Artificial intelligence (AI) was a big deal back when I was in engineering school (which wasn’t just yesterday). Through the years, AI’s evolution has produced multiple hype cycles, followed by disillusionment.
Today, in the time of Digital Disruption 2.0, AI’s ascent looks a bit different. It’s building on its foundation of machine learning and cognitive computing capabilities, and now capturing data elements that are human (behavioral/psychological) and contextual in nature. It then assembles these findings into new patterns that lead to previously unforeseeable insights.
By doing so, AI is opening the doors to dramatic financial services innovations. For example, credit underwriters are now using AI engines to analyze a whole new set of information sources to determine credit worthiness, such as the online activities of potential borrowers. The result is not only speedier decision-making but also a more refined set of scores to help make lending decisions.
In another example, AI and predictive analytics is helping financial institutions identify borrowers whose behaviors suggest an inclination to move to another lending organization, such as prepaying a mortgage to refinance. JPMorgan Chase has used this proactive approach to save hundreds of millions in lost business.
Using advances in natural language intelligence, virtual assistants like Siri, Alexa and Cortana could soon evolve from providing driving directions and movie recommendations, to addressing bank customer inquiries. Such AI-driven capabilities could revolutionize how services are provided to retail banking, wealth management and other financial institution clients.
In personal financial management, apps such as wallet.AI are moving to a new level. Using AI to create contextual awareness of users’ spending habits and financial condition, the app can advise the user to cut back on the lattes in order to make rent at the end of the month.
Kensho Technologies, a data analytics and machine intelligence startup, offers yet another good example of AI’s power. Kensho’s AI assistant responds to questions posed by investors regarding the impact of events ranging from natural disasters, political developments and earnings announcements, to product launches and regulatory approvals. The natural language search query function continues to get smarter as it uncovers new relationships and trends among geopolitical and world events.
AI holds great promise not only for traditional financial services companies, but also for their potential competitors. Internet companies deep into AI, such as Alibaba, are offering banking services. What will it mean to your business when Google, Apple, Amazon and other digital leaders further extend their financial services footprint, even launching a digital bank powered by AI?
My next post will explore how open APIs—application programming interfaces—can help banks align their services with the evolving financial services marketplace.