Data Analytics

How Banks Can Use AI to Deliver Personalized Service

From detecting fraud on the fly to maximizing customer service through chatbots, artificial intelligence can help small and medium banks stay innovative.

Ernie Smith

Ernie Smith is a former contributor to BizTech, an old-school blogger who specializes in side projects, and a tech history nut who researches vintage operating systems for fun.

The banking field is constantly feeling the tremors of disruption amid changing dynamics and advancing technology.

Luckily for banks, people don’t tend to hop around much once they find a bank they like — a study this year from Bankrate finds that people use the same checking account for an average of 14 years, and more than one-fifth of respondents have made it past the two-decade mark.

However, competition is rising in the banking space. Online-only banks and other apps often have appeal among younger customers that can be difficult for smaller banks and credit unions to compete with. Bolstered by lower overhead, these digital options can often pass on savings to their customers while delivering the personalized experiences they have come to expect from the organizations they do business with.

But banks and credit unions have access to those same personalization tools. Using the same techniques and technologies, they can improve the customer experience by using artificial intelligence to maintain their current customers, and even attract new ones.

Where Personalized Value Matters the Most

Consumers are ready for personalization in their banking routines. A 2019 Accenture study on consumer patterns in financial services outlines four bank consumer personas: the pioneer, the pragmatist, the skeptic and the traditionalist. Of the four groups, representing 47,000 banking and insurance customers globally, only the traditionalists — which make up about a fifth of survey respondents — showed any true resistance toward using personalized data to help improve the customer experience. Even then, 55 percent of traditionalists still said personalization is what they wanted.

Among the largest persona group, the tech-averse skeptics, 80 percent of respondents said they would be willing to share their data in return for personalized services. But consumers expect more in return from personalization to make giving away their data worthwhile.

“Personalized services should also demonstrate added value. It is not enough just to tell consumers how they are spending their money,” the Accenture report states. “Instead, providers should show them how they can save money and take advantage of offers.”

How AI Can Help Advance the Digital Experience

One way to translate this data into value might be through AI tools, which could not only improve customer experiences but also save banks money. According to a Business Insider Intelligence report from last year, front-office uses of AI had the potential to save the banking industry an estimated $199 billion by 2023.

AI-based approaches, according to author Eleni Digalaki, could help simplify customer interactions through the sharing of personalized insights with customers, by handing over simpler customer interactions to bots or voice assistants, and by easing authentication processes.

“Certain AI use cases have already gained prominence across banks’ operations, with chatbots in the front office and anti-payments fraud in the middle office the most mature,” Digalaki writes.

Personalization, of course, isn’t limited to product recommendations or ways to save money while surfing the web. It can also prevent theft. By catching unusual charges through fraud deception capabilities, banks can help consumers immensely, and save them money to boot.

AI’s Inherent Value for Local Bank Branches

This emphasis on AI can come in especially handy for local banks. As CaixaBank Business Intelligence head Cristina Lázaro noted in an article for ‌FinTech Futures, on-premises payments and deposits at banks are on the decline in recent years, but there remains a desire for face-to-face communication.

“Creating an omnichannel environment that caters for the increasingly diverse client base is a huge undertaking, but it can be expedited using intelligent tools, while also leading to significant returns on investment,” Lázaro writes.

AI-based tools can help minimize the impact of tasks that can be automated while bringing additional value to the in-person interaction when it’s needed.

But beyond facilitating more direct interactions, the use of AI offers potential to expand customer bases. One recent focus of the Consumer Financial Protection Bureau involves using machine learning models as an alternative approach to judging creditworthiness for people without traditional credit histories. This data can help lenders make better-informed decisions that can expand the bank’s reach to new customer bases.

By combining the power of personalized digital elements through the use of technology with the personal touch that a retail branch can bring, banks can keep up with consumers in multiple contexts while offering something that an online-only option simply can’t.

DISCOVER: Learn more about how banks can use technology to get future-ready.

ILLUSTRATION BY TRACI DABERKO