As banks push to increase efficiency and enhance customer experience, their use of innovative technology is crucial. Artificial intelligence, or the use of computers to carry out the processing and decision making tasks previously carried out by humans, is one form of innovative technology banks are adopting at a very high rate to achieve these objectives. The steady increase of AI in banking, however, will likely have both positive and negative impacts on the banking industry.
AI’s impact on efficiency
Increased efficiency is the primary value-added feature AI provides to banks. Innovative AI machines can process information quicker and more precisely than humans, which translates into time and cost savings. Prior to the introduction of AI, many banks used internal teams to perform tasks like evaluating loan applications and assessing documents for regulatory compliance. AI is able to perform these and other similar tasks in an effective and efficient manner, allowing bank employees to focus their efforts elsewhere and thereby increase productivity.
Efficiency is particularly important when a bank integrates with another following an acquisition. Integration following an acquisition involves converting all customer and account information of the acquired bank into the acquiring bank’s system, a task that AI can perform in a much less timely and costly manner than humans. Community banks, such as the First National Bank of Whynne, Ark., have reaped these time and cost efficiency benefits. For example, since First National Bank began using AI for conversion assistance following acquisitions of other banks, it has decreased conversion costs by 70 percent. Clearly, the efficiency increases AI provides have a tangible, positive effect on banking.
AI’s impact on customer experience
AI also adds value by enhancing the experience banks can provide to customers. By accumulating, organizing and processing customer information quickly, AI systems allow banks to increase customer intelligence. Banks can provide a more individualized service with greater customer intelligence, a feature that technology-savvy customers strongly value.
In addition to individualization, banking customers also value reliability. By giving consumers the ability to communicate with AI technology, banks can increase their service reliability by eliminating potential roadblocks such as human error and friction in communication that threaten the quality of a banking customer’s experience. Overall, through an uptick in individualization and reliability, banks adopting AI can enhance their customers’ experience and thereby grow their customer base.
AI’s impact on banking jobs
Despite the positive impact of AI in banking, many critics view it as a threat to banking employment. According to Autonomous Research, about 1.2 million bank workers are projected to be replaced by AI systems, 70 percent of whom are front-office workers like bank tellers. Yet, an Accenture study, indicates banks that adopt AI may actually experience a net gain in jobs, particularly in areas like computer programming. Though the type of effect AI will have on banking jobs is uncertain, there is no doubt the employment landscape in banking is in the process of changing dramatically. Ultimately, innovative technology, and the AI revolution in particular, is a major factor in the banking industry’s fast paced evolution.
J. Marc Ward is a shareholder with Fredrikson & Byron. He can be reached at [email protected] or 515-242-8901. This column originally appeared in Fredrikson & Byron’s Business Perspectives blog.