AI is changing the way the world does business — but its impact on retail banking has only just begun. To keep pace with looming shifts in the sector, retail banks need to take steps to implement AI for an optimised impact on their value stream.
To help retail banks understand the coming changes and how to tackle them, SnT and the Fraunhofer Institute for Applied Information Technology (FIT) have written a special 40-page report with the IT consultancy Senacor Technologies, that dives into the current state of AI, its implementation, and its potential to impact on the German-speaking retail banking sector. In the report, SnT’s Vadim Raego and Prof. Gilbert Fridgen (PayPal-FNR PEARL Chair in Digital Financial Services), together with Marc-Fabian and Körner from FIT, and Alexander and Stohr from Senacor Technologies, lay out the results of 22 interviews with industry experts and insiders from across the German-speaking region. Their research makes the tension clear: while consumers are uniquely sensitive to protecting private data, and therefore hesitant to use AI services, their interest in convenient, digital, and personal retail banking services continues to grow. In fact, between 2014 and 2021 alone, the number of consumers using online banking rose from 53% to 70%. Werner SteckChristian Wolfangel
To succeed in the digitalising world, therefore, banks must put customers’ needs and perspectives at the heart of their AI-powered products. A customer-centred approach that clearly explains AI’s benefits to the consumers will give retail banks the opportunity to break through their customers’ hesitancy to share their data. More than this, it will foster products that deliver the most value to the customers.
Conveniently, customer-centred use cases are also the best context for developing the technological infrastructure necessary to stay relevant in an AI-powered economy. By updating legacy systems incrementally with an eye to enabling specific use-cases first, and by doing so in a way that contributes to the creation of a more flexible overarching infrastructure solution, banks can update their legacy IT systems with minimal upfront investment and maximum short-term impact.
Ultimately, to maximise AI’s impact in retail banking and deliver the most value to customers, banks need to do more than just update their IT infrastructure or buy off-the-shelf AI solutions — they need to first rethink their value propositions and then develop their technological capabilities and business use-cases hand-in hand. The study illustrates that only an integrated, holistic development process will yield the successful AI-driven banking ecosystem that banks and their customers need. This process must be shaped by perspectives from IT, business, and compliance.
The report, therefore, approaches AI from a threefold perspective. It lays out AI’s technological opportunities and challenges with a special consideration for the retail-banking context; it highlights regulatory developments that support or impact the implementation of AI solutions in retail banking (including general regulations, such as AML and KYC, as well as specific laws such as the GDPR and PSD2); and it examines high-impact business use-cases that have yet to be fully explored and exploited by the retail-banking industry.
To learn more about the challenges and opportunities for AI in German-speaking retail banking, you can read the full report in German language here.