How artificial intelligence will transform financial services
As artificial intelligence, innovation and digitalization continue to grab headlines, the one thing that sparks deep discussions is the subject of disruption.
An ongoing theme that continues to affect individuals, industries and governments globally, disruption isn’t solely a shift in economics, products or market trends (though it continues to be a key influencer), but it also has consequences for the new age customer, shaped by very different needs, behaviors and demands.
So how does technology evolve financial services? What types of disruptions will emerge to reshape the entire industry? What does the future of financial services look like? And what role does artificial intelligence play?
Artificial intelligence will drive many of the changes, and financial services in 2020 will look like this:
Bots and virtual assistants dominate all transactional related customer interactions, escalating to human advisers only in the event of complex sales or services issues. Customers requesting routine transactions, for example an insurance claims status, overdue payment, or bank balance would have it resolved via AI-powered text/voice chatbots or robotic automation without customers realizing it`s a machine.
As the level of interaction becomes highly personalized, customers would no longer tolerate providers who can’t remember them, their diversity of preferences, or treats them as a member of a certain mass segment (traditionally done based on income, age or postcode).
Financial services have now designed highly personalized customer journeys using advanced high-powered analytics technologies and machine learning techniques to remain relevant and competitive in the eyes of the consumer.
Going beyond traditional banking or insurance needs, financial services now interact directly with customers’ personal virtual assistants (regardless of whether it’s Samsung’s Bixby, Amazon’s Alexa, Google’s Assistant or Microsoft’s Cortana), one that acts as the customer's personal financial advocate.
Banks now help consumers track spending patterns and present recommendations to save money or reduce debt, whereas insurers present clients with recommendations for healthier lifestyle or safer driving and travel tips, all embedded seamlessly via personalized interactions with AI-powered virtual assistants.
Shifting Customer Behaviour
With diluted loyalty, access to more data and evolved expectations to interact or transact at their convenience, the consumer in 2020 builds their own financial portfolio, cherry-picking products and services from an array of brands that exceeds their experience or expectation. As the changing behavior of the customer becomes more ubiquitous, financial services institutions now design products and services to fit around the life of a customer with different cost and accessibility options (instead of forcing customers to fit in with limited offerings).
Customers now perform simple functions like checking of bank account balances, viewing transaction history, paying bills or insurance premiums, or transferring funds using social commerce or social banking channels.
As the classic single channel becomes obsolete, consumers would expect financial institutions to have a seamless integration of channels. Let’s assume a scenario wherein a typical consumer commences the journey seeking product advice with a chatbot or robo-advisor on an insurer’s mobile channel, but then heads over to the branch to have the purchase / transaction completed.
At the branch, upon customer recognition (possibility through RFID/Biometric technologies), the virtual adviser at the branch anticipates the special needs and preferences of the customer, and in real-time prompts a service staff of the customer’s past behavior and needs, to have the transaction completed. Financial services institutions that deliver the best connected experience seamlessly through the different channels would deliver the experience satisfaction sought by the new age customer.
Trusted Digital Identity
As passwords, PIN (personal identification number) or two-step SMS authentication fades away due to security vulnerabilities, financial institutions now authenticate using biometrics technologies. Using mobile technologies, customers now log into their financial services provider’s network simply by scanning their eye, face, fingerprints, hand geometry or voice to access and perform financial transactions with their bankers or insurers.
Led by government institutions, the entire ecosystem of financial services now performs digital security authentication and verification on a standardized public registry of digital identity. From the eyes of a customer, their digital identity not only makes the entire process of authentication much simpler, quicker and convenient, but is also a more seamless experience to establish trust and prove, “I am who I say I am.”
Payments will be shaken
Financial services institutions now play an intermediary role, as opposed to being an end-to-end payment transaction provider. With payment fully digitalized, financial services institutions have integrated into the cashless ecosystem, supporting consumers that pay with their digital wallets, smartphones or digital currencies for everyday transactions.
In the age of hyper-connectedness, payment transactions are now fully transparent, empowering customers with friction-free payments and checkout procedures. Having embraced digital payment channels, customers view payment processes as a background activity seamlessly done via mobile devices agnostic to technology platforms whether it’s contactless NFC (Apple Pay), wearables, Smart TV or distributed blockchain ledgers.
Having built payment platforms that are interoperable, cost efficient, and secure, financial institutions are now razor focused on competing for a seamless customer experience and racing towards greater financial inclusion to attract the larger un-banked and uninsured market share.
The Non-Stop, Hyper-Connected World
The world is more connected than ever, and this trend is set to further proliferate for the rest of the 21st century. Having conversations with vehicles while driving down the road or asking Siri how stocks are performing will be in the new normal.
As the torrent of machine-to-machine communication opens up tides of data, financial institutions turn it into immediate competitive advantage for personalizing products and services, adjusting pricing dynamically and better prediction of customer needs to deliver superlative customer experience.
Insurers now overhaul their protection and investment offerings, with embedded machine-to-machine data (thanks to the proliferation of IoT sensors), to refine and recalibrate risk exposures dynamically across motor, home and health lines, rewarding consumers with safer and healthier lifestyle behaviors, while gaining immense bottom-line benefits from improved underwriting and reduced claims costs.
The sharing economy has now reached heightened levels of acceptance as consumers are accustomed to sharing assets or renting from others, be it cars, accommodation, travel or other shared products and services.
Having addressed the gaping holes in their products and services, financial institutions have differentiated their offering for the new age of the P2P ecosystem orchestration where communities are increasingly exchanging meals, accommodation, energy, workforce, music or household goods.
Insurers, for instance, have protection plans that cater for shared liability between customers as well as owners for potential damages, making trusting strangers a lot easier than they think. Banks have new complex structures using ‘On-behalf Models’ to enable automated transfer and receipt of payments from customers to owners upon deduction of commissions, reconciliation and settlements.
Winning financial institutions go the extra mile to win the war of value and boost alternate revenue models by building partnerships with the customers and suppliers on the shared ecosystem, at the click of a button.
Conclusion: The Future is in Constant Flux
Of course, these predictions are open to conjecture, as only time will tell what the future will be. Come what may, these disruptive forces are showing no signs of slowing. Indeed its nature and pace of change will inevitability propel financial services innovation forward for centuries to come.
While centripetal disruptive forces, ever increasing regulatory scrutiny, and eroding margins continue to drive uncertainties in the financial services world, the winning financial services institutions of 2020 are clear on the posture they will embrace and muscles they will flex to get ahead in the evolving landscape.
As a consumer in the new age of 2020, I have only one sense of direction; to be with a financial service that has the Apple Factor to drive my ambitions and preferences forward.