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Fostering a Banking Revolution with AI and Blockchain

As financial institutions increasingly embrace digital technologies and start to become tech solution companies, what role will new technologies like blockchain and AI play in fuelling this change?

       Mr.Kalyan Kumar

An Industry in Transition: Reckoning with the Headwinds

Today, the financial industry is in a state of constant change as it continues to evolve through demanding client needs and regulatory/compliance requirements. Beyond regulatory scrutiny and competitive stress from internal and external stakeholders, the industry is increasingly finding that customers are more likely to have relationships with multiple service providers and less likely to engage in face-to-face interactions with their bankers, courtesy today’s digital, on-demand, 24×7 available avenues available to consumers. While most financial institutions have embraced digital technologies, there are still a lot of challenges to overcome for this industry as we move forward. Most of these challenges emanate from competitive and compliance requirements.     

Some of these unique challenges include:

  • Evolving Customer Engagement –One of the biggest challenges that financial institutions are experiencing today is how to meet customer expectations and continuously enhance customers’ engagement. Different demographics have different engagementneeds. Some segment of customers prefer meeting face to face, while others want to operate virtually. As a response, financial institutions are continually changing and evolving their engagement models. It is important to note that brick-and-mortar stores are still essential to success; however,financial institutions are also looking at modernizing and creating digital workplaces which resonate with target client segments.

  • Emerging Threats from Non financial Institutions–The emergence of contemporary Fintech players in the market is disrupting the traditional operations of the financial industry. This poses a huge challenge for traditional financial institutions as they are unable to quickly adapt to changes, which are not only technological in nature but also include operations, culture, and other aspects of the industry as well. Even nonfinancial institutions are posing a threat to traditional financial companies. With companies like Amazon, Facebook,etc. leveraging their already massive consumer base to create financial opportunities, banking and financial institutions are scrambling to compete. Since these contemporary players maynot be held to the same set of rules and regulations as other financial institutions, they have the freedom to leverage their large customer bases in more flexible and innovative ways that are disrupting existing business models.

  • Regulatory Pressures – Regulatory requirements are on the rise and financial institutions have to spend a significant portion of their budgets and time ensuring compliance with enacted regulations. Institutions have to keep investing in building systems and processes which can help them keep pace with the needs of the changing world and fulfil the requirements these regulations and compliances demand.

Harnessing Technology to Drive Innovation

The future is anexciting time for the financial industry as technologies like blockchain and artificial intelligence (AI) present opportunities to overcome the challenges that have impeded growth and innovation.  These technologies – which enable machines to simulate and augment human intelligence along with increased transparency and security – have finally come of age and are being used increasingly. Financial organizations are also progressively venturing into this intelligence age, along with intense pressure from all fronts including fierce competition, digital disruption, technological evolution, etc. Although AI technology continues to evolve and blockchain continues to broaden its scope and impact across various financial domains, these technologies already have the capability to provide tangible, real-world outcomes today. Whether its robotic automation replacing repetitive manual tasks, human workers augmented with enhanced judgment, robots replacing humans in the front office, enhanced security, traceability and transparency across transactions, these technologies have started to drive growth, profitability, and sustainability.

Let’s look at a few ways in which these technologies are transforming the financial industry today.

  • Hyper-personalization of Products and Services – Embracing a fully digital strategy requires a transition from an account-based view of financialclients to one that knows them as individuals and enhances customer experience with relevant, convenient, and personalized products/services and enhanced contextualized security. Financial institutions do have access to a wealth of customer data, including demographics, web analytics, and online/offline transaction records which can be leveraged to derive useful insights using machine learning by forming a 360-degree view of a customer. Such information can be used to personalize the products and service offerings and interactions based on the behaviour of individual customers. The future lies in being able to offer tailored solutions for each customer need based on previous interactions. The evolution of chatbots is a definitive example of progress in this direction. Financial institutions are offering chatbots to end users to inquire about their transactions through multiple channels of interaction. These chatbots can also transition from just a transactional entity to personal assistants by providing intelligent and personalized recommendations over a period of time. All this is being supported by a robust blockchain enabled architecture that creates a transparent and secure transactional environment.

  • Utilizing Insights for Acquisition and Retention – Other than providing personalized products and services, AI and machine learning is also helpfulin predicting customer behaviour based on certain patterns and occurrences. This is enabling organizationsto framebetter strategies for acquiring new clients, retaining existing ones, and developing targeted campaigns.

  • Driving Process Optimization through Enhanced Security One of the most promising applications of AI and blockchain in the financial industry comes from automating high-volume, low-value repeatable processes that are executed with high accuracy and efficiency thanks to robotics and distributed processing. Many organizations have already started leveraging cognitive agents and robotic process automation (RPA) bots to automate high-frequency requests like password resets. RPA systems are also being leveraged for automating back-office processes for tasks which are routine in nature and have a defined standard operating procedure. All this is being enabled by blockchain solutions through transaction processing mechanisms that are increasingly secured, transparent, and error-free.

  • Promoting Customer Satisfaction with Seamless on Boarding and Service Delivery –Leveraging AI and blockchain technologies into the onboarding processes can help organizations reach a broader set of new customers while increasing revenue and making them stand out from the competition. In order to build stronger relationships with clients, on boarding a client is the first chance to make a difference. While many clients enjoy the personal touch provided at branches, footfall is continuously declining and user-friendly mobile options are turning to be more attractive to new-age customers. Financial institutions need to be aware of where the market is heading and what kind of technology will take them there. In order to deliver exceptional customer experiences that create long-term competitive advantage, many organizations are leveraging AI, machine learning,and blockchain for various use cases across financial domains. From designing seamless client journeys, create actionable insights on these journeys, new-age technologies like these are helping track the user throughout the service delivery value chain.

  • Security – Having flawless and uncompromised security is, and always has been, a defining requirement. However, with the growth of the global economy and global marketplace to include virtual payments and omni channel access, security risks are at an all-time high.Technologies like blockchain and AI come to the rescue by enabling linking, encryption, and traceability, along with various verification methods such as biometrics. All these combine to create a secure, intelligent, and agile environment within which businesses can successfully operate.