Banking’s Next Technological Challenge: Innovation, Not Competition

By Falk Rieker, global VP, global head of IBU banking at SAP SE

Well before COVID-19 shook up business practices and upended personal lives, the banking industry was heavily focused on digital transformation and digital disruption. Experts warned that banks should prepare for everything from startups providing 24×7 services to fintechs and pure technology companies disrupting the financial services market. Without this preparation, how could these firms compete with other banks?

Now, catalyzed by the global pandemic, banks need to refocus. Concerns about digital disruption and non-traditional competition are no longer the priority. Future success will be determined by how well banks innovate and stay ahead of the technological curve.

At the recent SIBOS conference, there was a lot of talk about the need to embrace innovation. The importance of the cloud for financial services companies who want to innovate using intelligent technologies such as machine learning, artificial intelligence, and blockchain was highlighted.

And bank leaders are beginning to take note. A recent SAP & Oxford Economics research study found that 83% of leaders are prioritizing innovating on existing products and services. But banks must also look ahead, brainstorming and adopting visionary methods to apply the technology.

Brainstorm problem-solving possibilities

For example, how can intelligent technologies help banks break down long-established internal silos? We see many examples where a customer is trying to communicate with a bank about some need or problem. Perhaps the customer tries the chat feature but doesn’t get a helpful answer. Maybe there are multiple interactions with a call center agent, or it takes an entire lunch break to resolve a simple problem.

Could AI technology be used to monitor these negative customer interactions and identify where service is subpar? What if AI provided real-time information to the bank agent, guiding the agent to a quicker resolution for the customer? Not only would banks have happier customers, but they could lower wait times and improve the efficiency of the call center. With seamless connectivity and end-to-end process integration, the bank could reduce the friction experienced by customers.

But that’s just the beginning. Banks are becoming digital platforms. They will have the ability to offer non-banking services alongside their banking services. Their cloud-based, open platform will allow them to easily plug-in any third party services. Given that, what if next-level technology and a commitment to innovation could make customers’ lives better?

This pandemic is creating extreme financial stress for many customers, who are struggling with layoffs, reduced income, and a lack of government assistance. Yet some customers might hesitate to call the bank to say that they lack the funds to pay their mortgage this month. What if the bank could use AI or machine learning to identify customers who need assistance and then proactively reach out to those customers to offer help?  The right combination of processes and intelligent technologies could help the bank become a trusted advisor to its customers, increasing loyalty and making people customers for life. Some advanced technologies can help companies analyze customer tone of voice or sentiment, which could allow them to quickly understand and respond to service or product issues. The resulting insight would help enable tactical closed-loop follow-up, increasing customer satisfaction and loyalty.

Apply intelligent technologies in new ways

We’re already beginning to see some banks prioritizing innovation as a way forward. Some firms are turning to intelligent technologies such as AI and machine learning to ferret out fraud signals from the noise of other transactions coming through the banking engine. With their unprecedented speed and processing power, these technologies excel at rapidly identifying incidences of fraud and data patterns that indicate suspicious activity.

For example, Lloyds developed a new tool that uses AI to sniff out fraudulent activity before victims’ accounts are compromised. Using biometrics, the technology identifies the patterns of how a customer typically uses Internet banking, with details such as the time needed to enter personal information or patterns in user movements around the screen. If a fraudulent user attempts to access the account, the software freezes access and contacts the customer. The bank estimates that this innovative technology already prevented fraudsters from illegally acquiring more than £4 million.

Another example is Coöperatieve Rabobank U.A. (Rabobank), a European bank that created a straight-through processing (STP) lending factory that reduced loan processing times from weeks to hours. Leveraging intelligent technologies such as machine learning helped Rabobank achieve an STP degree of 97%. Rabobank is also using conversational AI for invoice handling. The bank’s AI-enabled chatbot Billy is designed to handle repetitive questions from suppliers about invoices. Billy, which is available 24×7,  went live while the Netherlands was gripped by COVID-19 and had gone into lockdown. It was perfect timing: By freeing staff from the effort of looking up standard invoices, Billy enabled workers to address a growing number of specific questions during that period. With the chatbot taking over repetitive tasks, both employee and customer satisfaction increased. And Billy has been able to manage 100 to 150 conversations every day.

Other examples include financial services companies that use contract intelligence solutions, which rely on machine learning, to execute hundreds of hours of attorney effort in just seconds. And according to a recent article by Imtiaz Adam, startup payment service Face++ allows consumers in China to use the Alipay mobile app to transfer money using just their face.

Stay ahead of the curve

Like these companies, your bank can begin taking action. But don’t limit your vision to what other financial services providers are doing. Instead of viewing innovation as a means of keeping pace with your competitors, try to envision what your customers and employees want and need – and then figure out how to use intelligent technologies to deliver that experience.

You can innovate to lead. The best time to get started is right now.