While the word “disruptive” has positive connotations when combined with the word “technology,” the idea of disruption can make people uneasy.
That certainly was the case for Oliver Buechse.
Buechse, founder of consulting firm My Strategy Source and co-founder of grassroots organization Advancing AI Wisconsin, underwent a digital awakening in 2016. It was then he realized the era of social media and mobile as prevailing technologies had ended, and artificial intelligence had come to the forefront.
He felt like nobody in Wisconsin was talking about the issue, and that was unsettling for him. He’s been on a learning journey ever since. Helping establish AAIW was much about sparing others the discomfort he’d experienced and inviting them to join in that learning.
Disruptive technology is poised to impact the banking industry in big ways, and it can’t afford to ignore the AI tidal wave, Buechse says. Large banks are already embracing the technology and using it to provide faster, more efficient service and an improved customer experience.
“It’s not just a huge opportunity. It is a dramatic mandate,” Buechse says. “If you combine all these advantages, banks (that don’t adopt) won’t be able to compete in the long run.”
Fiserv, a financial services technology firm based in Brookfield, is developing AI technologies around creating efficiencies for bank employees, driving better customer experiences and next-generation risk and fraud protection.
Jon Nordhausen, vice president of product strategy and bank solutions for Fiserv, says most community banks and credit unions are still working to figure out how to make adopting AI solutions a priority. He estimates fewer than 10 percent are actively working on specific projects around the technology. Many community institutions, he says, are trying to figure out how to balance technology adoption with their dedication to the human touch and serving the communities they’re in.
The Amazon Prime effect
Michaell Semmann, executive vice president and chief operations officer of the Wisconsin Bankers Association, says if Wisconsin financial institutions fail to act, they’ll see capital continue to flow to the coasts and out of state because other, bigger players hold competitive advantages.
He calls it the Amazon Prime effect. A customer’s current expectation is based on their last experience, and they expect that businesses will upgrade to the latest user experience.
Wisconsin tends to be more risk averse, says Semmann, who co-founded AAIW along with Buechse and independent technology consultant Kurt Hahlbeck (see page 12), and oversees legislative outreach for the organization. Given this, he recommends the state consider a “regulatory sandbox approach,” which would give banking leaders a chance to use technology in ways that would help them determine the best time to act.
“It’s kind of like thinking of a speeding highway,” he says. “At what point do you get on the speeding highway?”
In a presentation AAIW put together to pitch AI solutions to the banking industry, the organization identifies technology development areas with proven impact. Those include the AI family of technologies — tools such as optical character and speech recognition, machine learning and neural networks — biometric identification and virtual assistants, chatbots and robotic process automation.
Understanding the terminology alone can prove daunting, leading to confusion and misconceptions. Machine learning isn’t about robots serving us, but rather small ways it can improve our lives and help make them more productive, Semmann says.
“To me AI is really a family of technology that mimics what makes humans intelligent, Buechse says. “Technology is advancing to mimic each of those human intelligence functions.”
It’s imperative, Buechse says, for people to understand how machines are evolving to support those functions and for people to get in the game of speaking that language.
AI applications in banking
Buechse recommends banks begin by determining where in the value chain they want to focus their efforts. That could include areas such as customer interaction, productivity gains and security and fraud detection.
Banks could use applications to look at customer data and make recommendations for how they can leverage tools to their advantage, Semmann says. For example, they could create apps for those wanting to become more aware of spending habits, work on budgeting or avoid overdrafts.
Fiserv has partnered with Micronotes, a cloud-based marketing automation company, in developing a technology that takes the traditional banner ad space and lets financial institutions put in an interactive banner ad. It acts almost as a survey that becomes very personal to the consumer, Nordhausen says, and provides real-time insights based on machine learning and AI.
Financial institutions also could use AI to streamline the business loan underwriting process. In today’s world, the process of collecting and analyzing information from potential borrowers can prove time-consuming and cumbersome. This can lead to a high percentage of loans either not being approved or lost to a competitor.
Automated solutions could scan financial information, organizing it quickly and identifying any missing elements. They could then use data to consider past borrowing decisions and AI-based analysis to inform and speed the lending decision, leading to a competitive advantage. In the security realm, AI can monitor people’s spending patterns to help identify anomalies and quickly address threats and potential fraud.
Still much to learn
Buechse says companies must start preparing themselves and their employees for potential changes to the workforce. “Some people will lose their jobs, but many people will work under different circumstances.”
Beyond concerns about effects on jobs, Buechse says banks need to consider how their customers will feel about AI technology and ask themselves whether people will be comfortable interacting with something akin to Siri for banking or having a machine decide whether they’ll get a loan. Customers also may have concerns about privacy and banks using their data.
In addition, while AI can enhance security, it also can introduce new challenges in this realm. Blockchain, for example, offers a secure, highly encrypted way to share information. Buechse says there’s concern about a race between those trying to crack and exploit this and those trying to protect it. People also have lingering worries about AI in general and whether we can “keep the genie in the bottle once we let it out,” he says.
Regardless, though, AI advances are coming, and banks need to prepare, Nordhausen says.
“I definitely see AI becoming part of the banking infrastructure and plan within the next five years,” he says. “It’s not a matter of if. It’s definitely a matter of when.”
On the web: advancingaiwisconsin.com
Related story: Personalities, page 12
Kurt Hahlbeck: Advancing AI Wisconsin sounds alarm for disruptive technology