An industry-specific guide to the applications of Advanced Analytics and AI to the banking industry
Artificial Intelligence (AI) technologies help organisations to get smarter and more effective over time - ultimately responding to, learning from and interacting with human voices. It is predicted that by 2025, half of all businesses will be using these intelligent, self-learning systems. Across its entire breadth and depth, the banking industry is at the forefront of investigating Advanced Analytics and AI technology for use in a broad range of applications, such as customer analytics and providing wealth advice for clients. AI and the Future of Banking provides new and established banking industry professionals with the essential information on the implications of data and analytics on their roles, responsibilities and personal career development.
Unlike existing books on the subject which tend to be overly technical and complex, this accessible, reader-friendly guide is designed to be easily understood by any banking professional with limited or no IT background. Chapters focus on practical guidance on the use of analytics to improve operational effectiveness, customer retention and finance and risk management. Theory and published case studies are clearly explained, whilst considerations such as operating costs, regulation and market saturation are discussed in real-world context. Written by a recognised expert in AI and Advanced Analytics, this book:
- Explores the numerous applications for Advanced Analytics and AI in various areas of banking and finance
- Offers advice on the most effective ways to integrate AI into existing bank ecosystems
- Suggests alternative and complementary visions for the future of banking, addressing issues like branch transformation, new models of universal banking and ‘debranding’
- Explains the concept of ‘Open Banking,’ which securely shares information without needing to reveal passwords
- Addresses the development of leadership relative to AI adoption in the banking industry
AI and the Future of Banking is an informative and up-to-date resource for bank executives and managers, new entrants to the banking industry, financial technology and financial services practitioners and students in postgraduate finance and banking courses.
Table of Contents
Acknowledgements xv
About the Author xvi
Introduction xvii
Chapter 1 Prologue: Why Banking? 1
Summary 1
Introduction 2
What is Banking? 4
What Do We Mean by ‘Money’ Today? 7
A Cashless Society Increasingly Emerges 8
Key Banking Functions 10
Future Jobs in Banking 14
Conclusion 17
References 18
Chapter 2 Imperatives in Banking 21
Summary 21
Introduction 21
Strategy and Imperatives 23
Strategy 23
Business Imperatives 24
Current Imperatives in Banking 24
Comparable Imperatives in the Retail Industry 26
Comparable Imperatives in the Telecom Industry 27
Comparable Imperatives in the Healthcare Industry 29
Future Imperatives in Banking 30
Greater Customer Centricity 30
Becoming Truly Digital 31
Completely Accepting Technological Change 33
Reimagining Banking 33
Reinventing Risk Management 35
Conclusion 36
References 37
Chapter 3 Data and Analytics Primer 39
Summary 39
Introduction 39
Data Management and Analytics 42
Data Management 42
The Hierarchy of Analytics 43
‘Next-Generation’ Cognitive Analytics 45
Extracting Value from Data 46
The Importance of Location Analytics 50
Conclusion 51
References 52
Chapter 4 Key Elements of Banking Analytics 55
Summary 55
Introduction 56
Office of Finance Management 56
Performance Management and Integrated Decision Making 58
The Key Elements of Banking Performance Management 59
Customer Analytics 61
Customer Insight 61
Credit Ratings 65
Branch-Specific Campaigns 66
Impact of Social Media Campaigns 67
Relationship Pricing 69
Client Servicing 71
Risk Management 73
Risk Scenario Analytics 74
Fraud Detection 75
Regulatory Compliance 76
Risk Management and AI 76
Operational Efficiency 77
IT Cost Transparency 78
Branch Performance Management 78
Contact Centre Service 80
Payments Monitoring 82
Mortgage Tracking 83
Sales, Compensation and Commission Management 83
Financial Markets Risk and Trade Monitoring 84
Analytics in Portfolio Management 85
Derivative Markets 86
Conclusion 87
References 89
Chapter 5 Machine Learning, AI and ‘Apps’ 93
Summary 93
Introduction 93
Theory and Practice of Machine Learning 95
Apps and Their Usage 96
Data Visualisation 101
Voice Recognition and Voice Assistants 102
Visual and Facial Recognition 104
Thumbprint Recognition 106
Palm Vein Recognition 107
Wealth Management Systems and Apps 107
The Biometric Moral Argument 109
Conclusion 111
References 112
Chapter 6 AI and the Importance of Brand in Banking 115
Summary 115
Introduction 116
Brand Value and Equity in Banking 117
Millennial and Gen Y Brand Expectations from Bank Brands 119
Branding Expectations of Generation Z 120
Branding Expectations of Generation X 121
Branding and Customer Experience Interlocked 123
Branding and Human-Centred Design 124
To Brand or to Debrand? 125
Banks Will Use AI to Become Lifestyle Managers 128
Consumption and Credit Smoothing 128
Conclusion 130
References 130
Chapter 7 AI Leadership and Employee Transformation 133
Summary 133
Introduction 133
Leadership in an AI-Infused Age 136
Augmented Leadership 137
Analytically Infused Leadership 138
A New Approach to Leadership: ‘Trust but Verify’ 140
Attributes of AI-Infused Leaders 141
Leadership Training for the Future 143
‘Digital Future of Banking Requires a New Leadership Model’ 145
Zen and Leadership in Banking 146
Functional Change and Role Transformation 147
The Evolution of the Banking Employee 149
A Banking Employee Persona in 2050 149
Conclusion 151
References 152
Chapter 8 The Bank of the Future 155
Summary 155
Introduction 156
Branch Makeover 156
The Emergence of the Café Bank 159
Millennials Not Happy with Dealing Only with Robots 160
Virtual Reality: Banking and Gaming Converge 161
Universal Banking and Beyond 163
Universal Banking in the United States 164
Banks as the Catalyst for Change: ‘Peer to Peer’ 164
Payment Processes Become More Customer Centric 166
Five Scenarios for the ‘Bank of the Future’ 167
The Full-Service Bank 168
The Digital Bank 169
The Disaggregated Bank 170
The Conversational Bank 173
The Collaborative Bank 174
Transformation of the Investment Bank 175
Conclusion 178
References 179
Chapter 9 Open Banking and Blockchain 183
Summary 183
Introduction 184
Setting the Stage: Open Banking 184
Interlock between AI and Open Banking 186
Blockchain: Setting the Stage 186
Interlock between Blockchain and AI 188
Blockchain in Banking 188
Interbank Market 189
Forex Market 190
Investment Banks and Blockchain 191
Blockchain in Indian Banking 193
Blockchain and Open Banking in Africa 196
Conclusion 199
References 201
Chapter 10 Innovation and Implementation 203
Summary 203
Introduction 203
New Roles and Responsibilities 204
Bootcamps, Hackathons, Innovation Labs, and Other Devices 205
Implementation 207
Innovation or Adaptation? 208
The Use of ‘Design Thinking’ 210
Finding Capital to Innovate: One Example 211
Fintech for Banking 212
Blockages to Innovation 216
Conclusion 218
References 218
Chapter 11 Cybercrime and IT Resilience 221
Summary 221
Introduction 222
Cybercrime in the Context of Operational Risk 224
The Internationalisation of Cybercrime 225
Cyber Security Toolkits 226
Cyber Risk Management Apps 227
Broader Cyber Issues for Banking 227
Safeguarding the Bank of the Future: New Cyber Security Threats 228
Responding to Cyber Attack 230
Cyber Readiness 231
New Cyber Roles, New Cyber Responsibilities 233
AI Fraud Detection in Banking 234
Advanced Analytics in Fraud Detection 235
AI and Anomaly Detection 236
Fraudulent Use of Data 236
Cyber and the Law 238
Conclusion 239
References 239
Chapter 12 Epilogue 243
Appendix: Fintech in Banking 247
Index 271
