Posted by Bill Simpson
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10 Minute Read

Think artificial intelligence is just a buzzword? Think again.

Unless you truly live in a cave, AI has put its stamp on your life—both at home and at work—and we can expect its influence to grow over the coming years.

In our last post on AI we debunked myths (no, the Terminator isn’t coming) and talked about why the combination of smart AI and smart humans helps us create better work product. Now we’re going into what AI means for our lives and jobs today—and what it might mean in the future.

Your friends Alexa and Siri

AI is everywhere, having infiltrated nearly every aspect of your life. Alexa turns on your lights and music while Siri texts your spouse to remind them to buy milk. AI-based algorithms are curating your social media and news feeds. They’re recommending products on Amazon and programs on Netflix. Chatbots are parsing language to help you with customer service queries while Gmail suggests specific email responses. Map apps are helping you find the shortest route home based on changing traffic conditions, and self-driving cars are becoming reality.

Even people living “off the grid” are impacted by AI. It’s used by many non-technology companies to do things like figure out our water usage patterns, plot the weather, and feed us, etc.

It’s nearly unavoidable.

It’s also in the professional world. Two thirds of banks with more than $100 billion in assets and almost 50 percent of banks with less than $100 billion in assets say they are “currently implementing AI strategies,” according to a report from Business Insider.

FIs use AI for retail-facing applications, including identifying and authenticating customers, providing, customer insights and recommendations, and streamlining customer support through things like chatbots. It’s also used in the back office to detect and prevent fraud and money laundering and improve credit underwriting, the report notes.

AI can also be used for reputational searches to get a feel for people’s views and opinions and to understand emotions.

AI and the Future of Banking

AI is poised to play a greater role in banking in the future. Here are just a few examples of where AI could have a measurable impact on FIs, getting work done faster and more efficiently than ever before.

  • Complaint management.

    Complaint management involves a lot of legwork for staff. Complaints come in across a variety of channels, including calls, emails, tweets and Yelp reviews. Each of these complaints needs to be reviewed and the FI must determine what regulations, rules, or laws apply to each complaint. An FI is then required to respond to the complaint. This is especially true when it comes to consumer complaints, where depending on the type of product, complaint, and channel used to report it can create a specific timeline for a response.

AI should make quick work of complaint management in the future. AI will be able to use the rules your FI provides to identify and assess complaints and grow more sophisticated as it gets more data. It will be able to cross reference policies and procedures in milliseconds, letting humans know what complaints require what types of action.

It might even be able to respond to complaints, using natural language processing (NLP), an area of machine learning that deals with speech, text, translation, understanding its context, and responding. Analyzing the content and past experience, it could determine which templated response would be most appropriate. Even if it can’t answer the complaint, it would be able to rout it intelligently to the right staff member.

  • Understanding if policies and procedures comply with regulation.

    AI is already used in call centers to answer basic questions. As AI becomes increasingly adept at understanding questions, it could help us understand if a policy meets both the spirit and letter of a regulation.

  • Better risk and credit decisions.

    Alternative data, including information gleaned from social networking and comparing peer behavior, is already in use today. These are only going to grow more sophisticated as different troves of data are connected. This newly combined data can be used to train AIs and improve their algorithms. Machines will be able to uncover some really interesting relationships. Maybe we’ll find out that people who wake up 6:30 a.m. in the morning are more likely to pay their bills on time.

 

Preparing for the AI of the Future

As AI becomes more advanced and offers more opportunities, financial institutions should be thinking about how AI can help their operations and what they should be doing be prepare. That includes:

Assessing the risks and benefits of AI.

FIs can choose not to embrace AI and keep doing things the way they are. Avoiding AI removes the risk of new and evolving technologies. Keeping the status quo may end up putting your FI at a competitive disadvantage if it allows other providers to offer products and services cheaper and quicker. Being an early adopter may be a market differentiator. The only way to understand the risk and opportunities of AI is with a careful risk assessment.

Finding partners and vendors able to provide these services.

Most financial institutions don’t have the resources to build their own AI. They are going to want to find companies capable of doing these things for them. Vendor due diligence and vendor management rules will apply.

Find new ways to connect data.

Google makes its AI technologies freely available, but there’s one thing it jealously guards and won’t share: its data. Data is the fuel that makes AI learn and evolve. Your FI could purchase the most expensive, sophisticated AI available, but if you don’t have relevant data it will provide a very limited value.

Much of the data at today’s FIs are siloed and segregated. Now is the time to start thinking about how your FI could centrally store and connect data from disparate departments for future AIs to analyze. There are insights to be gleaned if data can be connected.

Conclusion

Don’t write off artificial intelligence as a sci-fi movie plot point. AI is real and an increasingly valuable business tool, especially when it comes to risk and compliance management.

Bill Simpson