Transforming banking with artificial intelligence

Data is an invaluable asset for banks. By harnessing its power, they can deliver an exceptional customer and employee experience, inform decisions, optimize innovation, increase competitiveness, and navigate the ever-changing landscape. To thrive in a data-driven world, artificial intelligence (AI) comes into play – a field that will most likely steer the banking agenda for years to come.

With that in mind, the use of artificial intelligence in banking is ramping up: The global market is expected to reach $64 billion by 2030, and as per a KPMG survey, only 3% of banks don’t use AI in some capacity. Moreover, according to our research, 44% of the banking software market will be AI-led within the next five years.

Below, we delve into why and how financial institutions (FIs) are using artificial intelligence, Forrester’s view on the future of banking, and the innovative solution Sopra Banking Software offers their clients.

Leveraging artificial intelligence

In the digital-first and customer-focused world we’re living in, banks are increasingly using AI and data-enabled solutions to offer hyper-personalized and omnichannel experiences, leading to customer retention, loyalty, and advocacy. Through automation and better use of resources, AI also increases productivity and innovation while lowering costs.

Additionally, by using artificial intelligence to process large amounts of data, banks are uncovering opportunities to delight customers with inventive products and services, and discovering untapped markets to serve, like the unbanked population. On top of that, banks are using AI models to identify and combat financial crime.

Microloans case study

With financial inclusion and microloans on the rise, an AI-enabled credit scoring solution helps de-risk and de-bias the process for FIs, making it more efficient. AI-based credit scoring uses a plethora of data from many sources (not necessarily finance-related) to unearth non-linear, hidden, and more nuanced relationships between variables that traditional credit scoring platforms struggle to identify (or miss entirely).

Using complex and in-depth rules, self-learning AI-focused models continuously improve as additional data is fed into the system, providing creditworthiness predictions at scale. In 2022, Sopra Steria invested in Algoan, a leading French fintech, to offer “more inclusive and responsible access to credit, particularly for profiles that do not meet the classic ‘stability’ criteria”.

Forrester: banking and AI

For banks to compete in the ever-evolving landscape, Forrester believes AI is key. When thinking about the future of banking, the research and advisory company talks about four themes – each enabled and accelerated by artificial intelligence.

1. Invisible: FIs are “inserting financial services at the customer’s moment of need” by connecting with homes, machinery, and vehicles using intelligent agents, event-driven architecture, and application performance interfaces (APIs) – often at the expense of brand visibility.
2. Connected: To stay competitive and achieve “trusted advisor” status, banks are collaborating with an ecosystem of partners to offer open and embedded finance, using microservices, APIs, 5G, and the Internet of Things.
3. Insights-driven: To bolster customer trust, banks are unleashing the power of data by using data lakes, cloud platforms, machine learning (ML),  and predictive analytics to offer advice and strengthen relationships.
4. Purposeful: With sustainability concerns skyrocketing, banks are aligning their Environmental, Social, and Governance (ESG) values more purposefully via AI-centered ESG analytics.

Successfully achieving these goals hinges on leveraging AI, but banks face challenges along the way, including a lack of:

• Skills to implement, oversee, and operate AI systems;
• Transparency around how AI and ML platforms build models;
• Capabilities to develop complex artificial intelligence solutions.

Furthermore, banks may come up against:

• GDPR and privacy issues;
• Unpredictable AI and ML models;
• Concerns around public data usage and protection.

Change management comes into play here, too: Incorporating artificial intelligence into day-to-day operations. However, instilling an AI culture takes time, commitment, and a cultural shift.

Seamlessly integrating AI into banking operations

As banks explore the field of AI and continue integrating it into core systems, Indranil Bandyopadhyay, Principal Analyst at Forrester, believes they should keep the following in mind:

• Increase awareness and understanding of AI within banks.
• Start slowly and learn along the way, enabling faster future transformation.
• AI isn’t always the answer: Consider whether fit-for-purpose techniques like robotic process automation (RPA) or deterministic models are more appropriate.
• Consider off-the-shelf AI software before building a solution from scratch, saving time and requiring less skill.
• Develop in-house AI capabilities, making the transition smoother.

Sopra Banking Software’s end-to-end AI solution

Our expert team has successfully integrated machine learning, predictive analysis, and AI-based data processing into our banking platform, transforming efficiency, effectiveness, and experience. Our artificial intelligence solution adapts to specific needs and is effective across many use cases, including:

• Customer churn prediction
• Portfolio credit risk enhancement
• Contract lifecycle optimization
• Payments automation
• Credit scoring and risk analysis
• Pricing and promotion analytics
• Customer claims

AI: revolutionizing banking

Myriad reasons are driving AI in banking, from hyper-personalizing the customer experience to offering a seamless omnichannel journey. Moreover, intelligent automation requires minimal human support and is self-improving, helping financial institutions lower operational costs, boost IT and operational efficiencies, increase safety and security, and streamline internal processes. Looking to the future, AI will continue to benefit us, our clients, and their customers.

For more information on our AI-enabled solution or to see a demo, get in touch. For more expert content on industry outlooks and innovation, subscribe to our newsletter or visit our Insights page.