November 17, 2015 | Written by: Nicholas Drury and Sandipan Sarkar
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Cognitive computing has arrived and its potential to revolutionize the financial services industry is enormous.
Cognitive systems – with the power to unleash a new era of innovation and growth – are already helping institutions provide better customer service, uncover new insights and improve the quality of timely decisions.
Based on interviews with banking executives worldwide, a new study by the IBM Institute for Business Value found that cognitive computing has the potential to radically change the financial services industry.
Among those bankers familiar with the technology:
- 79 percent believe cognitive computing will play a critical role in the future of the business.
- 88 percent intend to invest in cognitive capabilities.
- 89 percent say it will play a disruptive role in the financial services industry.
Cognitive computing can help bankers mine for insight as big data grows rapidly in volume, variety and complexity, particularly in financial services.
Every day, more than 2.5 quintillion bytes of data are generated globally. What’s more, 90 percent of the existing data in the world today has been created in the last two years alone.
Traditional data analytics approaches may be effective for a number of applications, but they cannot fully exploit the value of big data. They are only suitable for structured and unstructured data with known, defined semantics, which is the relation to words and phrases and their meaning.
Without new capabilities, the paradox of having too much data and too little insight would continue.
Cognitive-based systems, on the other hand, build knowledge and learn, understand natural language, and reason and interact more naturally with human beings than traditional programmable systems. They continuously learn new information. They can handle ambiguity and adapt to new types of problems.
How can financial institutions, specifically, take advantage of cognitive computing to address issues preoccupying the industry?
This new computing paradigm has three capability areas that specifically address the industry’s need to improve engagement, discovery and decision making. They are:
1). Cognitive systems can fundamentally change the way humans and systems interact. They can also significantly extend human capabilities by providing expert assistance.
Cognitive systems provide advice by developing deep domain insights and bringing this information to people in a timely, natural and usable way. By broadening capabilities for both bank employees and customers, cognitive systems can help financial institutions focus more on interacting with customers, rather than the traditional transactions approach.
Because they are able to engage in dialogue with humans, these systems can understand customers based on their history and bring context- and evidence-based reasoning to the interaction.
Cognitive systems enable customized and self-service options for customers and can assist employees in offering tailored recommendations that align with customers’ needs and tolerance for risk.
2) Cognitive systems can help users discover insights that might otherwise not be found. Discovery involves finding insights and connections and understanding the vast amounts of information available around the world that even the most brilliant humans could not uncover.
Discovery capabilities can also dramatically reduce research time, providing the speed and agility required in an industry undergoing major changes. Cognitive systems can deliver detailed information about customers’ preferences and behaviors to help banks customize the products and services offered to individual customers.
They can also rapidly uncover insights, patterns and relationships from vast sources of information, providing more timely analysis of complex data used in detecting fraud, predicting clients’ behavior and managing risk.
In the future, cognitive systems could enable even more effective customer interactions. Banks will not only know your name, address, and preferences for certain products and services, but also be ready help you with the products or services you may need based on your current stage in life. That means that no matter how you contact your bank, it is able to have a dialogue with you, understanding the context of your needs and your preferences as a unique individual.
3) Cognitive systems aid in decision making by offering evidence-based options. They continually evolve and learn based on new information, results and actions.
By putting a premium on knowledge, cognitive systems learn from each transaction, whether it’s about the market, its customers or its operations. That knowledge provides banks with more and insight as they learn more about what their clients value.
As future cognitive systems have access to growing amounts of historical data and analysis, those recommendations could grow in both effectiveness and scale. Cognitive computing could revolutionize not only the way financial institutions operate through new uses of information technology, but the broader society in general as well.
To learn more about the new era of computing, visit ibm.com/outthink
A version of this story originally ran on Forbes.