We sometimes take for granted how easy financial institutions (FI) have made it for us to manage our financial lives. In times like these with a pandemic upon us, we realize we can still do most of our banking remotely from our homes. This not only benefits us as consumers, but it also helps the FIs who are trying to continue some level of service while keeping their employees and customers safe. But, how can artificial intelligence (AI) turbo-charge digital banking and is it here now? A PricewaterhouseCooper study last year confirmed a majority of FI decision-makers are investing in AI today at some level. We are on the cusp of the next generation of digital banking and it’s sure to be a game-changer.
WE’VE BEEN DOWN THIS ROAD BEFORE
Interestingly enough, there are many parallels to how AI is emerging compared to how digital banking originally developed. Let’s step back in time for a moment to the earliest days of “online banking.” There were many monikers back then for digital banking – home banking, internet banking, web banking, etc., but “online banking” seemed to stick. The first known deployment of it in the U.S. was in late 1980 at United American Bank in Knoxville, TN. Later, big banks like Chase and Citi followed suit in offering their versions of online banking using the videotext system.
For the next decade or so, various versions of online banking were created by big banks and technology firms and used by only the hardiest early adopters. Why didn’t it take off? While most consumers were hesitant to conduct monetary transactions on the internet, it didn’t truly take off because we did not have the right mix of technology available. Advances in financial technology are always bound by the systems and infrastructure that are available. Without the right ingredients coming together at the right time, advances and user adoption are unlikely.
THE TIPPING POINT
In the mid-90’s, things started to accelerate and we saw the first true internet-only bank in the U.S launched – Security First Network Bank. Big banks then began developing their own web-based solutions while community FIs relied on new online banking providers. This was all happening at the time personal computers and the internet were starting to be adopted by mainstream consumers, and online banking was a perfect application to make use of these tools. FIs were searching for ways to serve their customers beyond brick and mortar branches to reduce costs, and online banking was it. Today, almost all FIs offer digital banking.
HOW AI TAKES DIGITAL BANKING TO ANOTHER LEVEL
With the growing popularity of smart technology, channels like Google Home, Amazon Alexa, Facebook Messenger and advanced SMS can bring existing and new digital banking capabilities to customers via conversational AI. Is this the right time for the success of these new services? The right ingredients? Currently the same naming challenge as early online banking services applies to this new form of digital banking as well, as we have virtual financial assistants, conversational banking, chatbots and several other names being used. The digital banking functionality of virtual financial assistants (the naming front-runner) could not have been easily created without the convergence of data aggregation, analytics, insights, machine learning and natural language tools all coming together at the right time in what many refer to as simply “AI.” If you add in today’s customer expectations of “do it for me, do it now” and “give me intelligent, insightful information I can act on in the channel I prefer,” well, we have an opportunity to advance digital banking even further.
Without a doubt, AI is a powerful way to raise the bar in digital banking and it’s here to stay in my opinion. You only need to look as far as the big banks that have invested millions to create AI-based digital banking applications. Bank of America’s Erica, their virtual financial assistant with more than ten million users (30%+ adoption), is just one of several examples of the desire for this type of interaction and engagement.
IT’S NOT LIMITED TO JUST THE BIG BANKS
The good news is that these capabilities are not just limited to the mega FIs. At Abe.ai for instance, we have multiple community banks and credit unions that offer virtual financial assistants as good or better than the biggest banks. Again, history repeats itself – when online banking was initially introduced in the 80’s, it was the largest banks mostly leading the way. But before too long, we saw thousands of FIs of every size adopting online banking through various technology providers (we call them “fintechs” today – sounds much cooler). Technology advances never stop!
THE FUTURE IS NOW
In a nutshell, AI in banking is not a fad. It is a crucial element of the continued evolution of digital banking. It’s much more proactive, actionable, and accessible than ever before and gets smarter over time via “fleet” learning. As a customer, it provides the opportunity to engage more intimately with your FI resulting in improved financial wellness. The right ingredients at the right time exist now for AI in banking to accelerate and there is no doubt that the adoption curve will be much faster than it was for online banking. That’s what technology does.
Jeff Weikert brings more than 30 years’ experience in the financial services industry to Abe.ai having held a variety of leadership positions for more than a half dozen leading organizations. Prior to joining Abe.ai in 2018 as Chief Strategy Officer, he served as President of Payveris.