A report issued by the global consultancy McKinsey said that the adoption of artificial intelligence technologies could potentially deliver up to $1 trillion of additional value each year for banks.
AI technologies can increase the bank’s revenues through increased personalization of services to customers, lower costs through efficiencies gained by higher automation, reduced error rates and better resource utilization. They could also uncover new opportunities based on an improved ability to generate insights from vast troves of data, the consultancy’s Building the AI bank of the future report said.
“As customers conduct a growing share of their daily transactions through digital channels, they are becoming accustomed to the ease, speed and personalized service offered by digital native [companies], and their expectations of banks are rising,” Renny Thomas, senior partner at McKinsey, said.
“To compete and thrive in this challenging environment, traditional banks will need to build a new value proposition founded upon leading-edge AI-and-analytics capabilities. They must become AI-first in their strategy and operations.”
Lenders globally are facing improved operating conditions as businesses stabilize and economies around the world revived from the pandemic-driven slowdown. In April, the International Monetary Fund upgraded its global economic growth forecast to 6 per cent in 2021 from a contraction of 3.3 per cent last year.
Many banks have struggled to scale AI technologies across organizations because they lack a clear strategy, have fragmented data assets, an inflexible and investment-starved technology core or outmoded operating models, McKinsey’s report said.
Banks are also increasingly relying on AI and analytics capabilities to inform customer acquisition, credit decisions, monitoring and debt collections.
The use of advanced analytics allows banks to deliver highly personalized offers directly on a landing page for new customers. Banks can understand individuals’ needs more precisely by analyzing a potential customer’s browsing history, how they enter a website and their social media data to form an initial profile of each customer, including their financial position and provisional credit scoring, McKinsey said.