Banking’s Next Technological Challenge: Innovation, Not Competition

This pandemic is creating extreme financial stress for many customers, who are struggling with layoffs, reduced income, and a lack of government assistance. Yet some customers might hesitate to call the bank to say that they lack the funds to pay their mortgage this month. What if the bank could use AI or machine learning to identify customers who need assistance and then proactively reach out to those customers to offer help? The right combination of processes and intelligent technologies could help the bank become a trusted advisor to its customers, increasing loyalty and making people customers for life. Some advanced technologies can help companies analyze customer tone of voice or sentiment, which could allow them to quickly understand and respond to service or product issues. The resulting insight would help enable tactical closedloop follow-up, increasing customer satisfaction and loyalty.

We’re already beginning to see some banks prioritizing innovation as a way forward. Some firms are turning to intelligent technologies such as AI and machine learning to ferret out fraud signals from the noise of other transactions coming through the banking engine. With their unprecedented speed and processing power, these technologies excel at rapidly identifying incidences of fraud and data patterns that indicate suspicious activity.

For example, Lloydsiv developed a new tool that uses AI to sniff out fraudulent activity before victims’ accounts are compromised. Using biometrics, the technology identifies the patterns of how a customer typically uses Internet banking, with details such as the time needed to enter personal information or patterns in user movements around the screen. If a fraudulent user attempts to access the account, the software freezes access and contacts the customer. The bank estimates that this innovative technology already prevented fraudsters from illegally acquiring more than £4 million.

Another example is Coöperatieve Rabobank U.A. (Rabobank)v, a European bank that created a straight-through processing (STP) lending factory that reduced loan processing times from weeks to hours. Leveraging intelligent technologies such as machine learning helped Rabobank achieve an STP degree of 97%. Rabobank is also using conversational AI for=- invoice handling. The bank’s AI-enabled chatbot Billy is designed to handle repetitive questions from suppliers about invoices. Billy, which is available 24x7, went live while the Netherlands was gripped by COVID-19 and had gone into lockdown. It was perfect timing: By freeing staff from the effort of looking up standard invoices, Billy enabled workers to address a growing number of specific questions during that period. With the chatbot taking over repetitive tasks, both employee and customer satisfaction increased. And Billy has been able to manage 100 to 150 conversations every day.

Other examples include financial services companies that use contract intelligence solutions, which rely on machine learning, to execute hundreds of hours of attorney effort in just seconds. And according to a recent article by Imtiaz Adamvi, startup payment service Face++ allows consumers in China to use the Alipay mobile app to transfer money using just their face.

Like these companies, your bank can begin taking action. But don’t limit your vision to what other financial services providers are doing. Instead of viewing innovation as a means of keeping pace with your competitors, try to envision what your customers and employees want and need – and then figure out how to use intelligent technologies to deliver that experience.

You can innovate to lead. The best time to get started is right now. A recent McKinsey studyi reported that 90% of executives “believe that the COVID-19 crisis will fundamentally

Falk Rieker global VP, global head of IBU banking at SAP SE

Falk Rieker is the Global Vice President and Global IBU Head for Banking at SAP, a global tech leader that provides engineer solutions to fuel innovation, foster equality, and spread opportunity across borders and cultures.

change the way they do business over the next five years,” and 85% “are concerned that the COVID-19 crisis will have a lasting impact on their customers’ needs and wants over the next five years.” Yet, only 21% “feel confident that they are prepared to capture new growth opportunities” – which we know are arising from changing customer needs, preferences and expectations. These changes contain the seeds of product, service and customer experience innovations and are the bases for institutions to thrive into the future.

Innovation – creating viable new solutions to solve people’s real problems – will be essential to financial institutions’ ability to leverage these new opportunities and address this year’s intensified business challenges. These data suggest that while executives see innovation as essential, they do not feel well prepared to move towards a future that is no longer in front of them. The future is unfolding daily, right in front of us. Consider the business impacts of the digital acceleration of digitally enabled consumers, and concurrently the widening digital divide for the millions lacking the connectivity that contemporary financial institution digital experiences presume. These are just two examples of how the routine business model for retail banking, which has been under pressure for years, now faces the heightened threats of changing technologies, demographics, and distribution of wealth, along with a near zero interest rate environment and other macro issues.

Innovations that adapt to and anticipate contemporary market opportunities and challenges will not be discovered, developed and scaled by groups of like-minded people of similar background problem-solving skills gathered around whiteboards. Solutions will demand new levels of diversity and inclusion. Executives will have to take a fresh look at how they: 1. Define what “diversity” means for their organization, redesigning processes and the metrics to implement and manage progress, 2. Act and engage personally to embed inclusiveness in the culture, with relevant metrics and clear incentives, and 3. Leverage the linkages between a diverse and inclusive culture and creating innovation outcomes to accelerate and improve performance.

Too many conversations about innovation prioritize technology as the major driver. Technology is just one element of the complex execution puzzle for a breakthrough financial services innovation to come to life and scale. Technology is abundant and can be bought. Diversity – not simply defined as gender and racial representation – and Inclusion – the culture and environment where all members feel respected, valued, and heard – are core to building and sustaining an effective innovation pipeline. Diversity and inclusion cannot be bought; they must be created and nurtured organically.