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Will Digital Acceleration Simplify Banking?

By Guillermo Kopp, Worldwide Financial Services Industry Director, Microsoft on April 17, 2017

Filed under Banking & Capital Markets

How fast might banks innovate? Could digital transformation streamline the burdensome handoffs, controls, and compliance provisions that plague most banking business processes? Banks must keep up with fast-paced digital customers. Particularly with digital natives, who demand instant response.

Banks should obsess about bringing new digital value to their customers. Digital transformation often starts by rethinking customer interactions and eliminating non-value added steps in the transaction path. A desired outcome is the ability to fulfill customer needs in a fraction of a second.

At the heart of banking, the credit process may get in the way of the customer experience. Credit decision making might entail sluggish reviews and approvals to protect banks primarily from inappropriate risk. Navigating multiple analytics on credit risk exposure, ratings, and defaults takes time and is inefficient. Banks are challenged to extract business sense of today’s relentless data explosion, which generates about 100 times more information than a decade ago.

Technology will keep disrupting the banking business. Recent developments in artificial intelligence, such as bots, cognitive services, and deep learning will enable new dimensions of intelligent automation that were impracticable a few years back. Along with a progressive blend between digital and physical worlds, artificial intelligence will empower human decisions. Common sense in credit and financial decisions, as well as relationship management acumen, are distinctive characteristics of bankers. To get the most value from digital information, banks should embed sound policies and criteria in automated decision making engines.

Leaping forward from credit scoring methods, Fintech companies are figuring out new ways to apply machine learning models to originate loans. And banks are now adding deep insights to foretell contextual, personalized, and timely interactions that are relevant to each customer.

As artificial intelligence capabilities reach new frontiers, would bankers stay in the loop to make credit decisions in real time? There is just too much information about their customers, financials, transactions, and lifestyles. Still, technology developments will bring intelligent agents that can digest customer information and feeds from consumer, corporate, and financial markets in a snap.

Such advanced agents would envisage customer needs and lure customers with predictive banking offers. Well before non-financial deeds like acquiring a car or a home may prompt customers to apply for a loan, intelligent agents will enable banks to anticipate the needs and reach out proactively. While customers may still be unaware of purchasing bargains, anticipative offers combined with a credit pitch will alert them at the right time. Besides predictive credit for unexplored bargains, artificial intelligence will also bring other intuitive offerings involving smart liquidity and smart investments.

Marketing and credit processes will then become fully digital, integrated, simplified, and almost autonomous. Will banks expand beyond their traditional domain and cater for such combined lifestyle and financial opportunities? Or would banks relinquish these combined opportunities to adjacent industries? The banking value proposition should better evolve from “knowing your customer” to capitalizing on intelligent agents that address the holistic needs and wants of customers.

Read more on the Microsoft Banking & Capital Markets and Insurance blogs.

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