In only a few hundred years, the stock trade progressed from a group of investors signing papers under a tree on Wall Street to high frequency traders making thousands of transactions a second. The changes that result from new banking technology innovations could disrupt the current investment paradigm beyond recognition.
Are the latest innovative banking products faster and more powerful than the previous generation of innovative banking features? Not necessarily, but they are smarter. Adoption of artificial intelligence in the banking sector stands to define the difference between success and failure in finance from here on in. Let’s look at how the latest digital innovations in the banking sector can impact your business.
How will artificial intelligence affect online banking?
Whether you’re a blockchain quant trader, a small-scale investor, or an employee of a larger bank looking to keep your institution competitive, understanding the impact of artificial intelligence on online banking is crucial for success in today’s market. The four impacts of artificial intelligence on online banking discussed below are only a few of the effects this innovation in the banking sector is likely to have.
Overcoming runtime challenges
The Bank of Montreal recently issued a press release detailing their partnership with Riskfuel Analytics. The joint venture will employ artificial intelligence to speed up pricing for structured derivatives transactions. By removing a bottleneck in this sector of derivatives trading, BMO implements an innovation in digital banking that can accelerate capital markets.
Customer queries to banks tend to fall into certain categories: checking account balances, changing from paper statements to electronic and transferring funds between accounts at the same institution. These are but a few of the tasks that can be handled within an online banking app if only users could overcome their pain points with the UX. Machine learning is already being used to deploy virtual assistants embedded as chatbots within online banking apps who take in user input and provide advice on accessing desired services.
Innovation in retail banking isn’t just about providing top-tier customer service—it’s also about protecting consumers from security threats they may not even know exist. Not everyone knows that a personal email from the CEO of your bank requesting your online banking information is extremely unlikely to be legit. With artificial intelligence monitoring suspicious account transactions and matching them with known scams, banks can run an automated fraud detection system that informs consumers of threats in real time.
Open banking innovations
Open banking is already a key player in world capital markets after being deployed in the European Union. Now, the legalization of apps that interface directly with your bank to facilitate investing and account management across multiple institutions is coming to Canada. Prepare your finance company to incorporate open banking features as soon as the Government of Canada gives the green light. Otherwise, you stand to fall behind competitors who are already scrambling to adapt their practices to a more interconnected financial world.
What are the benefits of AI in banking?
Innovative banking services that utilize artificial intelligence have the potential to outcompete even the most deeply entrenched financial institutions. The potential for market disruption is tantalizing, and you may be eager to blindly adopt AI features in the hopes that one will stick. However, considering the unique characteristics of your enterprise and matching the AI feature to the benefit you hope to provide to your customers is more likely to have a productive outcome. Which of the three major benefits of AI in banking matters most to you and your business?
Friction sanding in a customer-facing user interface is always a plus, no matter your field. The virtual assistants described above are embedded in a banking app to help customers overcome pain points in the UX. Better fraud detection and decreasing runtime can also improve customer satisfaction.
Faster loan approval
Artificial intelligence is being used to evaluate credit scores for customers with a limited or complex credit history. Approving loans faster allows banks to push more of their assets out into the market while guaranteeing a return on investment.
Lowering the barrier to entry
In Canada, banking has been dominated by the same institutions for over a hundred years: Scotiabank, BMO, TD, and RBC, along with a handful of other large banks, control most of the financial sector. The security, speed of loan approval and flexibility afforded by innovative banking features that utilize AI can catapult smaller institutions onto the world stage.
The future of AI and online banking innovation
Artificial intelligence is a rapidly expanding field that stands to drive banking innovation trends in the near and far future. The increased use of edge computing is reducing the lag times that have long characterized the use of cloud computing in AI applications. As machine learning applications can occur at a faster pace and learn tasks more specific to its unique end users, AI-driven apps will become easier to implement and to access.
According to McKinsey’s Global AI Survey report, nearly 60 percent of leading financial institutions have adopted at least one AI feature. What will happen to the 40 percent who continue to rely on old methods? Like countries who still rely on specie (money backed by silver or gold instead of a nation’s credit), these institutions stand to become backwaters who stagnate while the rest of finance becomes smarter, bigger and faster.
Banking innovation and the future of Fintech
The importance of innovation in banking cannot be overstated. The stock market, online banking and high frequency trading algorithms have all proven to be kingmakers in the financial field. Now, artificial intelligence is promising to be the make-or-break element in the future of Fintech.
Implementing artificial intelligence without the right IT infrastructure can damage your business. Hypertec’s IT experts can help you determine the right combination of cloud computing services, bare metal edge servers and in-house data storage to support your adoption of machine learning features.
This post is also available in: FR