How Bankers Can Take Advantage of AI

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Among the biggest stories in tech remains the astonishing advancement in artificial intelligence, or AI, over the past several months. While AI has been evolving for a very long time, its latest iterations and implementations have reshaped how people think about AI and its capabilities.

Much of the conversation around AI has focused on AI-generated art and ChatGPT, both of which are able to accurately follow detailed prompts and create reasonably convincing works. And many industries have already begun utilizing AI to aid their businesses. What does all this mean for financial institutions? Finally, how can bankers leverage this innovative technology to help their organizations and their end users?

AI has many potential use cases for financial institutions and their processes. One of the most intriguing, in light of ChatGPT, is the ability to interface with customers in a very personalized way. Banks can use large language models, like GPT-3, to automate customer service. AI can take instruction and communicate back with an operator towards a specific goal in a way that feels human and can be very helpful. AI is also capable of following very specific communication styles and guidelines.

This gives banks a way to implement AI that enhances the customer experience. A bank customer with a question or seeking an update on a loan can ask an AI-enabled chatbot that can check the loan’s status on the back end and effectively communicate with the customer. If the bank has customer contact information, the AI can also automatically reach out to a customer and request whatever documents or information the bank needs to complete a loan or any other transaction.

AI can also help in a bank’s back office. AI’s ability to process massive amounts of information, coupled with its ability to change and improve over time, makes it a compelling candidate for decision making roles. One example already in operation is the use of AI in loan underwriting as an alternative to one-size-fits-all credit scoring models like FICO. Once the financial institution has gathered the information needed, an AI can recommend a decision to either approve or deny a loan using parameters that represent the customer’s unique demographic and provide a fairer method to evaluate risk. Even if that AI cannot make a decision on all pending loans or come to a complete decision, it can do the heavy lifting and eliminate the bulk of manual work for bank employees.

Another advanced role AI can play for financial institutions is known as optical character recognition, or OCR. OCR can extract text, handwriting and data from images and documents and move it into a system of record without manually inputting the information. Operators can automatically scan images or PDF files of document as they arrive and automatically draw all the information from each of them. Bankers can use OCR to radically increase efficiency for a wide range of document-based processes.

However, there are inherent caveats and shortcomings in all the aforementioned AI banking use cases. AI decision making is not perfect and requires human supervision. In fact, overreliance on AI for tasks like underwriting can lead to biases and ethical oversights. Even its use as a chatbot is not as straightforward as it sounds. ChatGPT, with all of its recent buzz, is far from perfect. Like most AI solutions, it cannot yet handle highly detailed financial information. Banks looking to implement AI should seek solutions that are specially tailored for financial services, which provide a higher degree of accuracy thanks to its specialization.

Finally, it should be noted that there is no magic bullet solution or product for any financial institution — including AI. Hype is a powerful force in both technology and finance, and it is easy to get swept up in the excitement. It is vital that any organization looking to invest in AI technology start with mapping and deeply understanding their own existing processes and use that starting point to determine the areas best suited for automation enhancement. The right way to think about AI within banking is to understand that while it can’t automate every task, it can eliminate large parts of the manual repetitive work that may be slowing down your financial institution today. That, for any team, is transformational.

4 Keys Banks Need to Unlock Value From Artificial Intelligence

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Banks of all sizes are tuning up their technology to better compete for customer loyalty by focusing on areas involving consumer interactions. But bank leaders need to understand that artificial intelligence, or AI, alone can’t revolutionize the customer experience.

In order for AI investments to elicit instant, human-like understanding and communication, banks must combine AI technology with:

  • Access to quality data.
  • Customer experience solutions that support responsiveness, natural interaction and context retention.
  • Security for enrollment, authentication and fraud detection — indispensable in the context of retail banking.

Data
Quality and Access
Data is the fuel driving AI-based experiences. That means the quality of the available data about the user for a specific use case and the ability to access this data in a real-time, secure fashion are mission-critical aspects of an AI investment.

Unsurprisingly, increasing the quality of data and providing seamless, secure access to this data has been a challenge that banks have grappled with for years.

But institutions must overcome these data utilization hurdles in order to offer an AI-based experience that is better than mediocre. The best outcome? Users will no longer suffer through disjointed experiences or delayed satisfaction caused by siloed data, multiple data connection hops and antiquated back ends that haven’t been modernized to today’s standard.

Collection and Understanding
Big data — the collection of very large data sets that can be analyzed computationally to reveal patterns, trends and associations — goes hand-in-hand with AI. When it comes to consumer banking, an AI solution for banks should store all customer interaction information, from words used to communicate with the bot to actions taken by the user, so it can be analyzed and applied in future interactions. To do this, banks need to adopt AI technology that integrates a learning loop that’s always running in the background.

As data accumulates, AI-powered bots should get smarter over time. Behavioral, transaction and preference information enables banks to create personalized experiences that elevates customer experience to the next level. J.D. Power’s 2022 U.S. Retail Banking Satisfaction Study found that 78% of respondents would continue using their bank if they received personalized support, but just 44% of banks are actually delivering it.

Without the right data, there’s no intelligence to inform interactions.

Customer Experience
If someone asked, “What’s your name?” and it took you 8 seconds to respond, the conversation would seem unnatural and disjointed. Similarly, AI technology requires real-time responsiveness to live up to its human-like image. Additionally, bank customers expect to be able to seamlessly transition between interaction channels without having to rehash their issue each time they get transferred, change interaction channels or follow up. Banks can only achieve this omnichannel customer experience that incorporates customer interaction information across channels with customer experience technology that integrates AI.

Consumers now rank omnichannel consistency as the most important dimension of customer experience, according to a 2021 Harris poll, up from No. 2 in 2019. In a Redpoint Global research study, 88% of respondents said that a bank should have seamless, relevant and timely communications across all channels; less than half (45%) reported that their bank effectively achieved this objective. An omnichannel customer experience is foundational for AI.

Security
As powerful as artificial intelligence can be as a competitive advantage in banking, lack of strong security measures is a nonstarter. In the latest The Economist Intelligence Unit Survey, bankers identified privacy and security concerns as the most prominent barrier to adopting and incorporating AI technologies in their organization. Thankfully, ironclad AI is within reach.

While AI capability is great, its usability is limited if its security is not up to par. An AI bot can go far beyond answering your customers’ basic questions if bank transactions are authenticated and secure; it can perform tasks such as retrieving account balances, listing and searching transactions, making payments, transferring funds and more. Imagine the impact that a friendly and reliable virtual teller, available 24/7, could have on your institution.

Four in five senior banking executives agree that unlocking value from artificial intelligence will distinguish outperformers from underperformers. To access its value, a bank’s customer-facing system must be supported by four pillars: AI understanding, quality data, omnichannel customer experience technology and security.

When technology budgets are tight, bank leaders must invest wisely; not all AI solutions are created equal. Chasing the new shiny thing can waste dollars if bank decision makers don’t have a handle on the scope of what their institution needs. Knowing which pieces of the puzzle will complete the picture is a competitive differentiator. Now, your bank can unlock the value of AI and win.

5 Strategies for Creating a Seamless AI Experience

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The broad adoption of digital channels has been accompanied by hiring challenges for banks that often struggle to adequately staff their service channels and branches. This leads to an urgent drive to adopt virtual assistants and chatbots as a way to provide better and more comprehensive service options to their customers.

This comes at the same time as the Consumer Financial Protection Bureau surveys the experience of digital chatbots and virtual assistants at big banks. This is likely due to poor perception the consumers have of chatbot-based service.

Bank executives must balance the need to provide self-service, always available options without alienating consumers with sub-optimal experiences. But there are several simple strategies that can go a long way in achieving the best of both worlds, making AI-boosted customer experience truly seamless.

To start, consider some reasons behind this poor perception. Many virtual assistants and self-service experiences try to replace humans, containing the customer without escalating the conversation to a human service member. This can lead to overly eager assistants persistently asking customers to rephrase their query or choose from a slate of options. In the worst case scenario, virtual assistants emulate humans with the aim of fooling the customer — resulting in greater frustration when this illusion is shattered. Another common source of frustration are virtual assistants that ask a lot of questions before routing the customer to an appropriate human service member, just to have those same questions repeated by the human agent.

All these examples show how a virtual assistant makes it more difficult for customers to accomplish their goal, rather than simplifies it, and increases the customer’s required effort.

The key to improving the customer experience, while getting the benefit of self service, is to make the virtual experience seamless: help the consumer when possible and get out of the way otherwise.

Here are five practical suggestions to make your bank’s virtual assistant experience seamless, leading to happier and more satisfied customers.

  1. Make it clear to your customers when they are interacting with a virtual assistant versus a human. This helps set consumer expectations and helps develop trust in the service. Consumers may choose to use shorter, direct questions, instead of more verbose communication they would normally use with humans.
  2. Always provide an option for customers to bypass the virtual assistant and connect to a human. Customers can typically tell whether their question is something simple that can be answered by a virtual assistant, or something more complex that requires human intervention. Providing an option to engage with a human when customers choose allows them to self-select into an appropriate path and delivers an experience that’s better adopted to their needs.
  3. Where possible, make it clear the limitations of the virtual assistant up front. For example, certain types of disputes and fraud-related questions might not be able to be handled by the virtual assistant; letting the customer know up-front helps them understand any possible limitations.
  4. Remove repetitive questions from the virtual assistant-to-human transfer process. If questions are needed to better route the customer, take care that they don’t overlap with verification and authentication questions that the human would ask after the transfer. Answering the same questions over and over gives the impression that customers aren’t heard; changing the questions leads to a more seamless transfer.
  5. Supplement any off-hour self-service queries with follow-up options. In cases where a virtual assistant is not able to help the customer solve their issue or it requires human intervention, your institution can offer to follow up on their request and leverage the virtual assistant to collect the relevant information rather than force the customer to repeat the process or switch channels. This gives customers an impression that they’re valued and worthy of additional follow-up to solve their issue.

When surveying your customers on their experience in a hybrid customer service journey, it is crucial to consider the entire experience and not just focus on one pathway or channel. Ultimately, great human customer service will not be sufficient to offset an unpleasant experience in a self-service setting or vice versa. Getting a full picture is crucial to understanding consumer pain points for improvements.

Insights Report: Technology Tools Enhance Financial Wellness

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https://www.bankdirector.com/wp-content/uploads/Insights-FIS-Digital.pdfIn a March 2022 survey, Morning Consult found that just 23% of U.S. adults could handle a major, unexpected expense. At a time when Americans are worried about rising prices for everything from cars to gas to groceries in today’s inflationary environment, lower-income individuals who earn less than $50,000 annually feel this financial anxiety most deeply. Yet, even people in higher income brackets are worried: Only 47% of those earning $100,000 or more believe they could handle such an expense, according to the market research firm.

Financial wellness is often conflated with financial inclusion. These informative tools can play an important role in helping lower-income customers, but everyone needs a trusted advisor to meet their financial goals, whether that’s saving for retirement, eliminating debt or creating an emergency fund.

Americans may be struggling but they trust their banks, according to Morning Consult, which recommends financial institutions acknowledge financial stress, demonstrate empathy and provide “actionable guidance” for their customers.

The rapid digital acceleration occurring in financial services today has changed how banks maintain and build customer relationships, as well as deliver advice. “Banking relationships have become digital relationships,” says Maria Schuld, division executive, Americas Banking Solutions at FIS.

Financial education isn’t new to the industry, and personal financial management tools have been around for years. But technologies like artificial intelligence can help institutions deliver more meaningful insights to their customers. What’s more, younger consumers have a greater need for financial advice; a recent online WalletHub survey of 350 respondents found that young people are three times more likely to seek a complete view of their financial health, compared to consumers aged 60 or more. Being Gen Z’s first bank could lead to larger relationships as their lives change. “Once you establish that relationship early on,” says Schuld, “you have a very strong chance of being able to retain that relationship as their financial needs grow.”

To download the report, sponsored by FIS, click here.

Top 5 Fintech Trends, Now and in the Future

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A version of this article originally appeared on RSM US LLP’s The Real Economy Blog.

Financial technology, or fintech, is rapidly evolving financial services, creating a new infrastructure and platforms for the industry’s next generation. Much remains to be seen, but here are the top trends we expect to shape fintech this year and beyond:

1. Embedded Finance is Here to Stay
Increasingly, customers are demanding access to products and services that are embedded in one centralized location, pushing companies to provide financial services products through partnerships and white-label programs.

Health care, consumer products, technology companies can embed a loan, a checking account, a line of credit or a payment option into their business model and platform. This means large-scale ecosystem disruption for many players and presents a potential opportunity for companies that offer customized customer experiences. This also means the possibility of offering distinct groups personalized services uniquely tailored to their financial situation.

2. A Super App to Rule All
We also anticipate the rise of “super apps” that pull together many apps with different functions into one ecosystem. For example, WeChat is used in Asia for messaging, payments, restaurant orders, shopping and even booking doctors’ appointments.

The adoption of super apps has been slower in the United States, but finance and payment companies and apps including PayPal Holding’s PayPal and Venmo, Block’s Cash App, Coinbase Global’s cryptocurrency wallet, Robinhood Markets’ trading app, buy now, pay later firms Affirm and Klarna and neobank Chime are building out their functionality. Typical functions of these super apps include payments via QR code, peer-to-peer transfers, debit and checking accounts, direct deposits, stock trading, crypto trading and more.

3. DeFi Gains Further Acceptance
Roughly a third of all the venture capital fintech investments raised in 2021 went to fund blockchain and cryptocurrency projects, according to PitchBook data. This includes $1.9 billion in investments for decentralized finance (known as DeFi) platforms, according to data from The Block. DeFi has the potential not only to disrupt the financial services industry but radically transform it, via the massive structural changes it could bring.

DeFi is an alternative to the current financial system and relies on blockchain technology; it is open and global with no central governing body. Most current DeFi projects use the Ethereum network and various cryptocurrencies. Users can trade, lend, borrow and exchange assets directly with each other over decentralized apps, instead of relying on an intermediary. The net value locked in DeFi protocols, according to The Block, grew from $16 billion in 2020 to $101.4 billion in 2021 in November 2021, demonstrating its potential.

4. Digital Wallets
Digital wallets such as Apple Pay and Google Pay are increasingly popular alternatives to cash and card payments, and we expect this trend to continue. Digital wallets are used for 45% of e-commerce and mobile transactions, according to Bloomberg, but their use accounts for just 26% of physical point-of-sale payments. By 2024, WorldPay expects 33% of in-person payments globally to be made using digital wallets, while the use of cash is expected to fall to 13% from 21% in the next three to four years.

We are starting to see countries like China, Mexico and the United States strongly considering issuing digital currency, which could also drastically reduce the use of cash.

5. Regulators Catching Up to Fintechs
It’s no surprise that regulators have been playing catch up to fintech innovation for a few years now, but 2022 could be the year they make some headway. The Consumer Finance Protection Bureau, noting the rapid growth of “buy now, pay later” adoption, opened an inquiry into five companies late in 2021 and has signaled its intent to regulate the space.

Securities and Exchange Commission Chair Gary Gensler signaled the agency’s intent to regulate cryptocurrencies during an investor advisory committee meeting in 2021. The acting chair of the Federal Deposit Insurance Corp. has similarly prioritized regulating crypto assets in 2022, noting the risks they pose. And this January, the Acting Comptroller of the Currency, Michael Hsu, noted that crypto has gone mainstream and requires a “coordinated and collaborative regulatory approach.”

Other agencies have also begun evaluating the use of technologies like artificial intelligence and machine learning in financial services.

The Takeaway
There are other forces at play shaping the fintech space, including automation, artificial intelligence, growing attention on environmental, social and governance issues, and workforce challenges. But we’ll be watching these five major trends closely as the year continues.

Leveraging Artificial Intelligence in 2022

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Around a quarter of bank executives and board members reported that their institution used artificial intelligence (AI) and/or machine learning in Bank Director’s 2021 Technology Survey — leaving room for more banks to adopt these technologies over the next few years. Slaven Bilac, CEO of Agent IQ, shares use cases for AI and offers advice for bank leaders seeking to add these solutions.

  • AI Applications
  • Requirements for Adoption
  • Overcoming Barriers
  • Questions to Ask

FinXTech’s Need to Know: Augmented Intelligence

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Banks are exploring how to best develop and retain personal relationships as financial interactions move online.

Here’s what they need to know.

Replicating in-branch experiences isn’t only about providing customers with tailored responses and greeting them by name. It’s also about giving those customers the ability to control their interactions: how, when and with whom they handle their financial situations.

Some customers may want to call, some may feel more comfortable texting and some may change their mind and want to head to their local branch in the middle of a conversation. Chatbots — often powered by rules-based artificial intelligence — can automatically populate responses, but may fall short when it comes to fluid and intuitive communications that customers want, potentially complicating their issue resolution.

To address this shortcoming and improve digital communication capabilities, some banks have decided to build their own technology. Umpqua Holdings Corp., which has $30.9 billion in assets and is headquartered in Portland, Oregon, launched its customized Umpqua Go-To platform in 2018. The stand-alone app was developed and built in-house at Umpqua’s innovation lab, Pivotus Ventures, according to The Financial Brand. Umpqua Go-To allows customers to personally select which banker they want to interact with based on who was available online.

But many banks don’t have the bandwidth, resources or budget to build their own technology from scratch. Instead, a bank can choose to partner with a financial technology company such as Agent IQ.

The San Francisco-based fintech helps banks communicate with their customers using augmented intelligence. Augmented intelligence is used to enhance and assist human-based communication, unlike artificial intelligence, which often aims to replace it.

At institutions that use Agent IQ, customers can choose a specific, personal banker to communicate with through digital channels, which can include mobile messaging, web chat and SMS text messaging, as well as social media channels like Whatsapp and Facebook Messenger.

Agent IQ uses asynchronous technology: Customers and bankers can pick up conversations where they left off, at any time and through any channel. The conversation records are saved after a banker or customer leaves a session and can be referenced afterward by either party, by another banker or for compliance purposes.

Bankers are always looking to improve their customers’ experience. In fact, Bank Director’s 2021 Technology Survey found this to be the second most popular response driving banks’ technology strategy; 68% included it in their top three objectives.

And as it turns out, customers respond well to 24/7 access to personal bankers.

Independent Bank Corp., the $14.5 billion parent of Rockland Trust Company based in Rockland, Massachusetts, has seen significant engagement with the Agent IQ platform since its implementation. Since late May 2021, over 37,000 customers — approximately one fifth of their online customers — have used the platform without the bank marketing it or notifying customers of its presence, said Patrick Myron, Rockland’s senior vice president of retail network strategy and sales analytics, during a recent webinar hosted by Agent IQ. That’s an average of 500 to 600 weekly conversations that customers are opting into because they want to reach their banker digitally.

“We’ve done customer surveys,’’ he said. “The majority [of the results] are seven out of seven. They really like the engagement – the ability to talk to a banker any time they want.”

Chatbots are built to interact with customers with predetermined responses. That automation can be useful for directing traffic to certain webpages or answering yes and no questions, but many financial situations are complex and can’t be appropriately addressed solely by chatbots. Instead of being transferred to a bank representative 10 minutes into a conversation with a chatbot, Agent IQ will show the customer who’s available to communicate at the start of the interaction.

According to Bank Director’s 2021 Technology Survey, chatbots may not even be what banks want. Seventy-eight percent of respondents stated the bank doesn’t use chatbots. Only 15% had chatbots and 7% were unsure if the bank had them.

Augmented intelligence can enhance digital communication between banks and their customers, not replace it with algorithms. Firms that leverage it, like Agent IQ, may be an attractive solution for banks looking to create and maintain digital relationships with their customers.

Agent IQ is included in FinXTech Connect, a curated directory of technology companies who strategically partner with financial institutions of all sizes. For more information about how to gain access to the directory, please email [email protected].

How to Modernize Your Payments Strategy

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2020 induced widespread digital transformation in response to the coronavirus pandemic.

In payments, we saw the rise of options for contactless payments, digital wallets, P2P transfers and more. The challenge for banks was that consumers often did not have to go through their bank to use any of these solutions.

The developments in the payment space over the past year make one thing clear: Banks should keep up with the newest available consumer technology to retain and attract customers, and modernize their digital payments strategy for future success as well.

Consumer demand remains strong, and the experience companies provide matters more than ever. After leaning so heavily on digital solutions for the past year and a half, they expect everything to be easy and instant. It is now relatively easy to find payment apps that provide real-time payments, P2P, bill pay and more. Banks that don’t offer similar solutions runs the risk of losing market share to non-banks that do.

Customers are weighing their banking experience against their experience with fintech apps as well as  any other experience they have when shopping online, ordering food or taking a rideshare. Any good customer experience — no matter the industry — is one that the bank must now measure up to.

Take artificial intelligence (AI) and machine learning, for example. While not every financial institution is using AI and machine learning today, retailers like Amazon.com use AI and machine learning to predict consumer behavior, knowing what they need and when they will need it. They estimate when consumers will repurchase a product or try something new. A bank that is not doing the same is falling behind in providing the experiences that many consumers are growing accustomed to.

Where to Start?
By leveraging technologies like AI and machine learning, banks can use the tremendous wealth of customer data at their disposal to provide a more personalized experience. This is a tremendous advantage over non-bank competitors that do not have access to the same consumer information. It can seem like a challenge to effectively put customer data to use, but there are a few steps banks should take to make the change a successful one.

First, a bank must set clear goals for what it wants to achieve when updating its payment platform or adding a technology like AI and machine learning. For most, the goal will be to provide a better experience, but it is helpful to dig even deeper than that. Ask: Do we want better customer satisfaction? More engagement with the platform? More bill pay users? More account-to-account (A2A) transactions? More P2P transactions? Be as specific as possible with goals, as these form the roadmap for the remainder of the process.

Once goals are set, find the partner that can help achieve those goals. Look for a partner that shares the bank’s vision for payments and has the right skill sets and capabilities to achieve those goals. Finding the right vendor partner will ensure the bank is successful in the end.

Clear goals and a like-minded vendor ensure that the tech a bank uses can help meet its goals. Just as Amazon uses AI and machine learning to predict a consumers’ purchases or recommend a product, banks can predict customers’ payment habits or make proactive payment recommendations to manage their financial health. The use cases of AI and machine learning are versatile, and can serve many different purposes to help banks reach their unique goals.

Finally, do not lose sight of the future. It is easy for banks to get concerned with what will make them successful now, but keep looking ahead. Work with your vendor to think about where both the industry and your bank are going. Be sure to choose solutions that can grow and change with the bank and its customers for years to come, rather than focusing too heavily on the here and now.

Change can be intimidating, but following the right steps to implement a tool like AI will ensure success by creating a better customer experience. Revitalizing your bank’s digital payment strategy is a process, but done right, the stronger digital relationships you build with your customers will be worth it.

The Robust Potential of Robo-Advisors

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When the New York Stock Exchange closed its doors on its physical trading floors in March of 2020, the immediate future of investing looked fraught with trepidation. The Dow Jones Index had plunged nearly 3,000 points on March 16 — the largest point drop in its history — and many saw this as a grim indicator of the months to come.

Others saw an opportunity.

During the second quarter of 2020, at the onslaught of the pandemic, Apex Clearing’s Next Investor Outlook Report saw a 27.5% increase in volume of trades as compared to the first quarter. A Charles Schwab study found that 15% of U.S. investors entered the market for the first time during 2020. Robinhood claimed 13 million users by the end 2020, a number some now believe to be near 20 million, according to the news publication CNBC.

Interest in investing has arguably never been more popular, and this trend has no signs of slowing down. CB Insights’ State of Wealth Tech Q1’21 reported that the wealth tech sector raised $5.6 billion in capital in the first quarter of 2021, surpassing the total amount raised during all of 2020 ($5.2 billion). Investors plowed the most money into retail investing, with $4.2 billion raised during the first quarter.

Consumers, specifically new individual investors, are showing that they want in on the action. And banks are in a prime position to introduce their customers to all types of services associated with wealth management via robo-advising technology.

Implementing robo-advising capabilities is an affordable way for banks to provide personalized financial advice to a broad segment of customers. There is typically no asset minimum, and services are available at any time. Also worth noting, banks don’t have to pull professionals away from their high net worth clients and accounts.

Robo-advisors aren’t strictly rooted in investment capabilities. Robinhood and other similar retail investment technology platforms get a lot of press, but there are hundreds of wealth management companies around the world that offer retirement, personal finance management, savings, onboarding, back office automation, reporting, portfolio analytics and aggregation, as well as automated trade execution services.

ABAKA, for example, is a London-based fintech that uses its artificial intelligence technology to offer bank customers retirement, wealth management, banking, workplace and mortgage advice, among other services. Their technology isn’t limited to one sector of wealth management, and customers are in control of what type of advice they seek out depending on their current needs.

Bambu takes a similar stance when it comes to offering individuals specific financial advice at specific moments in time. “Everybody wants a better financial life,” says Ned Phillips, CEO and founder of the Singaporean digital wealth management technology developer. And while this is a universal want, the path to financial security is as unique as snowflakes are.

Phillips points out that the banks that will succeed in keeping customer accounts will be the ones that understand their goals and desires, and subsequently provide personal and actionable advice, as well as recommended next steps. “You need a smaller, nimble company to provide that tech,” he adds. And currently, he thinks fintechs are much better positioned than a bank to understand how to make this attainable for each individual user.

While robo-advisors are an incredible way to both democratize and personalize financial advice, they do not diminish the importance of professional advisor and management services a bank may offer. There will be customers whose needs surpass the services a robo-advisor can offer, and should be transferred to a physical advisor when the time comes.

There isn’t enough time in the world for each individual person to sit down with a financial advisor, but wealth techs with robo-advice capabilities can at least offer it as an option to bank customers. For many, this may be the first time they ever receive financial advice that is tailored to their wants and needs.

Making these services accessible to all will be what sets a bank apart from the rest. And Phillips believes that we’ve barely scratched the surface regarding robo-advising technology and its potential impact on consumer financial wellness. “Today, we’re not even at the beginning.”

Tactical Pillars for Quick Wins in the Challenging Operating Environment

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The challenges of 2020 included a landslide of changes in financial services, and the sheer effort by banking professionals to keep operations running was nothing short of historic.

Although there will be some reversion to prior habits, consumers in 2021 have new expectations of their banks that will require more heavy lifting. This comes at a time when many banks in the U.S. are engaging in highly complex projects to redesign their branches, operations and organizational charts. Fortunately, there are some quick win tactics that can support these efforts. Consider the following three “pillar” strategies that offer short-term cost savings and guidelines to set a foundation for operational excellence.

Portfolio Rationalization
Portfolio rationalization need not involve product introductions or retirements. But, given the changing consumer landscape, executives should consider taking a fresh look at their bank’s product portfolios. Due to the many changes in accountholder behavior, certain cost/benefit dynamics have changed since the pandemic began. This fact alone makes re-evaluating and recalibrating existing portfolio strategies a matter of proper due diligence. Rationalizing the portfolio should include revising priorities, adding new features and reassessing risk profiles and existing project scopes.

Process Re-Engineering
Banking executives have been under tremendous pressure recently to quickly implement non-standard procedures, all in the name of uninterrupted service during socially distanced times.

Though many working models will see permanent change, it is critical to optimize these processes early for long-term efficiency, security and customer experience. As the digital curve steepens, banks will need to map out the customer journey across all digital channels to remain competitive. Some process re-engineering methods include eliminating workarounds, streamlining processes and updating legacy policies that are no longer relevant.

Intelligent Automation
Banks are increasingly leveraging technologies classified under the umbrella of intelligent automation. These include machine learning, robotic process automation and artificial intelligence — all of which have become especially relevant to deal with multiple types of high-volume, low-value transactions. Automated workflows remove the clerical aspects of the process from the experts’ plates, allowing them to focus time and energy on more high-value activities. When executed well, intelligent automation works alongside humans, supplementing their expertise rather than replacing it. For example, areas like fraud and underwriting are becoming increasingly automated in repetitive and known scenarios, while more complicated cases are escalated to personnel for further analysis.

Supplier Contracts
Auditing invoices for errors and evaluating vendor contracts might be the last place a banker would look to establish a quick win. However, our benchmarks suggest they can be a critical stepping-stone to bottom-line opportunities. Existing vendor contracts often include inconsistent clauses and undetected errors (such as applications of new pricing tiers missed, etc.). Eventually, minor errors can creep into the run rate that adds up over the years to significant dollar discrepancies. With extensive due diligence or someone in the know, it’s possible to find a six to seven figure lift, simply by collecting intelligence on the prevailing market rates, the available range of functionality and reasonable expectations for performance levels.

While the financial services industry has been keeping operations running uninterrupted, there is no time like the present to optimize operating processes. Accomplishing a few results early  on can free up resources and support long-term gains. Executives should take the time now to optimize operating model structures in order to brace for what comes next. Looking into the increasingly digital future, consumers will continue to expect banks to reinvent and build up their operating models to greater heights.