CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
CEO.digital collaboration with Digital ReasoningIndustry Insight Series
2017
Financial services: Ready for next-generationtechnology?
2
Financial services: Ready for next-generationtechnology?This report carries insight from senior executives (C-level, Heads, Directors and equivalent) at major UK and North American financial institutions. CEO.digital contacted 7,500+ decision-makers operating in major US and UK financial services organisations.
We are entering ‘The Fourth Industrial Revolution’. Professor Klaus Schwab, founder and executive chairman of the World Economic Forum, has described an emerging era where industries are being transformed, disrupted and invented. Fuelled by next-generation technologies – artificial intelligence, machine learning, predictive analytics, big data – financial services firms are at the vanguard of this revolution.
The industry is among the leading users of intelligent analytics and is finding new opportunities to drive revenue, mitigate risk, and improve the customer experience. However, financial services has unique requirements and chal-lenges: regulatory compliance, data protection and governance. How are professionals balancing these requirements with the need to innovate, grow and compete?
Financial services: Ready for next-generation technology?
72% consider customer experience the primary way they willdifferentiate themselves from the competition
Predictive analytics is the most popular 2018 investment for finance leaders
Lack of in-house expertise is the main barrier to investing in next-generation technologies
Increasingly complex cyber-attacks are the biggest challenge facing the industry over the next 12 months
Key findings:C
EO
.dig
ita
l &
Dig
ita
l R
ea
son
ing
In
du
stry
In
sig
ht
Se
rie
s
3
How much do you agree with the following statement:“By 2020, customer experience will become the primary way banks differentiate themselves from the competition”
This report has established that most financial institutions (72%) consider customer experience the primary way they will differentiate themselves from the competition.
The drive for improvement in this area has increased over the past few years and is accelerating due to technologies such as cognitive computing. These allow companiesto harness customer insights to enhance customer experience, resolve dissatisfaction, and identify hidden revenue opportunities.
“2018 is going to be a big year for customer experience because now there’s C-level awareness that someone at the top of the company needs to be dedicated to driving it” Forbes
Strongly agree55%
Agree28%
Unsure7%
Disagree7%
StronglyDisagree
3%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
4
Next-generation technologies should be deployed for the following business objectives
Company revenue and customer experience are the top business objectives that financial service organisations are looking to meet. Improving retention and increasing upsell and cross-sell opportunities are not far behind.
The responses show that senior executives across financial services believe that next-generation technologies will help them to reach the majority of their business objectives. Institutions not yet using or planning to use them are at risk.
“[AI] is definitely giving us a competitive edge now but it is a necessity to move forward. If you don’t start adopting these technologies, you will fall behind.” Kim Prado, Managing Director, Head of Client, Banking and Digital for Royal Bank of Canada (RBC)
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
35%
Financial services: Ready for next-generation technology?
62%
3%
82%
14%
4%
71%
24%
5%
42%
46%
2%
Strongly Agree Agree Unsure Disagree
45%
45%
10%
Increasing Company revenue
Improving customer experience
Improving customer retention
Increasing upsell opportunities
Increasing cross-sell opportunities
5
What’s your view of chatbot/virtual assistant technology within financial services?
While 38% of the financial services industry is using chatbot/virtual assistant technology, 31% believe it needs improvement. Chatbot technology today is largely human-coded, meaning it’s not all that intelligent. Of course, this will change as chatbots introduce AI. Next generation ‘bots get smarter and more useful the more they are used.
‘Bots enabled with machine learning and natural language processing can determine not just what rules-based action to take based on a word, but also understand the meaning of words in different combinations. What’s more, they can ask questions to create context and intent.
“To remain competitive, these large banks will have to adapt their traditional services by incorporating more robotics in banking that will attract more tech-savvy customers.” Business Insider
We use this technology and it works well
7%
We use this technology and it needs improvement
55%
We plan to deploy this technology within 12 months
31%
We plan to deploy this technology over the
next 2–3 years10%
We have no plans to implement this technology
21%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
6
Predictive analytics is the most popular technology for leaders in finance to invest in over 2018, followed by cyber security, cloud, and robotics/automation.
The popularity of predictive analytics is unsurprising. After all, data is no longer just being used to build reports of past events, but also to anticipate future customer needs. Naturally, this enables the industry to build greater customer relationships and experiences.
“It is clear that the industry must move away from the siloed approach that has always defined banking, toward a model where the focus is on customer needs. This advanced analytic approach has the power to reinvigorate the relationship with customers while increasing satisfaction, improving profitability and building trust at a time when large and small competitors are providing new customer-centric digital solutions.” The Financial Brand
0% 10% 20% 30% 40% 50% 60% 70% 80%
52%
69%
Which of the following next-generation technologies do you plan to invest in within the next 12 months?
Machine learning
Predictive analytics
Blockchain
Big Data
Cyber security
Robotics/automation
Biometric technology
Cloud
Chatbots
41%
48%
59%
59%
10%
59%
41%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
7
Almost 70% of respondents believe the biggest impact will be on improving customer experience. This is closely followed (65%) by uncovering insights within customer data.
Financial institutions are already using next-generation platforms. For example, AI-enabled solutions from Digital Reasoning, a technology vendor, have helped many of the world’s leading banks to find new efficiencies and achieve a twofold ROI within 4 months. The company’s technology allows organisations analyse communications data with human-like skill, but at speed and scale.
This kind of capabilities is becoming increasingly important. In order to remain competitive, leading financial institutions are having to become customer focused.
“AI delivers extraordinary insight into customer satisfaction. Envision a real-time, aggregated cross-departmental analysis that encompasses all actors within the bank – sales, trading, syndicate, origination, analysts, back office personnel, etc.” Christhi Theiss
Within the financial services industry, where do you see next-generation technologies having the biggest impact?
0% 10% 20% 30% 40% 50% 60% 70% 80%
34%
45%
Improving ability to compete with other institutions
Tackling fraud
Uncovering insightswithin customer data
Increasing workforce productivity
Improving customer experience
Improving wealth management and investment
Offering personalized services
Increasing up-sellingcross-selling opportunities
66%
41%
69%
17%
59%
21%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
8
A clear majority (72%) see a lack of in-house expertise as the main barrier to investing in next-generation technologies. According to The New York Times, technology companies are paying “huge” salaries to artificial intelligence specialists, leaving it difficult to compete for other companies seeking to fill the talent gap. With the rise in adoption of new technologies, there is currently a recruitment war for those with skills in high demand, such as data scientists.
However, not having an AI or Big Data team in-house doesn’t need to stop innovative financial institutions from employing the technology. With right partners, tools and platforms, enterprises can transform into a cognitive organisation.
“Financial institutions are being challenged to accelerate their customer-centric strategies. In addition to identifying hidden trends and opportunities that can drive revenue, uncovering early signs of dissatisfaction is becoming critical as regulators rule that customer abuses will be met with large fines and even caps on growth.” Digital Reasoning
What do you see as the main barriers to investing innext-generation technologies?
0% 10% 20% 30% 40% 505 60% 70% 80%
45%
Technology is still too new/unproven
Lack of in-house expertise
Siloed data sets
Unclear ROI
Need to realize ROI from legacy infrastructure
Lack of budget
Regulatory and compliance requirements
Organizational culture needssupport to change
38%
72%
17%
28%
21%
51%
45%
21%
38%
55%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
9
What do you see as the biggest challenge facing thefinancial services industry over the next 12 months?
The increasingly complexity and scale of cyber-attacks is a major concern for financial institutions. As this report has found, 35% see it as their biggest challenge over the coming year. While there are numerous threats aimed at bank systems and their customers, cyber-attacks are one of the biggest threats, and often one of the hardest to detect.
Technologies like machine learning and robotics allow businesses to prepare for this by protecting data in real-time and automating routine security and maintenance tasks
“Compared to today, the secure bank of the future will use more machine-learning technology and systems to proactively prevent potential breaches and data loss.” Information Age
0 5 10 15 20 25 30 35
34%35%
Increasingly complex cyber attacks
Growing volumes of big data
Finding employees withcognitive computing expertise
Changing customer expectations driven by technology
Geopolitical uncertainty
Something else
3%
17%
17%
14%
17%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
10
Would you consider collaborating with a fintech company/start-up if it meant being able to offer customers a new service or tool?
Fintech startups have had a game-changing effect on the industry. Offering new services such as increased payment options, online only services and mobile.
Rather than fearing these new entrants on the scene, banks and insurers can collaborate with them in order to take advantage of new technology and combine it with their established brand and customer base.
86% of those surveyed are either already taking advantage of these partnerships or planning to, as long as the infrastructure is in place to take advantage, the industry’s future will be one of collaboration rather than competition.
“The European fintech scene is still maturing, driven by advances in key metropolitan hotbeds of innovation as well as increased policymakers’ engagement.” IDC Spending Guide
We’re already partnering48%
We plan to partner within 12 months21%
We plan to partner in more than 12 months’ time
17%
No – we would always develop new services or tools in-house
14%
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
Financial services: Ready for next-generation technology?
11
CE
O.d
igit
al
& D
igit
al
Re
aso
nin
g I
nd
ust
ry I
nsi
gh
t S
eri
es
This report shows that leaders in the financial services industry are on the way to readiness when it comes to adopting next-generation technologies. Although the sentiment and intention is clear, there are still plenty of opportunities – and challenges – on the road to widespread adoption.
The era of The Fourth Industrial Revolution will be a competitive one. Financial institutions must leverage unharnessed insights and predictive analytics in the race to provide improved customer experiences.
There’s clear awareness among financial service leaders of the need to harness technolo-gies such as AI and cognitive computing. However, barriers to adoption, such as lack of in-house expertise and a slow change to organisational culture, are impeding progress. Finding the right partner is essential to enable enterprises to leverage next-generation technologies. In a way that causes the least organisational disruption and fits in with exist-ing legacy systems. The right partnerships will provide a platform for taking advantage of technology’s ability to enhance customer experiences. Indeed, this may be the only way companies remain competitive in a digital-driven future.
Conclusion
Financial services: Ready for next-generation technology?
About Digital Reasoning
Digital Reasoning has built the world’s leading AI system for understanding human communication and deployed it at the scale of global banks. Our ability to bring truly human-centric analytics into our customers’ existing technology stack means we are trusted, even in high risk applications, to automate complex tasks and augment human ingenuity.
Communication accounts for 80% of data in most enterprises, but its innate variability has forced leaders rely on basic analyses of structured, meta, and keyword data. Our Customer Insights solution proves that revolutionary AI doesn’t have to mean painful change. Our proven and award-winning AI technology integrates with established systems and existing processes. It finds risks and opportuni-ties hidden within millions of emails, chat messages, social media posts, and phone calls. It makes the voice of the customer an actionable asset, enriching CRM systems, CX programs, and management dashboards.
Customer Insights turns all forms of communications data into discoverable, understandable, and actionable insights that help to accelerate customer-centric data strategies. Employees become more effective and efficient. Management can focus on identifying new trends and opportunities, while mitigating hidden risks.
About the CEO.digital Industry Insight Series
A series of reports featuring digital transformation-focused analysis of major industries, verticals and regions. For this report, CEO.digital reached out to 7,500+ senior UK & US financial services industry leaders, during 2017. On behalf of CEO.digital we thank them for their input.
You can find more digital transformation reports at ceo.digital/digital-reasoning
