What's next for banking with AI

By Theodora Lau and Bradley Leimer of Unconventional Ventures

What are some of the key trends in financial services that will further evolve in 2021? 

If the first two months of this year are any indication, 2021 will be an exceptional year for fintech development, especially in regard to new funding and partnership opportunities.

We wrote about some of this earlier this year: from vertical integration to embedded finance, we see new opportunities and emerging business models for both incumbents and fintech startups, propelled by technologies such as artificial intelligence and cloud computing, ushered in by a centralized workforce and customer appetite for all things digital.

But digital transformation is not just about tech disruptions, and technology isn’t just about bits and bytes, just as Margaret Hamilton described the Apollo project as “a system of software, peopleware, hardware”. 

Behind the push for digital transformation is a renewed focus on the unique characteristics that make us human. The essential skill sets for the future of work are not just about coding; rather, it’s patience and empathy. Beyond the focus on shareholder value is an emphasis on stakeholder value. 

Do we have the right people with the right data solving the right problem for the greatest amount of impact?

As it turns out, there are problems that even the best technology stack in the world may not be able to solve without embracing the very nature of what brings the 1’s and 0’s together. Learn more about how IBM is helping banks and insurers build AI solutions for a post-COVID-19 world here. 

Our interconnectivity

Broadly speaking, algorithms are “a step-by-step procedure for solving a problem or accomplishing some end” according to Merriam-Webster. But who sets those instructions and who defines the problem sets? 

The sources of these little snippets of code matter as much as what they do. 

Algorithms are, and have been, a part of our lives for quite a long time. From search engines to news aggregators and ecommerce sites, algorithms decide what gets presented to us, and in what order. Every click is recorded as part of our digital footprint, creating an invisible profile of who we are in the world of personal zettabytes, predicting our preferences and our actions. 

How does this translate to financial services? And more importantly, how can we create thoughtful solutions that can ultimately benefit our customers and the broader society? Can financial institutions leverage emerging technologies such as artificial intelligence and cloud computing to re-imagine a future where they evolve from mere custodians of assets to stewards of consumer financial well-being focusing on shared outcomes?

The power of technology has been particularly evidenced from the past year since the onset of the pandemic; the movement to remote work could not have been accomplished at such scale and speed without the digital tools that we have at our disposal today. Similarly, greater digital adoption in contact center workflows have enabled organizations worldwide to confront the challenges efficiently and effectively. AI-powered chatbots and virtual assistants are two great examples of how agents are able to drive positive customer experience despite sudden increases in customer demands. 

But we are merely witnessing the beginning of what is possible.  

New technologies are not only making financial services more efficient and more flexible, it is also making it more intelligent. Instead of leaving the data in silos — in different stacks and varying institutions, we can connect the dots to create a more accurate and complete picture of our financial lives, allowing us to pinpoint where we can make changes to attain a secure financial future. The best opportunities in the future of the financial services business model lies within these technologies and the data that surrounds our activities.  

Banks will be in a better position to offer financial advice at scale, in real-time and through the context of real-life moments. They can now deliver true value far beyond a colorful user interface, especially to those who need them the most. Companies around the world are expected to spend US $97.9 billion on AI by the end of 2023. This is our chance to use technology for good, and build on the great acceleration and business model iteration that we have witnessed in the past year. 

Ethics by design

The road to the future state of augmented banking relationships is not without perils. With great power comes great responsibility. 

Trust is the fundamental building block for any relationship; it is also hard to gain, but easy to lose. Be it an incumbent bank or a fintech startup, customers must trust that they will not be exploited and that the financial institution has their best interest at heart. 

Before AI-powered systems are deployed, banks must have the appropriate framework in place to address the principles of fairness, ethics, accountability and transparency. How will designs be evaluated? How do we assess risks and ensure compliance? Do we know what data is used and why, and who has access to it? How might we address the implications of potentially biased historical data being used for training? Is the AI model explainable? Can the results be made accountable?

Do the ends justify the means? 

Ethical aspects cannot be an afterthought; rather, they must be incorporated into the solutions by design. We must be mindful of potential bias embedded within the data and code that we use in our systems. Accountability and transparency must be as baked into our processes and culture to ensure fairness and equal distribution of impact within the communities we serve. 

How we measure success also matters. Digital is not a channel, but the key to our ability to react to change. In the center of it all is data; and the values we embrace are the values we uphold. In the world of digital disruption and uncertainties, the principles of both trust and purpose transcend business models and corporate boundaries.  

They are the currencies of our collective future.