How AI resolves the trade-off between cost and customization
FINANCIAL service providers are almost perfect substitutes for each other.
There’s seldom anything that differentiates one from the other, apart from the relationship that managers have built and nurtured with companies and individual customers – over decades or even generations.
However, artificial intelligence (AI) seems to have a solution. If implemented appropriately, AI has the potential to completely disrupt the financial services industry in every sense of the word.
According to a new report by the World Economic Forum (WEF), AI resolves the traditional trade-off between cost and customization, allowing institutions to offer tailored products at near-zero marginal cost.
Customers, who now live in a world with rich digital experiences, expect the same from their banks and other financial services organizations.
When let down, customers these days are much more comfortable ‘searching’ for an alternative — someone who will meet (and hopefully exceed) expectations.
As a result, it’s about time that banks and financial services businesses took notice of AI and its capabilities.
Especially with banking, investment, and insurance products becoming increasingly commoditized, personalization is expected to drive differentiation strategies in the industry.
The WEF’s report studied the impact of AI on financial services businesses and found that AI can provide significant personalization capabilities in the following areas:
# 1 | Deposits and lending
AI can help analyze data across disparate sources in order to unlock insights in real-time, to ensure customers, can be provided with high quality, self-serve experiences.
Clarity Money, for example, can integrate account balances, bills, and credit scoring to help customers understand their complete financial story and actively manage their accounts. Since it uses AI to provide support to customers, it’s able to keep costs low while still providing a significantly tailored customer experience.
# 2 | Insurance
AI can be used to support complex decision-making (e.g. quotes for commercial clients), supplementing sales teams’ capabilities.
Allstate is a good example to showcase this. The company is using its ‘personal lines’ agent network to sell commercial lines products, according to the WEF. To support the effort of salesmen, it has deployed an internal chatbot to provide agents with accurate quotes and valuable advice for complex commercial clients.
# 3 | Payments
AI can be used to tailor rewards programmes to individual customer behavior, helping to maximize customer engagement.
In the payments space, in particular, there are several examples of AI solutions being deployed to enhance the customer experience. Mogl, to name one, accesses data from Visa, Mastercard and American Express in real time to offer customers personalized, time-based cashback rewards at nearby restaurants.
# 4 | Investment management
AI can automate the generation of very detailed, specific insights (e.g. personal wealth report generation) to support advisers’ interactions with their clients.
Unfortunately, this is where it gets murky. AI-powered robo-advisors, such as Wealthfront and Betterment, for example, provide comprehensive investment management solutions. However, not many financial services providers have been able to integrate with them.
On the other hand, there are companies such as RightCapital who provide easy-to-use financial-planning software tools (e.g. tax projections) to aid financial services employees to help them perform ad-hoc analysis and generate reports for clients.
The fact is, AI can help transform financial services with exciting personalization solutions, however, it’s up to the providers to incorporate them into their DNA before its too late.
The future of financial services — and customer satisfaction — relies not just on new-age AI tools but also on their successful incorporation into the existing workflows and offerings of traditional financial services providers.