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AI and advanced analytics: The foundation for the cognitive bank


Banks can use advanced technologies to mine their troves of data for insights that help improve customer engagement, decision making, and operations.

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Today the banking industry faces a rebirth by necessity. As the digital age morphs into the cognitive era, success depends on radical transformation that enables the integration of advanced analytics, artificial intelligence (AI), machine learning, robotics, blockchains, and more. In addition, leveraging these technologies to tap huge quantities of dormant bank-owned data, much of it unstructured, is essential to offering the individualized engagement that customers demand. How can today’s banks transform to move beyond traditional functions and become a cognitive bank?

AI technologies unleash the power of data

Traditional financial services business models are under the microscope. For many financial organizations, sustained profitability is a challenge in today’s lower-interest-rate environment. Competition from new market entrants is also generating new layers of disruption, while customer experience and engagement are not keeping pace with the ever-growing expectations of digitally savvy consumers.

Many financial organizations have responded with headcount reductions and tactical cost-cutting measures. However, sustainable performance requires a shift in strategy – a strategy enhanced by new technologies.

Success in the digital age requires banks to tap the hidden treasure they already own in massive quantities: data. Cognitive systems and AI technologies can help banks unleash the power of their data, revealing insights about the enterprise, customers, and competitors. Cognitive systems continually build knowledge and learning, understand natural language, and reason and interact more naturally with human beings than traditional programmable systems.

AI enhances operational efficiency

To better understand how cognitive computing and AI technologies can benefit the banking industry, we engaged more than 2,000 executives worldwide for the 2016 Cognitive Bank Survey. Our research confirms that commoditization, discerning customers, and disruptive competitors are major industry challenges. It also reveals that some banks have found more success than others in responding to these challenges.

We also found that only 11 percent of study respondents have adopted AI technology. Fifty-eight percent say improving operational efficiency is their most important strategic priority, and 49 percent tell us that operational efficiency is one of the expected benefits of AI. In this report, we explore how bankers can start now to decipher data and use analytic insights to start achieving more against their strategic goals.

We identified a group of banks – the outperformers – that are surpassing their peers in terms of revenue growth and operating efficiency over the past three years. The outperforming banks are much more aware of the disruption triggered by fintechs – and are responding proactively.

Becoming a cognitive bank

The outperformers understand that disruptive competition can’t be ignored. Seemingly ubiquitous attacks from new competitors – which include digital-only, non-bank entrants – offer bank customers lower costs and new value. Why, for example, wait two days to learn by phone or email whether a bank has approved your car loan if you can get an online decision within minutes from a non-traditional loan source?

Compared to their underperforming counterparts, 3.3 times more outperforming banks have experienced disruption by fintechs to at least a moderate degree. And industry leaders are learning that partnering with fintechs may be a better approach than treating them strictly as competitors. In fact, 80 percent more outperformers than underperformers have adjusted their strategies to deal with challenges related to fintechs.

While many organizations still have far to go, we discovered that outperformers are already taking strides to become full-fledged cognitive banks. They are leveraging data for insights that help drive enhanced customer engagement, more informed decisions, and improved operational efficiencies.

Read the full report to discover what steps financial institutions can take today to start the transformation into a cognitive bank.


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Meet the authors

Jim Brill

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, Director, Global Industry Marketing


Allan Harper

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, Cognitive Banking Leader, IBM Global Business Services


Nicholas Drury, Global Banking & Financial Markets Leader, IBM Institute for Business Value

Likhit Wagle, Global Industry General Manager, Banking and Financial Markets


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