AI as a catalyst for digital transformation in financial services
The recent rise of cloud-based fintechs and highly-agile startups has put enormous pressure on financial services institutions (FSIs) to transform their business models to meet customer expectations. Despite initial concerns about going digital, many FSIs are now embracing cloud technology and artificial intelligence (AI) as a way to drive additional agility and help improve their customer experiences.
More than just a survival method, AI is a catalyst in digital transformation that responds quickly to evolving operating models and shifting competitive dynamics across the market. AI technologies represent the most viable path toward becoming an “intelligent bank”—where big data and advanced analytics provide the predictive insights needed to make smarter, data-driven decisions.
The public cloud can both modernize and streamline existing processes in ways that can transform how a FIs do business. Explore how AI-infused technology helps financial institutions adapt to new competitive dynamics to drive profitable growth, decrease risk, and achieve better business scale.
AI is gaining traction
Artificial intelligence (AI) refers to systems that change behaviors without being explicitly programmed. AI leverages aggregated data, usage analysis, pattern recognition and predictive analytics to deliver intuitive insights.
But, AI is not one universal technology; it’s an umbrella term that includes multiple technologies like machine learning, cognitive computing services, and natural language processing. These technologies work, both individually and in combination, to add intelligence to applications.
According to IDC, worldwide spending in cognitive and AI systems is expected to grow from $12.5B in 2017 to $46B by 2020, with 25% of this growth in banking and security services. It’s no surprise that the heavily regulated banking industry is one of the early growth drivers seeking new innovations in risk minimization, fraud detection, and tools to better map products to customer needs.
Banks are turning to AI to aid with digital transformation
While traditional analytics tools examine historical consumer data, AI and cloud-enabled systems provide advisors the ability to leverage data from a variety of sources to forecast future events and behaviors more effectively. Predictive analytics, the process of using customer data and machine learning to determine future outcomes, helps financial services firms to accurately conduct what-if analyses. These analyses are useful in forecasting the effects of potential changes in business strategies empowering firms to make smarter, data-driven decisions. In Europe, a study of more than a dozen banks that replaced older statistical-modeling approaches with machine learning techniques experienced on average 10 percent increases in sales of new products, 20 percent savings in capital expenditures, and a 20 percent decline in churn.
Financial institutions are also shifting towards intelligent, cloud-enabled systems to meet rising customer expectations. Consumers want customized, flexible, easy-to use tools and services which banks cannot provide without a centralized, intelligent customer view. Effectively harnessed, big data empowers advisors to enhance relationships with customers with more personalized, financial advice based on a predictive, and holistic view of customer habits and lifestyle trends. This future-focused analysis provides smarter, faster decision-making and creates a tailored, frictionless customer experience.
Additionally, implementing AI supports institutional ability to drive real-time payments and glean data insights from transactions to predict future events and improve business models. It also reduces the rate of false-positives in fraud detection processes and improves systems of verification to help prevent financial crime.
Banks don’t have to take on the task of digital transformation alone
Determining how to integrate AI into existing business processes may seem like a daunting task, but banks don’t need to tackle digital transformation alone. Microsoft and our partners offer the most comprehensive cloud and AI technology platform available today and is heavily invested in the revolution of big data, cloud, and AI technology for FSIs. Together with our broad partner ecosystem, we are committed to helping businesses get started by implementing intelligent banking solutions that transform their operations today, while looking ahead to pave the future.
Learn more about how cloud and AI technology are poised to transform traditional banking operations.
