Banks, credit unions, and other agencies in the financial services industry are at a crossroads right now. These firms can choose to carry on with business as usual or go through a digital transformation.
The first option will eventually lead to irrelevance, while the other provides the possibility of long-term growth. Which one will lead to the most success?
Change is always scary. Predictive analysis and artificial intelligence are rapidly reshaping the banking industry in ways that were never thought possible in previous generations. Those who decide to proceed through a digital transformation process will get to experience numerous benefits for taking that risk.
List of the Benefits from Predictive Analytics and AI
The banks already going through a digital transformation find that a series of benefits develop over time with this investment.
1. It improves the firm’s risk management profile.
Banks face several forms of risk in their daily operations. These institutions can leverage the power of predictive analytics to examine their historical data to identify past situations where issues could have been handled better. The information can look at compliance, cybersecurity, operations, and other areas to discover what went wrong in real-time situations. AI can even suggest measures that can mitigate damage or entirely stop the risk factor.
2. Improvements to fraud detection and prevention occur.
Banks dealt with over 1.4 million cases of fraud in 2018. Predictive analytics allows the industry to identify, monitor, and remove potentially harmful behavior before it can have its intended detrimental impact. AI can recognize the behavioral patterns of each customer, flagging accounts that take actions which fall outside the model of that profile. Then human contact can verify if the suspected activities happened.
3. It helps banks to understand their customers better.
According to Deltec Bank, Bahamas, “Predictive analytics and artificial intelligence help banks automate segmentation.” The data contained in every consumer profile work with machine learning to build predictive models. This information is useful in the presentation of lending offers, specific financial services, and cross-selling identification. These processes create more opportunities to increase the lifetime value of each customer in the industry.
4. New customer acquisition activities become more productive.
The cost of acquiring new customers is steadily increasing in the banking industry. Institutions must find ways to optimize their efforts in this area. Predictive analysis allows for lead scoring to generate qualified prospects for sales teams to pursue. Then machine learning algorithms can evaluate the data to prioritize the potential consumers who are most likely to take positive actions. This benefit can even determine what marketing content would be the most applicable to each demographic so that the initial contact feels like a personalized process.
Predictive analysis and AI in the banking industry is not something that will happen in the future. This technology is providing benefits to early adopters already. Banks must update their approach to technology accordingly if they want to offer services in the digitized landscapes that customers prefer today. The only way to do so is to have the courage to navigate through a digital transformation.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.