How will artificial intelligence shape the future of banking?

How will artificial intelligence shape the future of banking?

Microsoft’s Roni Karassik and Philippe Brissaud discuss the opportunities that AI offers for financial service providers 

Alice Chambers |

Microsoft’s 2023 Future of Finance Trends report found that financial teams and leaders are struggling to strike the right balance between strategic innovation and protecting the financial health of their organisations, with 88 per cent feeling overwhelmed by the amount of data they are handling. 

The report concludes that AI and automation are vital for growth, with 82 per cent of finance leaders believing that technology is necessary to support business goals by freeing up valuable time for finance teams.  

However, 89 per cent of organisations do not have integrated automation, analytics or AI, according to KPMG’s 2021 The Future of Finance report, meaning that they are losing out on valuable benefits in terms of time and money. 

“The key to advancing business and staying on top of the problems we’re currently facing is to be data-driven by building predictive and analytical capabilities that will deliver the right insights to make well-informed decisions,” says Roni Karassik, director of product for Microsoft Cloud for Financial Services and industry AI. “AI applications provide three overarching benefits –transforming the customer experience, empowering employees and providing deeper insights.” 

Firms are looking to use AI to do more with less by automating and processing data more effectively. They are also looking to reshape how they engage with customers to deliver products and services successfully, whilst improving the employee experiences.  

Cybersecurity is a priority too, with cybercrime on track to cost the world $10.5 trillion every year by 2025, according to Cybercrime Magazine. 

Overcoming obstacles  

“Financial services organisations also need to continue reshaping customer engagement modalities and deliver experiences, products and services that are consistent, contextual and personalised to compete in the current environment,” says Karassik. 

Businesses can do this by implementing Microsoft Cloud for Financial Services, which provides a powerful and flexible platform that unlocks business value and deepens customer connections. It does this through a combination of cloud capabilities from Microsoft 365, Dynamics 365 and Power Platform. Users can also deliver personalised customer experiences and empower their employees by streamlining customer onboarding to provide easy access to loan applications and self-service tools.  

“With the right tools and insights, companies will be able to increase productivity and efficiency, whilst collaborating better and delivering deeper and more meaningful customer engagements,” says Philippe Brissaud, product operations lead for Microsoft Cloud for Financial Services and industry AI. “For AI to play a role in these decisions, it’s essential that organisations use the technology responsibly and plan for unintended consequences. This is important for ensuring compliance as legislation evolves and maintaining trust with consumers.” 

With a whole variety of financial service providers to choose from – including big technology-based e-wallet services, fintech and insurtech companies, and neo-banks and traditional institutions – businesses need to invest in solutions to onboard and retain customers.  

“Azure AI-powered analytics and machine learning models are built into Microsoft Cloud for Financial Services,” says Brissaud. “This allows financial services organisations to proactively avoid and mitigate potential negative experiences that impact customer retention, and create intelligent, lower-effort ways of attracting new customers.” 

With AI, ML and analytics applied throughout the customer life cycle, businesses can identify trends, protect identities and assets, and provide personalised customer experiences. For example, large language models can recognise, summarise, translate, predict and generate text and other content based on knowledge gained from massive datasets. These help to build effective chatbots and virtual assistants like Chat GPT that can improve customer service. 

“Ironically, the use of AI-powered insights in this manner can also create more human-focused and personal service experiences,” says Karassik. “AI allows employees to devote time to other activities, with less attention needed to solve customer problems.” 

AI can also be used to provide personalised, real-time offers. The Royal Bank of Canada is doing precisely this through a piloted Virtual Clean Room – a privacy-preserving, multi-party, data-sharing platform built on Microsoft Azure Confidential Computing.  

What’s more, AI technology can prevent attempts of fraud, money laundering and cyberattacks through its predictive qualities. 

“AI optimises market and operational risk management to deliver risk insights, comply with regulatory requirements, secure identities and manage sensitive data against threats,” says Karassik. “Scalable computers and analytics can power modelling, insight and regulatory reporting as a result of this.”  

Other AI-powered tools can help to secure user identities and control access, identify and protect sensitive data and govern critical data and communications channels, as well as protect against external cybersecurity threats and insider risks. It comes as no surprise then, that analysts including IDC FutureScape, predict that 10 per cent of attempted identity fraud will be reduced thanks to more sophisticated AI and ML technologies in open banking sources.  

A future in data  

“We are already seeing financial institutions realise significant gains by deriving more insights from their data than ever before,” says Brissaud. “Fintechs have demonstrated the power of data by incorporating insights and improved analytics from social media platforms and other alternative sources. Commercial banks are quickly closing this gap and using AI to innovate well beyond them.” 

For example, HDFC Bank partnered with Microsoft in January 2023 to leverage Azure, Power Platform and Microsoft 365 to enhance its data-sharing capabilities, modernise and migrate is application portfolio, and provide a secure digital workplace for its employees. HDFC Bank will use AI and ML capabilities to process data from multiple sources and encourage employee collaboration. 

“Banks must seize the opportunity to make their way through the mountains of data that is largely underutilised,” says Brissaud. Data in the privileged relationship between banks and their clients must be managed carefully, but within that context there are incredible insights and value waiting to be derived and applied.”  

Partner perspectives

We asked a range of Microsoft partners about their views on the role of AI in financial services and how they are building on Microsoft's AI capabilities:  

“AI technology is dramatically transforming the customer contact centre, especially in the financial services arena where it is improving customer satisfaction and loyalty, reducing costs and increasing efficiency by enabling effortless and personalised experiences,” says Tim Sherwood, global vice president of products and offer management at Avaya.

“Microsoft’s AI capabilities have the potential to expand into new markets. We have been focusing on creating differentiated offerings leveraging capabilities on Microsoft Cloud for Financial Services and Microsoft Azure AI,” says Debanjan De Sakar, lead consultant of Microsoft practice at Infosys.

“Businesses can make their risk management more robust and enhance their trading and investment by analysing larger amounts of data faster and interpreting historical data and current market trends with AI,” says Andy Birkey, marketing communications specialist at Metafile Information Systems.

Read more from these partners in the Spring 2023 issue of Technology Record.  

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