Generative AI is reshaping banking, but Big Tech poses a threat. AI is revolutionising customer service and how we navigate cybersecurity risks, prompting a race for a competitive edge.
ChatGPT launched in November 2022 and, some 18 months later, it’s clear that banks must undergo an artificial intelligence (AI) transformation to remain competitive.
Generative AI (GenAI), which uses machine learning algorithms to interpret
and respond to prompts, has already begun to revolutionise workplaces. For banks looking to leverage this technology, scaling up is part of an ongoing digitalisation process – it will require effective change management, clear targets and accountability
for results.
However, banks face fierce competition. The Sopra Steria Digital Banking Experience (DBX) report, with Forrester & Ipsos, surveyed over 900 banks and 12,500 users and showed that banking leaders have embraced GenAI – indeed, some pilots are already underway. But it also showed that traditional banks must compete with tech-savvy newcomers, and consumers demand a higher level of digitisation than what banks currently provide.
GenAI: The latest player in digitisation
GenAI has emerged as a critical component of digital transformation, with almost one-in-two (47%) banks planning to integrate AI into their business, according to the DBX report.
Many of these forays are in their early stages,
with pilots being conducted to explore how to deploy AI while mitigating risk. The most advanced banks, however, have identified high-priority areas to scale, to turn AI-led banking into a reality.
“There
is a high level of personalisation and proactivity offered by AI, whereas currently, most banks only react to their customers’ requests,” said Mung Ki Woo, Sopra Steria Financial Services Chief Operations Officer.
“When was the last time your bank called to propose a product or change? That would probably be appreciated – for example, if your bank suggests that you put money into a savings account to take advantage of rising interest rates. Something as simple as that is what GenAI can provide.”
Yet, these technologies are unlikely to be customer-facing – at least not at first.
In the short-to-medium term, GenAI is more likely to be used to help bank staff, who in turn will help customers.
“Bank staff are overwhelmed with the level of complexity in their industry. That’s down to a combination of two things: the portfolio of services that banks offer has become very broad, and the regulatory environment is ever-changing,” Woo explained.
“For instance, with rising interest rates, many consumers have wanted to understand more about their mortgages. But the same question asked by two different people, each with a different mortgage product, may have two completely different answers.
A ChatGPT-like service that helps bank staff to sort through regulatory and product information would dramatically increase their quality of service.”
The risk posed by Big Tech
While banks’ appetite to deploy AI appears strong, traditional providers face competition from an intimidating source: Big Tech.
Tech companies such as Apple and Amazon have begun to creep into financial services, a process eased by the fact that many consumers already trust them to store their financial information. Almost half (47%) of customers surveyed in the DBX report
said they were tempted to open a bank account with a Big Tech player. Banking leaders registered this threat, with more than one in three (36%) judging Big Tech as “the greatest threat to our business”.
“Big
Tech is entering banking slowly but surely,” Woo said.
“Most have made forays into payments, which is probably the easiest banking service to penetrate – particularly in Europe, where the regulatory barriers
to entry have been lowered. From there, they have expanded into simple loans and basic savings products. Most likely, they will continue to expand one step at a time.
“These companies are formidable competitors. They own large
technology platforms, they have very large customer bases and they can invest massively. What’s more, many customers already trust them to provide financial services.”
The DBX report also indicated that banks were at
risk of losing customer trust. While trust remained high at 80%, over half of consumers (51%) said they believed their bank was not interested in earning them money and only 27% thought that their bank offered them suitable financial services.
“One of the things on which banks pride themselves, one of their core assets, is the trust that the public has in them. That trust is being challenged,” Woo said.
“Our report shows that banks
need to do a better job of serving consumers. That means becoming more personalised, more proactive and more streamlined. GenAI can help on those fronts.”
The cyber arms race
Like any technology, GenAI also poses risks, which become more pronounced given the sensitivities of financial services.
The DBX report highlighted concerns of an AI ‘arms race’, with 37% of bankers concerned the technology
will put their company at greater risk of a successful cyberattack.
These fears are not unfounded. For example, GenAI makes it easier to produce deepfakes, which may surpass banks’ identity checks. However, AI can also be trained to identify deepfakes and respond to this threat.
“This is where you see an arms race,” Woo said.
“On the one side, you have fraudsters using AI maliciously. On the other side, banks can use the technology to improve how they protect themselves.”
While the pace of change in GenAI is fast, the message
is clear: banks must work quickly to keep up with the competition.
“It’s a never-ending race,” Woo said. “Those who act quickly will be the first to gain the benefits and build a competitive edge."
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