identified by human data scientists, and, in turn, allowing companies to take full advantage of today’s massive data sets – evolutionary AI will soon be a vital tool in all FIs’ arsenals.
The nuts and bolts of evolutionary AI
Emerging technologies that enable AI algorithms to design themselves are allowing organisations to transcend human limitations. Evolutionary AI operates iteratively. Firstly, it randomly generates a set of potential solutions to form an initial population and assigns a score to each solution based on how well it performs relative to other solutions. In the second round, it retains the solutions that performed best, perhaps only 5% of the total, and recombines their components, sometimes “mutating” them to create a new population. This new population is then tested, and the process begins again. Over multiple generations, the appropriate components of the more successful solutions become increasingly prevalent in the population, and eventually a solution is discovered that yields the best outcomes.
Advantages and use cases
Compared to human design, evolutionary AI can be deployed far more quickly, avoids biases and preconceptions, and typically performs better. Furthermore, the chosen model will evolve and improve over time based on new data.
Evolutionary AI can be applied in a wide variety of areas at FIs. Some examples include designing quantitative trading strategies to maximise returns while minimising risk and loan underwriting. Rather than relying on human analysis, evolutionary AI solutions can quickly analyse all the combinations of relevant variables to create models that more accurately assess the risk of default by a potential borrower.
A recipe for success
In order to reap the benefits of the technology, FIs should focus on the following:
- Responsible AI – Behave in ways that make customers and employees comfortable, i.e. not making decisions that are unethical or exhibit bias. Companies need to monitor them to ensure they continue to act appropriately, as they learn and evolve.
- Viewing AI through a business lens – Having AI projects managed by cross-functional teams with business executives in the lead is a good place to start. Companies also need to look across their organisations to identify opportunities to generate concrete business value from AI — not only in reduced costs but also in boosting revenues by delivering enhanced customer experiences and through improved decision-making.
- Enhance data management – AI applications depend on access to timely and accurate data, which is a challenge for many FIs that have fragmented data architectures with multiple legacy systems. Companies need to identify which types of data are required for each AI project and ensure they can be captured in an appropriate format.
- Approach with speed and caution – AI projects need to be rolled out quickly, while at the same time be rigorously measured, so failures are terminated promptly while successes are moved into production.
The sophistication of AI technology is set to significantly improve over the coming years as it continues to design and test itself. As a result, it will become more critical to the productivity of FIs, and soon businesses will recognise it as a vital tool for consulting on important business decisions. It will not be long before humans and AI are working alongside each other, with robots handling routine tasks, enabling employees to focus on more complex and sensitive activities. Delivering more value together than either could on their own.
FOR FINANCIAL INSTITUTIONS IN 2021, INTELLIGENCE IS A MUST
By Ed Lane, VP Sales EMEA, nCino
Artificial intelligence (AI) is quickly transitioning from a “nice-to-have” technology to a key business driver for financial services organisations. Over the past few years, financial institutions (FIs) have begun to think about AI beyond the abstract and are discovering the many practical and profitable use cases for this emerging technology. A growing number of FIs have started truly understanding the importance of using AI to enhance the customer and employee experience.
As AI becomes demystified and valuable use cases emerge, FIs are becoming more attuned to the idea of adopting these technologies across a wide range of key business functions. In 2021, the time has come for FIs to evolve beyond agility and embrace intelligence by incorporating cognitive technologies into their operations. When FIs fully harness the power of AI to capture deeper customer insights, make informed, data-driven decisions, manage risk and increase efficiencies, they transform themselves into Intelligent Enterprises and bring more value to their customers and teams.
Agility is the Launchpad
Any discussion of the Intelligent Enterprise begins with an understanding of the Agile Enterprise as the necessary foundation. The idea of the Agile Enterprise centers around the industrialization of banking, the idea of turning every core banking function – from product development and customer acquisition to account opening and commercial lending – into a systematic, fast and seamless process. It necessitates a configurable and flexible system of engagement that allows multiple users – including executives, staff and customers – to collaborate in real time, with full transparency and visibility into every step of the process.
To fully leverage the Intelligent Enterprise, it is essential to first enable the Agile Enterprise. It would be incredibly difficult for an institution to effectively and efficiently make the leap into AI without first having established a strong foundation to support the myriad of back-office processes, including customer relationship management (CRM), document management, collateral analysis, covenant tracking, loan origination, portfolio analysis, regulatory compliance, customer service, the digital channel and on and on. Once an institution has established a foundation of agility through a single system of engagement, it can begin the journey toward becoming an Intelligent Enterprise.
AI is the Rocket Fuel
AI and related technologies, including machine learning, natural language processing and cognitive computing, serve as the foundation of the Intelligent Enterprise. There is a broad array of current and potential use cases within financial services for AI and related technologies, ranging from robo-advice and next-product recommendations to anti-money laundering (AML) compliance and credit card fraud protection.
Within the Intelligent Enterprise, cognitive technology can be utilized to bring a true return on investment to the institution. FIs need actionable insights to maintain competitiveness and serve their customers’ needs. The successful deployment of the Intelligent Enterprise checks one or more of these boxes to varying degrees, depending on the specific use case: increasing revenue, growing profitability, improving efficiency, reducing costs and mitigating risk. Embedding cognitive technologies into core banking processes can present FIs with measurable results, a positive ROI and benefits that continue to increase over time.
Challenges Along the Flightpath to the Intelligent Enterprise
All of this is not to say that widespread transformation to the Intelligent Enterprise will come easily. Incumbent financial services firms of all sizes come burdened with long-held processes and systems that serve as barriers to change. The industry faces a number of daunting challenges, including the burden of legacy systems, slow adoption rates, talent acquisition, competition from Big Tech and fintech upstarts, regulatory overreach and connecting the prediction with the customer.
The key is to focus on seamlessly incorporating cognitive technologies into existing processes while also maintaining a human touch with customers, i.e., to build AI solutions that engage employees and put the customer first. The most effective way to achieve this ideal is through the deployment of a single platform, a system of engagement that seamlessly integrates and analyzes data from all customer channels and across the organization. Only with the foundation of a truly holistic platform, which allows every employee to have access to the same information, can the Intelligent Enterprise really begin to take flight.
Achieving Orbital Flight Requires a System of Engagement
For FIs, the journey to the Intelligent Enterprise begins with defining the value you desire to achieve through the implementation of AI and related technologies. Too many FIs begin by building the rocket mid-mission – by creating the infrastructure without first understanding the true ROI of the endeavor. Start by choosing one use case that will return value to the organization – whether it is streamlining the financial statement data capture in commercial lending, employing next product to sell capabilities in retail customer onboarding or implementing risk-based pricing to help meet consumer fair lending compliance requirements.
Next, decide whether to buy or build the technology. For FIs that do not have the benefit of massive resources to create their own software, partnering with a vendor like nCino that has the expertise, experience and a track record of success working with AI-driven data insights may likely be the better option. Our AI application suite, nCino IQ (nIQ®), supercharges the nCino Bank Operating System® by leveraging AI, analytics and machine learning to enable FIs to become more predictive and proactive. nIQ offers an FI’s employees the opportunity to do more for the institution by, for example, saving valuable time through automatic data extraction and analysis of tax returns and financial statements. It’s no longer just about convenience, it’s about increasing profitability, safety, soundness and growth in a customer-centric banking world.
AI and cognitive technologies are transforming banking. They are enabling FIs to increase revenue, gain operational efficiencies and fully meet customer expectations. With this type of technology in place, FIs no longer have to spend time on cumbersome, manual tasks but can offer employees the opportunity to do more for the institution by saving valuable time. 2021 will be an exciting year as FIs continue to adopt new AI tools to transform the customer experience.
GLOBAL STUDY: PEOPLE TRUST ROBOTS MORE THAN THEMSELVES WITH MONEY
Research shows growing confidence among consumers and business leaders that robots handle finance tasks better than people
The study of more than 9,000 consumers and business leaders in 14 countries found that the COVID-19 pandemic has increased financial anxiety, sadness, and fear among people around the world and has changed who and what we trust to manage our finances. In addition, people are rethinking the role and focus of corporate finance teams and personal financial advisors, according to the research.
COVID-19 has created financial anxiety, sadness, and fear
The global pandemic has damaged people’s relationship with money at home and at work.
- Among business leaders, financial anxiety and stress increased by 186 percent and sadness grew by 116 percent; consumer financial anxiety and stress doubled and sadness increased by 70 percent.
- 90 percent of business leaders worry about the impact of COVID-19 on their organization, with the most common concerns centering on a slow economic recovery or recession (51 percent); budget cuts (38 percent); and bankruptcy (27 percent).
- 87 percent of consumers are experiencing financial fears, including job loss (39 percent); losing savings (38 percent); and never getting out of debt (26 percent).
- These concerns are keeping people up at night: 41 percent of consumers reported losing sleep due to their personal finances.
People see robots as a better way to manage finances
The financial uncertainty created by COVID-19 has changed who and what we trust to manage our finances. To help navigate financial complexity, consumers and business leaders increasingly trust technology over people to help.
- 67 percent of consumers and business leaders trust a robot more than a human to manage finances.
- 73 percent of business leaders trust a robot more than themselves to manage finances; 77 percent trust robots over their own finance teams.
- 89 percent of business leaders believe that robots can improve their work by detecting fraud (34 percent); creating invoices (25 percent); and conducting cost/benefit analysis (23 percent).
- 53 percent of consumers trust a robot more than themselves to manage finances; 63 percent trust robots over personal financial advisors.
- 66 percent of consumers believe robots can help detect fraud (33 percent); reduce spending (22 percent); and make stock market investments (15 percent).
The role of finance teams and financial advisors will never be the same
To adapt to the growing influence and role of technology, corporate finance professionals and personal finance advisors alike must embrace change and develop new skills.
- 56 percent of business leaders believe robots will replace corporate finance professionals in the next five years.
- 85 percent of business leaders want help from robots for finance tasks, including finance approvals (43 percent); budgeting and forecasting (39 percent); reporting (38 percent); and compliance and risk management (38 percent).
- Business leaders want corporate finance professionals to focus on communicating with customers (40 percent); negotiating discounts (37 percent); and approving transactions (31 percent).
- 42 percent of consumers believe robots will replace personal financial advisors in the next five years.
- 76 percent of consumers want robots to help manage their finances by freeing up time (33 percent); reducing unnecessary spending (31 percent); and increasing on-time payments (31 percent).
- Consumers want personal financial advisors to provide guidance on major purchasing decisions such as buying a house (45 percent); buying a car (41 percent); and planning for retirement (38 percent).
Our relationship with money has changed, it’s time to embrace AI to manage finance
The events of 2020 have changed the way consumers think about money and have increased the need for organizations to rethink how they use AI and other new technologies to manage financial processes.
- 60 percent of consumers say the pandemic has changed the way they buy goods and services.
- 72 percent of consumers say the events of 2020 have changed how they feel about handling cash, with people feeling anxious (26 percent); fearful (23 percent); and dirty (19 percent). More than a quarter (29 percent) of consumers now say that cash-only is a deal-breaker for doing business.
- Businesses have been quick to respond as 69 percent of business leaders have invested in digital payment capabilities and 64 percent have created new forms of customer engagement or changed their business models in response to COVID-19.
- 51 percent of organizations are already using AI to manage financial processes, compared with 27 percent of consumers.
- 87 percent of business leaders say organizations that don’t rethink financial processes face risks, including falling behind competitors (44 percent); more stressed workers (36 percent); inaccurate reporting (36 percent); and reduced employee productivity (35 percent).
Felicity Burch, Director of Digital and Innovation at the CBI, said: “The pandemic has been a watershed moment for technology adoption. The financial services sector has innovated swiftly to support customers at a difficult time, and it’s fantastic to see businesses and consumers alike recognising the potential AI has for managing money. Trust will underpin the successful adoption of emerging technologies, and so firms must be taking steps like embedding robust governance processes, engaging employees, and addressing unfair bias in data.”
“Managing finances is tough at the best of times, and the financial uncertainty of the global pandemic has exacerbated financial challenges at home and at work,” said Farnoosh Torabi, personal finance expert and host of the So Money podcast. “Robots are well-positioned to assist – they are great with numbers and don’t have the same emotional connection with money. This doesn’t mean finance professionals are going away or being replaced entirely, but the research suggests they should focus on developing additional soft skills as their role evolves.”
“Financial processes in our personal and professional worlds have become increasingly digital for many years and the events of 2020 have accelerated that trend,” said Juergen Lindner, senior vice president, global marketing, Oracle. “Digital is the new normal and technologies such as artificial intelligence and chatbots play a vital role in managing finance. Our research indicates that consumers trust these technologies to accelerate their financial well-being over personal financial advisors and business leaders see this trend reshaping the role of corporate finance professionals. Organizations that don’t embrace these changes risk falling behind their peers and competitors; hurting employee productivity, morale and well-being; and struggling to attract the next generation of AI-empowered finance talent.”
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