How Artificial Intelligence Enhances Customer Experiences in Banking

By Mohan Naidu, FPT UK Managing Director

Since the concept of banking first sprung up around 8000 BC, banks and financial institutions have gone through various drastic changes to expand their services, innovate their business models to offer better products and services and, most important of all, improve the customer experience. Today, Artificial Intelligence (AI) and Machine Learning (ML) are applied to help banks and financial institutions improve customer satisfaction – one of the most important factors to drive a bank’s success. A survey by the Economist Intelligence Unit (EIU) on behalf of Temenos showed that 77% of banking executives believe that the use of AI will ultimately differentiate between winning and losing banks.

Changing customer behaviour during COVID-19

The pandemic has triggered a sudden socioeconomic shift from physical to digital, both for consumers and businesses. Consumers are rapidly switching to digital channels. Unsure about how the pandemic might evolve, they are uncertain about what to buy. This means businesses can no longer rely on historical data and traditional ways of predicting future purchasing patterns.

At the same time, recent research by YouGov, conducted on behalf of IBM in June 2021, revealed that digital services have become the de facto way of conducting business and access services during the COVID pandemic. Around half of those surveyed aged 18-24 (54%) and 25-34 (50%) would welcome the use of technologies such as AI if they improve services and create personalised interactions.

Personalising the customer proposition

EIU’s survey revealed that enhancing the user experience through better personalisation ranked first in the most valuable uses of AI, followed by customer fraud detection, digital marketing and product development.

Done right, personalisation is much more than merely addressing the customer by their name or sending them birthday wishes. Instead, it consists of tailoring all communication, products and services offered to each customer’s current situation and individual requirements. Customer propositions are no longer fit-for-all, they must be intelligent and tailored, involving both banking and non-banking products and services.

To identify the customers’ needs and deliver such intelligent propositions, banks must take an entirely new approach to innovation. They must move away from a product-centric approach where they develop new products and push them to customers. Instead, they should adopt a customer-centric view, which starts with understanding customer needs to deliver both the bank’s own products and their partners’ products and services in real time. This requires AI and analytics capabilities.

AI makes it much easier to analyse customer preferences, allowing banks to provide relevant offers or recommend suitable products before customers even recognise their own needs. Banks are more likely to gain their customers’ trust and loyalty if they can customise the banking experience in this way.

From budgeting tools to loyalty points

Among the most prominent use cases that benefit customers are budgeting tools for saving and goal planning, fee reductions, partner discounts, early fraud detection, loyalty points, new value propositions and non-banking services.  The redesigning of customer loyalty programmes gives banks a deeper and more accurate understanding of customer context, behaviour, needs and preferences.

Based on this, effective personalisation offers customers not only better leads but also a more unique experience. For example, based on a customer’s health and fitness activities, they could receive a discounted offer for health insurance alongside discounted coupons to buy health products if they purchase them using the bank’s credit card.

Improving the customer experience by applying AI requires integrated capabilities. Banks must therefore take an API First, Data First and AI First approach. The goal is to understand how customers engage with the bank, both for banking services and non-banking services, to adopt a holistic data-driven approach. Banks must also build out their capabilities to strike new partnerships at scale with non-financial services institutions.

Taking an AI First approach

Businesses across all industries are working hard to retain their customers, and banks are no exception. AI can become a banking institutions’ superpower: applied in the right way, it can take the customer experience to new heights, resulting in happier and more loyal customers. At the same time, it will reduce a bank’s operating costs and enable increased revenue per customer.

To become AI First, banks must focus on streamlining their technology layer so they can provide customers with distinctive omnichannel experiences, provide personalisation and drive rapid innovation.

They also require a clear strategy on how to engage customers through channels owned by them and their non-banking partners. Banks must adopt a design-thinking lens as they build experiences within and beyond banking to enable true tailoring and personalisation for customers, reengineering back-end processes, and ensuring that data is captured at every step. The solution is not just to implement the right technology: Instead, business and technology must work hand in hand, with cross-functional teams breaking up organisational silos to improve the overall customer experience.

By Mohan Naidu, FPT UK Managing Director

Since the concept of banking first sprung up around 8000 BC, banks and financial institutions have gone through various drastic changes to expand their services, innovate their business models to offer better products and services and, most important of all, improve the customer experience. Today, Artificial Intelligence (AI) and Machine Learning (ML) are applied to help banks and financial institutions improve customer satisfaction – one of the most important factors to drive a bank’s success. A survey by the Economist Intelligence Unit (EIU) on behalf of Temenos showed that 77% of banking executives believe that the use of AI will ultimately differentiate between winning and losing banks.

Changing customer behaviour during COVID-19

The pandemic has triggered a sudden socioeconomic shift from physical to digital, both for consumers and businesses. Consumers are rapidly switching to digital channels. Unsure about how the pandemic might evolve, they are uncertain about what to buy. This means businesses can no longer rely on historical data and traditional ways of predicting future purchasing patterns.

At the same time, recent research by YouGov, conducted on behalf of IBM in June 2021, revealed that digital services have become the de facto way of conducting business and access services during the COVID pandemic. Around half of those surveyed aged 18-24 (54%) and 25-34 (50%) would welcome the use of technologies such as AI if they improve services and create personalised interactions.

Personalising the customer proposition

EIU’s survey revealed that enhancing the user experience through better personalisation ranked first in the most valuable uses of AI, followed by customer fraud detection, digital marketing and product development.

Done right, personalisation is much more than merely addressing the customer by their name or sending them birthday wishes. Instead, it consists of tailoring all communication, products and services offered to each customer’s current situation and individual requirements. Customer propositions are no longer fit-for-all, they must be intelligent and tailored, involving both banking and non-banking products and services.

To identify the customers’ needs and deliver such intelligent propositions, banks must take an entirely new approach to innovation. They must move away from a product-centric approach where they develop new products and push them to customers. Instead, they should adopt a customer-centric view, which starts with understanding customer needs to deliver both the bank’s own products and their partners’ products and services in real time. This requires AI and analytics capabilities.

AI makes it much easier to analyse customer preferences, allowing banks to provide relevant offers or recommend suitable products before customers even recognise their own needs. Banks are more likely to gain their customers’ trust and loyalty if they can customise the banking experience in this way.

From budgeting tools to loyalty points

Among the most prominent use cases that benefit customers are budgeting tools for saving and goal planning, fee reductions, partner discounts, early fraud detection, loyalty points, new value propositions and non-banking services.  The redesigning of customer loyalty programmes gives banks a deeper and more accurate understanding of customer context, behaviour, needs and preferences.

Based on this, effective personalisation offers customers not only better leads but also a more unique experience. For example, based on a customer’s health and fitness activities, they could receive a discounted offer for health insurance alongside discounted coupons to buy health products if they purchase them using the bank’s credit card.

Improving the customer experience by applying AI requires integrated capabilities. Banks must therefore take an API First, Data First and AI First approach. The goal is to understand how customers engage with the bank, both for banking services and non-banking services, to adopt a holistic data-driven approach. Banks must also build out their capabilities to strike new partnerships at scale with non-financial services institutions.

Taking an AI First approach

Businesses across all industries are working hard to retain their customers, and banks are no exception. AI can become a banking institutions’ superpower: applied in the right way, it can take the customer experience to new heights, resulting in happier and more loyal customers. At the same time, it will reduce a bank’s operating costs and enable increased revenue per customer.

To become AI First, banks must focus on streamlining their technology layer so they can provide customers with distinctive omnichannel experiences, provide personalisation and drive rapid innovation.

They also require a clear strategy on how to engage customers through channels owned by them and their non-banking partners. Banks must adopt a design-thinking lens as they build experiences within and beyond banking to enable true tailoring and personalisation for customers, reengineering back-end processes, and ensuring that data is captured at every step. The solution is not just to implement the right technology: Instead, business and technology must work hand in hand, with cross-functional teams breaking up organisational silos to improve the overall customer experience.