Until just a few years ago, artificial intelligence was primarily relegated to a behind-the-scenes role in the banking industry, limited primarily to use cases involving fraud prevention. That’s beginning to change, however, and fast. Responding to the consumer’s embrace of digital banking accelerated by the COVID-19 pandemic, banks are now leveraging AI to authenticate customers, automate everyday transactions, provide customer support to solve complex banking issues, and much more.
To better understand the profound opportunities and challenges AI presents within the banking industry and predict who the winners and losers of this next phase of digital banking might be, I turned to John Whaley, Senior Vice President of Emerging Products at Prove.
John is the founder and former CEO of UnifyID, which was recently acquired by Prove. He is a renowned expert in digital security with over 15 years of experience in the field. Before UnifyID, he was the Founder and CTO of Moka5, a desktop virtualization company. Before that, he worked at IBM’s T.J. Watson Research Center and Tokyo Research Labs on static program analysis and just-in-time compilation. He was also a Visiting Lecturer in Computer Science at Stanford University.
John received his bachelor’s and master’s degrees in Computer Science from MIT and his Ph.D. in Computer Science from Stanford University, where he won the Arthur L. Samuel Thesis Award for Best Doctoral Thesis.
How will AI impact how consumers bank?
JW: The authentication process is the first user-visible area for AI technology in banking. Today, there is a much greater need to authenticate people remotely, especially when they cannot come into a brick-and-mortar branch or do not have the time to wait for documents to arrive in the mail.
AI will further enable the widespread use of a variety of biometrics in authentication, beyond the typical fingerprint or facial recognition, including behavioral biometrics such as speaker recognition (authenticating individuals by the way they talk), motion/gait (authenticating individuals by the way they walk or move), and keystroke dynamics (authenticating individuals by the way they type). In general, AI will make digital identity and authentication more seamless, natural, and secure.
Another area of interest is the increasing use of virtual assistants and other intelligent conversational agents. Rather than interact with a real person, banking customers are likely to interact with a virtual assistant via a conversational interface; however, transactions and services can also be conducted via phone, chatbox on a website, social media, or through SMS. Virtual assistants will become so powerful and trusted that these agents will handle most banking interactions.
Moving forward, what will be the most common use cases for AI in consumer banking?
JW: The most popular use cases for AI in customer banking will continue to be fraud detection and prevention and, after that, underwriting and risk management support. I think we will see more sophisticated banks adopt AI, enabling them to evaluate whether a user is legitimate or a fraudster based on individual behaviors. Additionally, banks can leverage the data and AI models guided by machine learning to enhance the user experience, providing more personalized offers and information.
What do you think are going to be the biggest projects in this space in 2022? How will the industry shape up, and what will it take to succeed?
JW: Banking and finance are relatively conservative industries, but there is an opportunity for AI and machine learning technologies to disrupt the status quo.
Technology-first organizations will continue to move quickly, gaining an advantage over those who are slower in adoption. We've seen it for the past year or two; technology, data, and analytics are paving a pathway to the future – those adopting now will likely be viewed as 'winners' in terms of innovation, unlocking business intelligence, and a vast amount of opportunity ahead.
Because large players dominate the banking industry, it is hard for small companies to break through and deploy their AI technology solutions in larger banks. Those who are opportunistic and eager to conquer this challenge, I believe, will make the most progress by forging partnerships with providers who already have the 'in' and their technology deployed, as opposed to a 'rip-and-replace' type solution which would require a massive overhaul.
With the mainstreaming of AI services, who do you believe will be the winners? Who will lose?
JW: I believe the real winners will be those who can access data and derive models and insights from AI, further enabling them to leverage the information across multiple organizations or industries. The losers will be the organizations stuck on manual, human-based processes.
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As artificial intelligence advances, its role in the banking industry will only grow more prominent. In the next few years, expect banks to continue to leverage this burgeoning technology to detect payment anomalies and prevent fraud, accelerate onboarding to cut down customer abandonment, and provide instant customer support remotely.
For more information on how banks can leverage emerging digital technology like AI, please reach out to the team.
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