Artificial Intelligence in Banking - Series 1

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Wednesday, August 15, 2018/11:00AM/Deloitte


The Rise of Artificial Intelligence

Despite the nascent stage of Artificial intelligence (AI) adoption, its benefit are already being realized at many large banks across the globe. According to Tata Consultancy Service (TCS) research, ‘’banking and FS executive found that investment in AI helped them reduce production costs by 13%.


Additionally, executives reported a 17% average revenue increase in the area of their AI initiatives”. At one European bank, a shift from statistical regression to machine learning for credit analysis increased mortgaged collection by over 30%.


The opportunities for the application of AI in banking are immense and we expect the effect to grow significantly in the next few years. Research by the international Data Corporation forecasts that globally, AI solutions will continue to see significant corporate investment over the next several years, achieving a compound annual growth rate of 54.4% through to 2020.


There is huge potential for banks to realize value from the data available to them. It has been said that data is the new oil. AI is a natural fit for ”mining” this data and extracting value for the banks. Banks globally have begun to utilize AI across the banking value chain to grow revenue, reduce costs, increase productivity and gain strategic insight.

The graphic below describes a few ways banks can derive real value by placing AI on top of their huge data ‘reserve’ (in a manner of speaking):


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A case could be made that Artificial intelligence is actually “Real” Intelligence is actually. What comes to mind when one hear the words “Artificial Intelligence” used within the context of setting differentiation in the banking industry? The general thinking is that these may be far-fetched and/or unrealistic concepts in the Nigeria Banking ecosystem. The thought provoking question then becomes: How is it possible for anything we create to successfully imitate our intelligence? If we are to put this into the context of Banking in our environment and allowing the overlay of digital and innovation to set in, thought of Artificial intelligence specifically in our banking industry is not as far-fetched as we might think. In truth, AI is driving tangible personal benefits today.


We currently interact with AI enabled systems in multiple aspects of our lives. From virtual assistants like Apple’s Siri and Amazon’s Alex, to personalized recommendations op popular websites, sophisticated navigation systems like Google Maps using analytics to correctly estimate traffic conditions and derive efficient routes-just to give a few examples. In mature markets, there is no doubt that AI has disrupted the conventional way “Customer-touchpoints” function. From virtual banking assistants allowing customers to chat with banks on the go and perform various levels of transaction, elements of AI are creating perceptible value in banking.


Because of all the data banks generate in the course of serving customers, they are able to not only understand customer behavior patterns, but intelligently tailor products and services individually. From the customer perspective, the level of attention received would truly make them feel like they are the bank' only customer! Just imagine what this will do for customer experience. Loyalty and ultimately retention and profitability.


Are Nigeria Banks there yet?

Nigerian banks are cautiously dipping their toes in to gauge the ‘watres’ of AI before driving in. In view of the novel nature of AI use cases in banking, a carefully reasonable and cautious approach is justified. Banks are already adopting elements of AI technologies including software robots to streamline & automate processes and chatbots that on more advanced platforms use AI and machine learning to provide human-like interaction and dynamic banking services via chat conversations.


The journey for banks in Nigeria has started with rule-based chatbots like Diamond Bank’s Ada, Stanbic IBTC’s Sami, Access bank’s Tamara and UBA’s Leo which allow customers to perform basic banking transactions on the go at various levels of sophistication. While these are not pure AI, they are a good starting point as an introduction into the AI realm. The key area of sensitivity is data. The deeper a bank goes into the AI sphere, the more data it must make available to the platform to enable advanced, true human like capabilities. These chatbots can provide responses to enquires around account balances, and facilitate basic pre-linked services including funds transfers and payment. However, if you ask any typical chatbot a product question like “How can I make the greatest return on my savings in a short time?” you will quickly see that there is still some way for Nigerian Banks to go into the AI realm before the advantages can be fully leveraged.


Beyond chatbots, Robotics Process Automation (RPA) Is being deployed to automate processes and bring unprecedented operational efficiencies by augmenting human capabilities. Union Bank recently made a widely published announcement to this effect around deploying RPA bots to automate processes related to its ATMs. Other banks are at various stages of Proof of Concept (PoC) to understand how RPA use cases can derive value for them. However, even with that, RPA is still rules-based. However, it is wise to learn to walk properly before starting to run. We believe though that we should not take too long as an industry to perfect our steps. Robotics and Cognitive Automation (RCA) is already making  huge stride across the globe. RCA is RPA infused with AI-unlashing the huge potential that exists from machine learning and self-actuated decision making.


How Nigeria Banks can unlock the value of Artificial Intelligence

Banks in Nigeria can leverage AI to unlock significant opportunities that would transform retail lending, product design, and the overall banking model to the mass market. AI will significantly reduce cost to serve each customer allowing banks increase coverage to the unbanked and boost profitability while providing excellent customer service at a progressively reducing cost. AI and its derivatives when applied correcting will reduce error rates and can help attack the data quality monster that has haunted Nigeria banks for years. Yes, AI enabled data clean –up can significantly speed up the process of rectifying years of wrongly captured and poorly managed customer data.


We would then have the natural extension of AI in Nigeria Banking to Customer Relationship Management (CRM). The personal touch is always appreciated by the Nigeria customer (and actually every typical banking customer across the globe.) Prior to AI, this had to come from a person of time made the effort to learn and understand each customer’s banking and personal history, alongside their temperament and preferences. Automating this has been near impossible –until now. AI unlocks this huge area of opportunity, where 100% of a bank’s customers can now have a Private Banker” experience enabled by this impressive technology.


Nigeria Bank executives need to envision where AI has the potential to disrupt their business and make the important decisions of how and where to invest in AI-based technologies. This requires understanding the AI technologies and then analyzing the bank’s existing operating model (including business processes, talent models, legacy systems, data assets, and markets) in order to identity how to obtain the maximum benefit. Ill-informed AI investments made based merely on buzz and unbridled excitement can lead to financial loss from wasted resources while the right investments can increase operational efficiency & effectiveness, and create competitive advantage.



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