Cognitive computing is transforming the banking industry

By Swanie Tolentino

Recent years have seen major shifts in the financial industry. With ever-increasing complexity in banking regulations and an influx of nontraditional financial technology startups, banks are having to continually figure out how to reinvent themselves.

The power of processing data has increased significantly while the cost has declined dramatically, making it more practical to use the deep analytics and cognitive applications that would have used up much of the workload. Mobile, wearable technologies and social media all contributed to an explosion of data. Mobile banking has become one of the most accessible and convenient ways to access bank accounts. The good news? Data is there. The bad news? It is overwhelming and impossible to understand — that is, unless you can apply intelligence to it.

So, what is in store for banking?

Banks are using cognitive systems to gain insight from massive amounts of data and to discover ways to improve products and services, engage with customers and make operational decisions. An IBM study on cognitive banking found that 89 percent of banking executives familiar with cognitive computing believe it will play a disruptive role in the industry. A majority of executives know that if they want to stay ahead of competitors and satisfy customers, insight must be taken from all data to ensure strategies are up-to-date and fact-based.

As cognitive banking plays a more influential role within the industry, customers can expect to experience positive changes to their banking experience, particularly when they use their mobile apps. According to the Federal Reserve, more than half of smartphone users have accessed their accounts from mobile banking apps, and that number is only expected to increase. As more people use these apps, banks need to find better ways to serve their customers through this interface.

The following are some potential use cases of cognitive capabilities in banking:

Customized and personalized banking experiences to drive loyalty

Financial institutions can offer more personalized services in real-time at much lower costs and lower barriers to entry. Many applications are starting to emerge that signal the successful adoption of cognitive applications, including the following:

  • Banks leveraging robots to improve personal engagement in branches and extend the same technology to their mobile apps.
  • An automated “conscience” as part of a smart wallet. It can monitor and learn your habits and needs and coach you to show restraint and suggest behaviors that balance needs so you’re put on the right path to achieving your savings goal.
  • Financial advisers assisting their clients in making decisions that involve assessing personal goals and portfolios, then looking at the potential and risks associated with a particular mix of stocks and bonds. Some companies are now deploying a robo-adviser online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners.
  • The ability to recognize individuals so they can pay more securely via selfies and to anticipate via learned behavior whether the transactions are legitimate.
  • Improving customer care and service with “Intelligent Assistants” where the use of natural language results in calls routed more quickly with higher accuracy, exceeding service level agreements and increased customer satisfaction rate. The same technology can be delivered through mobile apps where clients can simply ask a question to get the answers they need.

Deal with risks, fraud and threats

With better insights on behavioral patterns to identify warning signs of fraud attempts, documenting evidence is becoming the norm. Cognitive capabilities can only make this more precise and deliver insight in real time. There is a new art to complement the science of risk management — and that is to go on offense and defense at the same time. This means generating value while protecting sensitive data from attacks.

Productive employees

Data-driven decision-making is taken to the next level through cognitive computing. Imagine being able to ask questions so data can be analyzed and produce recommended decisions. Cognitive banking allows for more reliable, evidence-based decision-making at a far faster rate. Banks are then able to reflect on, verify and audit how a decision was made and why. By analyzing and providing insight into more data more quickly, cognitive banking lets institutions stay ahead of their competitors. Use cases for improving employee productivity include arming staff in call centers to help them deliver intuitive personalized service.

With more accurate decisions made at a faster rate, customers can expect increased speed and precision on the overall service of their bank.

The future of banking

As the data shows, banks are moving to implement cognitive systems to take advantage of their tremendous amounts of information. With its obvious benefits, its growth is almost certain. However, it will require new policies, governance and security and will have to be prepared to deal with an onslaught of privacy issues. Cognitive banking will not succeed if users do not find value in it nor trust its applications.

Written By

Swanie Tolentino

Director, Mobile Enterprise Market Management at IBM

Swanie leads IBM's mobile offerings, industry solutions & marketing, enablement and ecosystem partner market management function interfacing with product management and marketing. She helps technology make sense for business.

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