Artificial Intelligence (AI) is rapidly changing the way financial institutions attract and retain their customers. However, it requires new models of collaboration among competitors to transform this industry into something better – report by the World Economic Forum (WEF) and Deloitte.
The report, “The New Physics of Financial Services”, explores the work of AI in transforming global financial institutions by radically changing operations of the front and back office, creating major shifts in the regulation of markets.
Many have seen the impressive demos of AI assistants making appointments by calling a restaurant or a hair salon. In New Zealand, many banks have planned to launch these AI based customer service offerings for their retail consumers.
The report identifies four core findings that investigate how AI is fundamentally changing the front-and back-office activities of financial institutions:
1. Cost center to profit center – Artificial Intelligence enabled back-office functions will enable global financial institutions to transform their services while pushing them to outsource other unimportant functions. These AI enabled processes will continuously learn and improve by themselves, using data from its collective users. By learning and improving simultaneously, the products developed here can be easily used in the real world. Thus, R&D centers can give a much lower turnaround time and can go from cost centers to profit centers.
2. A new battle for customer loyalty – Old methods of differentiation for financial institutions such as cost, speed and access are disintegrating. Artificial Intelligence is offering a new set of competitive tools with which financial institutions can differentiate themselves.
For instance, the ability of institutions to recommend and advise their customers, will allow them to compete on the value offered.
Also, curating the ecosystem by uniting data from multidimensional systems that incorporate customers, corporate clients and third parties will enable financial institutions to offer better advice and improve performance.
3. Self-driving finance– Financial advice, a part of every product, is often impersonal and generic. It also tends to be excessively dependent on subjective advice from various customer service agents. A self-driving vision of global financial institutions could transform the delivery of financial advice, centering customer experience on AI. Thus, every customer may get different advice based on his income, risk appetite, etc.
With this, individuals can interact with a single platform or an agent who recommends the exact investments/ products an investor should choose – which can be unique for every investor.
AI executes this in three ways:
Empowered platforms which can think about, switch products and providers progressively customized advice in view of information and consistent optimization through calculations which will automate most routine customer decisions.
4. Aggregate solutions for shared problems– While AI presents increased opportunities for competition, it exhibits a solid mechanism for co-operation as there are too many shared data-sets
There is a great potential for cross-institutional cooperation on issues, for example, fraud prevention and anti-money laundering controls, which are regularly run ineffectively and insufficiently today.
Collaborative arrangements based on shared data-sets will fundamentally increase the accuracy, convenience and execution of non-competitive capacities, improving mutual efficiency in tasks and improving the safety of the financial system.
New Zealand is one of those rare developed nations which has advanced research & development facilities and has quickly implemented value add products that show promise.
It is always one of the first countries to import and try out new technologies, which can make it a net exporter of advanced products and services. It has made a lot of progress in the field of Finance, Financial Technology and Artificial Intelligence and is currently on the cusp of becoming a major financial hub due to its efforts.
Despite all the tech and innovations, New Zealand still needs skilled talent to manage this technology.
The University of Otago is one of the best Universities in New Zealand and the world. Along with BSE Institute Limited, it offers an Master of International Business in New Zealand, pursuing which could be one of the best decisions of your lives.
With 5 postgraduate courses which provide a research-led learning environment, New Zealand can truly be a destination of choice for those hoping to build an international finance career.
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