Generative AI in banking and financial services

Processes such as funding, staffing, procurement, and risk management get rewired to facilitate speed, scale, and flexibility. These gains in operational performance will flow from broad application of traditional and leading-edge AI technologies, such as machine learning and facial recognition, to analyze large and complex reserves of customer data in (near) real time. Exhibit 3 illustrates how such a bank could engage a retail customer throughout the day. Exhibit 4 shows an example of the banking experience of a small-business owner or the treasurer of a medium-size enterprise. Management teams with early success in scaling gen AI have started with a strategic view of where gen AI, AI, and advanced analytics more broadly could play a role in their business.

The successful bank of the future will be defined as a network of platforms. Few banks will capture all of the ten platform opportunities described in this article in their regions, but many will participate in multiple platforms. Given the platforms’ enormous value creation scale, getting even one right can unlock tremendous value for shareholders and broader stakeholders alike. But success will come to only those banks willing to move beyond their traditional operating models. Banks should be prepared to evolve through multiple stages on their way to becoming a platform network. These new platforms dismantle the barriers between traditional industries, reshaping customer behavior and turning formerly linear value chains into ecosystems that fulfill customer needs in new ways.

Natural language processing is often used in modern chatbots to help chatbots interpret user questions and automate responses to them. Machine learning (ML) is a branch of artificial intelligence and computer science that focuses on using data and algorithms to enable AI to imitate the way that humans learn, gradually improving its accuracy. Applied to IT automation, machine learning is used to detect anomalies, reroute processes, trigger new processes, and make action recommendations. The chief automation officer (CAO) (link resides outside ibm.com) is a rapidly emerging role that is growing in importance due to the positive impact automation is having on businesses across industries. The CAO is responsible for implementing business process and IT operations decisions across the enterprise to determine what type of automation platform and strategy is best suited for each business initiative.

Improves Operational Efficiency

As a result, they’re better able to identify investment opportunities, spot poor investments earlier, and match investments to specific clients much more quickly than ever before. The landscape of currency could fall anywhere on a spectrum between wide open and tightly closed. However, none of the scenarios would stop what’s certain to be the breakup of traditional banking. Rather, they would likely determine the shape of the industry and the winning players. If currency isn’t a factor, data take center stage and create a more even playing field.

Kinective is the leading provider of connectivity, document workflow, and branch automation software for the banking sector. With the most comprehensive, open, and connected technology ecosystem in banking, Kinective helps financial institutions unlock new services, modernize operations, and elevate client experiences to enhance their competitive edge. Kinective serves more than 2,500 banks and credit unions, giving them the power to accelerate innovation and deliver better banking to the communities they serve. You can make automation solutions even more intelligent by using RPA capabilities with technologies like AI, machine learning (ML), and natural language processing (NLP). According to a McKinsey study, AI offers 50% incremental value over other analytics techniques for the banking industry.

• Process mining, workflow automation, business process management (BPM), and robotic process automation (RPA) are examples of process automation.
• To capture this opportunity, banks must take a strategic, rather than tactical, approach.
• Often underestimated, this effort requires rewiring the business processes in which these AA/AI models will be embedded; making AI decisioning “explainable” to end-users; and a change-management plan that addresses employee mindset shifts and skills gaps.
• The AI-first bank of the future will need a new operating model for the organization, so it can achieve the requisite agility and speed and unleash value across the other layers.

InfoSec professionals regularly adopt banking automation to manage security issues with minimal manual processing. These time-sensitive applications are greatly enhanced by the speed at which the automated processes occur for heightened detection and responsiveness to threats. IT automation is the creation and implementation of automated systems and software in place of time-consuming manual activities that previously required human intervention. IT automation helps accelerate the deployment and configuration of IT infrastructure and applications and improve processes at every stage of the operational lifecycle. Automation helps banks streamline treasury operations by increasing productivity for front office traders, enabling better risk management, and improving customer experience. A successful gen AI scale-up also requires a comprehensive change management plan.

Learn how SMTB is bringing a new perspective and approach to operations with automation at the center. And at CFM, we’re devoted to helping you achieve this better banking experience, together. Ultimately, the banking industry may need to get better at anticipating and proactively shaping how automation will stoke the flame of innovation and demand while shifting competitive dynamics beyond operational transformation. First, ATMs enabled rapid expansion in the branch network through reduced operating costs. Each new branch location meant more tellers, but fewer tellers were required to adequately run a branch.

Blanc Labs helps banks, credit unions, and Fintechs automate their processes. Leveraging process mining and digital twins can help banks to gain process intelligence and identify back-office processes to automate. AI and NLP-enabled intelligent bots can automate these back-office processes involving unstructured data and legacy systems with minimal human intervention.

What obstacles prevent banks from deploying AI capabilities at scale?

Banking automation behind the scenes has improved anti-money laundering efforts while freeing staff to spend more time attracting new business. The banking industry has particularly embraced low-code and no-code technologies such as Robotic Process Automation (RPA) and document AI (Artificial Intelligence). These technologies require little investment, are adopted with minimal disruption, require no human intervention once deployed, and are beneficial throughout the organization from the C-suite to customer service. And with technology fundamentally changing the financial and consumer ecosystems, there has never been a better time to take the next step in digital acceleration.

But after verification, you also need to store these records in a database and link them with a new customer account. With cloud computing, you can start cybersecurity automation with a few priority accounts and scale over time. Cybersecurity is expensive but is also the #1 risk for global banks according to EY.

Robotic process automation (RPA) is a software robot technology designed to execute rules-based business processes by mimicking human interactions across multiple applications. As a virtual workforce, this software application has proven valuable to organizations looking to automate repetitive, low-added-value work. The combination of RPA and Artificial Intelligence (AI) is called CRPA (Cognitive Robotic Process Automation) or IPA (Intelligent Process Automation) and has led to the next generation of RPA bots.

However, banks must resolve several weaknesses inherent to legacy systems before they can deploy AI technologies at scale (Exhibit 5). Core systems are also difficult to change, and their maintenance requires significant resources. What is more, many banks’ data reserves are fragmented across multiple silos (separate business and technology teams), and analytics efforts are focused narrowly on stand-alone use cases. Without a centralized data backbone, it is practically impossible to analyze the relevant data and generate an intelligent recommendation or offer at the right moment. Lastly, for various analytics and advanced-AI models to scale, organizations need a robust set of tools and standardized processes to build, test, deploy, and monitor models, in a repeatable and “industrial” way.

Automation is the application of technology, programs, robotics or processes to achieve outcomes with minimal human input. The following paragraphs explore some of the changes banks will need to undertake in each layer of this capability stack. Discover smarter self-service customer journeys, and equip contact center agents with data that dramatically lowers average handling times. With UiPath, SMTB built over 500 workflow automations to streamline operations across the enterprise.

QuantumBlack Labs is our center of technology development and client innovation, which has been driving cutting-edge advancements and developments in AI through locations across the globe. Once you’ve successfully implemented a new automation service, it’s essential to evaluate the entire implementation. Decide what worked well, which ideas didn’t perform as well as you hoped, and look for ways to improve future banking automation implementation strategies. Learn how top performers achieve 8.5x ROI on their automation programs and how industry leaders are transforming their businesses to overcome global challenges and thrive with intelligent automation. Investment advisory is the arena to provide investment and insurance products for all kinds of customers, from young people just starting to build wealth to older people who need sophisticated investments and protection to institutions. This includes financial planning, brokerages, trusts, retirement plans, and many kinds of insurance.

In the target state, the bank could end up with three archetypes of platform teams. Business platforms are customer- or partner-facing teams dedicated to achieving business outcomes in areas such as consumer lending, corporate lending, and transaction banking. Enterprise platforms deliver specialized capabilities and/or shared services to establish standardization throughout the organization in areas such as collections, payment utilities, human resources, and finance. And enabling platforms enable the enterprise and business platforms to deliver cross-cutting technical functionalities such as cybersecurity and cloud architecture. First, banks will need to move beyond highly standardized products to create integrated propositions that target “jobs to be done.”8Clayton M.

Automation Without Integration

Discover the true impact of automation in retail banking, and how to prepare your financial institution now for a brighter future. Banks that foster integration between technical talent and business leaders are more likely to develop scalable gen AI solutions that create measurable value. By making faster and smarter decisions, you’ll be able to respond to customers’ fast-evolving needs with speed and precision. The bank’s newsroom reported that a whopping 7 million Bank of America customers used Erica, its chatbot, for the first time during the pandemic. A digital portal for banking is almost a non-negotiable requirement for most bank customers.

In addition to strong collaboration between business teams and analytics talent, this requires robust tools for model development, efficient processes (e.g., for re-using code across projects), and diffusion of knowledge (e.g., repositories) across teams. Beyond the at-scale development of decision models across domains, the road map should also include plans to embed AI in business-as-usual process. Often underestimated, this effort requires rewiring the business processes in which these AA/AI models will be embedded; making AI decisioning “explainable” to end-users; and a change-management plan that addresses employee mindset shifts and skills gaps. To foster continuous improvement beyond the first deployment, banks also need to establish infrastructure (e.g., data measurement) and processes (e.g., periodic reviews of performance, risk management of AI models) for feedback loops to flourish. Built for stability, banks’ core technology systems have performed well, particularly in supporting traditional payments and lending operations.

Many banks are rushing to deploy the latest automation technologies in the hope of delivering the next wave of productivity, cost savings, and improvement in customer experiences. While the results have been mixed thus far, McKinsey expects that early growing pains will ultimately give way to a transformation of banking, with outsized gains for the institutions that master the new capabilities. Today, many of these same organizations have leveraged their newfound abilities to offer financial literacy, economic education, and fiscal well-being. These new banking processes often include budgeting applications that assist the public with savings, investment software, and retirement information. Customers want to get more done in less time and benefit from interactions with their financial institutions. Faster front-end consumer applications such as online banking services and AI-assisted budgeting tools have met these needs nicely.

In fact, MyLifeAssistant is the front-end evidence that the institution that created the app has decided to compete aggressively as a CMS. Behind the scenes, while coordinating all this activity, MyLifeAssistant is constantly adding to its database so that it can improve its future predictions via advanced analytical models. Later in the day, when a user visits a local café, MyLifeAssistant might preselect their favorite coffee or lunch, giving them one-tap access to their favorite repast—with discounts and rewards. In fact, MyLifeAssistant is so easy to use that customers use it for investing, planning, shopping, socializing, and more throughout the day. As a customer keeps using MyLifeAssistant for more kinds of shopping and services, the app increasingly knows their friends, how their money is spent, and what they do in their free time. A business gateway provider will compete with online accounting platforms, software companies, and even telcos for the small-business service ecosystem.

A system can relay output to another system through an API, enabling end-to-end process automation. Your employees will have more time to focus on more strategic tasks by automating the mundane ones. Hyperautomation can help financial institutions deal with these pressures by reducing costs, increasing productivity, enabling a better customer experience, and ensuring regulatory compliance. Among the financial institutions we studied, four organizational archetypes have emerged, each with its own potential benefits and challenges (exhibit). To get the most from your banking automation, start with a detailed plan, adopt simple-but-adequate user-friendly technology, and take the time to assess the results.

Back-office operations

The 2021 Digital Banking Consumer Survey from PwC found that 20%-25% of consumers prefer to open a new account digitally but can’t. RPA does it more accurately and tirelessly—software robots don’t need eight hours of sleep or coffee breaks. This article was edited by Jana Zabkova, a senior editor in the New York office. Start automating instantly with FREE access to full-featured automation with Cloud Community Edition.

These organizations will have the advantage of not being tied to the old standards and practices of traditional financial services. But they need to be mindful that this advantage doesn’t guarantee success, even for companies with cutting-edge innovations. Despite billions of dollars spent on change-the-bank technology initiatives https://chat.openai.com/ each year, few banks have succeeded in diffusing and scaling AI technologies throughout the organization. Among the obstacles hampering banks’ efforts, the most common is the lack of a clear strategy for AI.6Michael Chui, Sankalp Malhotra, “AI adoption advances, but foundational barriers remain,” November 2018, McKinsey.com.

This means that global investors are voting with trillions of dollars against the future profitability and sustainability of the existing business model of universal banks. It’s an AI-driven solution that helps you automate more business and IT processes at scale with the ease and speed of traditional RPA. Hyperautomation is an approach that merges multiple technologies and tools to efficiently automate across the broadest set of business and IT processes, environments, and workflows.

Working on non-value-adding tasks like preparing a quote can make employees feel disengaged. When you automate these tasks, employees find work more fulfilling and are generally happier since they can focus on what they do best. The next step in enterprise automation is hyperautomation, one of the top technology trends of 2023. The language of the paper have benefited from the academic editing services supplied by Eric Francis to improve the grammar and readability. Business units that do their own thing on gen AI run the risk of lacking the knowledge and best practices that can come from a more centralized approach. They can also have difficulty going deep enough on a single gen AI project to achieve a significant breakthrough.

Traditional software programs often include several limitations, making it difficult to scale and adapt as the business grows. For example, professionals once spent hours sourcing and scanning documents necessary to spot market trends. Today, multiple use cases have demonstrated how banking automation and document AI remove these barriers. A thriving CMS will offer more than mere personalization, simplicity, and affordability. CMSs will have more access to their customers and much more data about those customers than traditional banks have ever had. Because they will become primary touchpoints for a wide range of transactions, they can build an unbeatable edge in collecting and analyzing big data.

Robotic process automation, or RPA, is a technology that performs actions generally performed by humans manually or with digital tools. If you are curious about how you can become an AI-first bank, this guide explains how you can use banking automation to transform and prepare your processes for the future. QuantumBlack, McKinsey’s AI arm, helps companies transform using the power of technology, technical expertise, and industry experts. With thousands of practitioners at QuantumBlack (data engineers, data scientists, product managers, designers, and software engineers) and McKinsey (industry and domain experts), we are working to solve the world’s most important AI challenges.

About 30 percent use the centrally led, business unit–executed approach, centralizing decision making but delegating execution. Roughly 30 percent use the business unit–led, centrally supported approach, centralizing only standard setting and allowing each unit to set and execute its strategic priorities. The remaining institutions, approximately 20 percent, fall under the highly decentralized archetype. These are mainly large institutions whose business units can muster sufficient resources for an autonomous gen AI approach.

Each layer has a unique role to play—under-investment in a single layer creates a weak link that can cripple the entire enterprise. As we analyze what automation means for the future of banking, we must look to draw any lessons from the automated teller machine, or ATM. The ATM is a far cry from the supermachines of tomorrow; however, it can be very instructive in understanding how technology has previously affected branch banking operations and teller jobs.

Employees in that area should be eager for the change, or at least open-minded. It also helps avoid customer-facing processes until you’ve thoroughly tested the technology and decided to roll it out or expand its use. Timesheets, vacation requests, training, new employee onboarding, and many HR processes are now commonly automated with banking scripts, algorithms, and applications. The first and most important step is to commit to adapting as soon as possible. Banks and nonbanks that begin to transform themselves now will have a huge advantage over competitors that become paralyzed with indecision and confusion. It’s possible that, over the next decade, customer data will become the new oil—highly regulated, jealously guarded by institutions that capture it, and a key source of business value.

As a result, companies must monitor and adjust workflows and job descriptions. Employees will inevitably require additional training, and some will need to be redeployed elsewhere. Banks and the financial services industry can now maintain large databases with varying structures, data models, and sources.

By integrating separate, manual IT operations tools into a single, intelligent, and automated IT operations platform, AIOps provides end-to-end visibility and context. Operations teams use this visibility automation banking industry to respond more quickly—even proactively—to events that if left alone, might lead to slowdowns and outages. Equally important is the design of an execution approach that is tailored to the organization.

Formerly known as digital workers, AI assistants are software robots (or bots) that are trained to work with humans, or independently, to perform specific tasks or processes. AI assistants use a range of skills and AI capabilities, like machine learning, computer vision, and natural language processing. Document processing solutions use artificial intelligence technologies like machine learning and natural language processing to streamline the processing of business documents. You can foun additiona information about ai customer service and artificial intelligence and NLP. Business automation refers to technologies used to automate repetitive tasks and processes to streamline business workflows and information technology (IT) systems. These solutions can be tailored specifically to the needs of an organization.

It can be difficult to implement uses of gen AI across various business units, and different units can have varying levels of functional development on gen AI. With this archetype, it is easy to get buy-in from the business units and functions, as gen AI strategies bubble from the bottom up. This structure—where a central team is in charge of gen AI solutions, from design to execution, with independence from the rest of the enterprise—can allow for the fastest skill and capability building for the gen AI team.

Lenders rely on banking automation to increase efficiency throughout the process, including loan origination and task assignment. To be clear, this transformation will take time, but leaders who move fast, stay ahead of the curve, and remain patient can break out of today’s stagnant growth trajectory and put themselves on a strong valuation path. Many banks already are moving forward and getting recognition from the market. We believe that as more and more banks embrace this kind of transformation, the market will see the change, recognize the increasing potential, and view the industry as one with a bright future.

• According to the research by James Bessen of the Boston University School of Law, there are two reasons for this counterintuitive result.
• Optimize enterprise operations with integrated observability and IT automation.
• Banks’ traditional operating models further impede their efforts to meet the need for continuous innovation.
• Our grandparents tolerated those frustrations, but they also used pay phones.

Complex financing is the arena for individual and business services that require more sophistication than everyday banking. Examples include mortgages, home equity loans, car loans, and start-up loans. Such services are complex because many kinds of players are part of each ecosystem. These falling margins are contributing in turn to weaker stock market valuations. Banking stocks trade at an accelerating discount to other industries—from a 15 percent discount in 2000 to a 70 percent discount in 2022.

To compete successfully and thrive, incumbent banks must become “AI-first” institutions, adopting AI technologies as the foundation for new value propositions and distinctive customer experiences. No one knows what the future of banking automation holds, but we can make some general guesses. For example, AI, natural language processing (NLP), and machine learning have become increasingly popular in the banking and financial industries. In the future, these technologies Chat GPT may offer customers more personalized service without the need for a human. Banks, lenders, and other financial institutions may collaborate with different industries to expand the scope of their products and services. Additionally, banks will need to augment homegrown AI models, with fast-evolving capabilities (e.g., natural-language processing, computer-vision techniques, AI agents and bots, augmented or virtual reality) in their core business processes.

Products such as checking accounts, loans, and even corporate advisory can seem undifferentiated. And people increasingly feel frustrated by the financial fragmentation that banks have imposed on many consumer processes. For instance, buying a home once required navigating a confusing world of disconnected real-estate brokers, mortgage lenders, insurance companies, lawyers, renovation contractors, and so on. Our grandparents tolerated those frustrations, but they also used pay phones.

The nascent nature of gen AI has led financial-services companies to rethink their operating models to address the technology’s rapidly evolving capabilities, uncharted risks, and far-reaching organizational implications. More than 90 percent of the institutions represented at a recent McKinsey forum on gen AI in banking reported having set up a centralized gen AI function to some degree, in a bid to effectively allocate resources and manage operational risk. When banks, credit unions, and other financial institutions use automation to enhance core business processes, it’s referred to as banking automation. Delivering personalized messages and decisions to millions of users and thousands of employees, in (near) real time across the full spectrum of engagement channels, will require the bank to develop an at-scale AI-powered decision-making layer. RPA combines robotic automation with artificial intelligence (AI) to automate human activities  for banking, this could include data entry or basic customer service communication. RPA has revolutionized the banking industry by enabling banks to complete back-end tasks more accurately and efficiently without completely overhauling existing operating systems.

Kaspi charges its partners a 5 to 11 percent fee, and its users pay nothing. For frequent purchases, they get cash bonuses deposited directly into their Kaspi accounts—a strong incentive to make Kaspi their primary bank. The future of banking will be contested in five cross-industry competitive arenas. In the next decade, revenues for all these arenas could grow by as much as three to 30 times. We believe that the skeptics are right about today—and wrong about tomorrow.

Check our article on back-office automation for a more comprehensive account. In this article, we’ll explore why the banking industry needs hyperautomation, its use cases, and how banks can get started with their hyperautomation journey. For the best chance of success, start your technological transition in areas less adverse to change.

Still more have begun the automation process only to find they lack the capabilities required to move the work forward, much less transform the bank in any comprehensive fashion. This platform-centric approach to banking enables WeBank to offer various types of loans to prospective customers from the Tencent ecosystem, supported by its partner bank network. WeBank evaluates loan risk via its advanced risk model and then sells the vetted loans to partner banks that participate in its platform for a small fee. For investing, customers can also purchase mutual funds, money market funds, or other investment products offered by various financial institutions via WeBank’s marketplace. Because of cross-industrial “platformization,” banks must now compete with any organization that has the capacity and desire to offer any kind of financial services.

IBM Consulting’s extreme automation consulting services enable enterprises to move beyond simple task automations to handling high-profile, customer-facing, and revenue-producing processes with built-in adoption and scale. Increasingly, customers expect their bank to be present in their end-use journeys, know their context and needs no matter where they interact with the bank, and to enable a frictionless experience. Numerous banking activities (e.g., payments, certain types of lending) are becoming invisible, as journeys often begin and end on interfaces beyond the bank’s proprietary platforms. For the bank to be ubiquitous in customers’ lives, solving latent and emerging needs while delivering intuitive omnichannel experiences, banks will need to reimagine how they engage with customers and undertake several key shifts. In today’s rapidly evolving landscape, the successful deployment of gen AI solutions demands a shift in perspective—that is, starting with the end user experience and working backward. This approach entails a rethinking of processes and the creation of AI agents that are not only user-centric but also capable of adapting through reinforcement learning from human feedback.

A financial institution can draw insights from the details explored in this article, decide how much to centralize the various components of its gen AI operating model, and tailor its approach to its own structure and culture. An organization, for instance, could use a centralized approach for risk, technology architecture, and partnership choices, while going with a more federated design for strategic decision making and execution. McKinsey sees a second wave of automation and AI emerging in the next few years, in which machines will do up to 10 to 25 percent of work across bank functions, increasing capacity and freeing employees to focus on higher-value tasks and projects. To capture this opportunity, banks must take a strategic, rather than tactical, approach. In some cases, they will need to design new processes that are optimized for automated/AI work, rather than for people, and couple specialized domain expertise from vendors with in-house capabilities to automate and bolt in a new way of working. A number of financial services institutions are already generating value from automation.

Banks need to identify and engage these customers—as their newer competitors are doing. Few would disagree that we’re now in the AI-powered digital age, facilitated by falling costs for data storage and processing, increasing access and connectivity for all, and rapid advances in AI technologies. These technologies can lead to higher automation and, when deployed after controlling for risks, can often improve upon human decision making in terms of both speed and accuracy.

But to prepare yourself for your customers’ growing expectations, increase scalability, and stay competitive, you need a complete banking automation solution. Banking automation has facilitated financial institutions in their desire to offer more real-time, human-free services. These additional services include travel insurance, foreign cash orders, prepaid credit cards, gold and silver purchases, and global money transfers. Ultimately, whether you are the leader of a company that depends on banking or a consumer hoping to enjoy better customer service in your life, there is a lot to look forward to. For example, virtual agents that are powered by technologies like natural language processing, intelligent search, and RPA can reduce costs and empower both employees and external customers.

This ensures that gen AI–enabled capabilities evolve in a way that is aligned with human input. In addition to real-time support, modern customers also demand fast service. For example, customers should be able to open a bank account fast once they submit the documents. You can achieve this by automating document processing and KYC verification.

Ignoring challenges or underinvesting in any layer will ripple through all, resulting in a sub-optimal stack that is incapable of delivering enterprise goals. Traders, advisors, and analysts rely on UiPath to supercharge their productivity and be the best at what they do. Address resource constraints by letting automation handle time-demanding operations, connect fragmented tech, and reduce friction across the trade lifecycle. As computers improve, they may be able to perform these more abstract tasks as well. Ultimately, we will likely reach that reality someday, but it will likely be a while ahead yet.

According to Deloitte, some emerging banking areas where generative AI will play a key role include fraud simulation & detection and tax and compliance audit & scenario testing. Feel free to check our article on intelligent automation strategy for more. For more, check out our article on the importance of organizational culture for digital transformation. It is easy to get buy-in from the business units and functions, and specialized resources can produce relevant insights quickly, with better integration within the unit or function.