Consumer Banking Investment Products: Technological Trends
Artificial intelligence (AI) and blockchain technology are two technological trends in consumer banking investment products and services. These trends will impact this segment of the consumer banking industry by reducing operational costs and preventing fraud. Some banks that have adopted these technology trends include Bank of America, Wells Fargo, JPMorgan Chase, National Bank of Canada, Royal Bank of Canada, and Scotia bank.
Artificial Intelligence (AI)
- The banking industry is already using artificial intelligence (AI) and robotics for certain consumer banking investment products and services. There is no segment of the banking process that is not transforming because of AI.
- Some areas of deployment of this technology in the banking industry are to "address key pressure points, reduce costs, and mitigate risks." Specifically, for the consumer banking investment products and services, the technology trend makes "banking processes faster, money transfers safer, and back-end operations more efficient."
- This technology trend can evolve in various capabilities such as "social and emotional intelligence, natural language processing, logical reasoning, identification of patterns and self-supervised learning, physical sensors, mobility, navigation, and more." It is a trend that looks beyond displacing the bank teller, which is even a key component of consumer banking investment products and services. As this trend evolves with the capability to learn, financial experts are projecting more gains in new models and platforms soon.
- The most visible way how this technology trend would impact this segment of the consumer banking industry is the use of chatbots and robots for customer service. Another way this technology is impacting this segment of the consumer banking industry is the facilitation of mobile banking, which allows all-round-the-clock access "for consumers to conduct banking operations."
- One expectation of this technology in the consumer banking industry is that it will save costs remarkably. By 2023, the impact of AI would have seen about $447 billion in global savings in banking and financial services. The technology will also impact this segment of the consumer banking industry by ensuring frauds are detected easily and security is formidable.
- Another way this technology is impacting this segment is through the help it offers consumer banking products and services in "risk management and lending decisions." AI is also the foundational technology for technologies like big data analytics and others. Through it, other technology can interface and run efficiently for efficient results in this segment of the consumer banking industry.
- A study by PricewaterhouseCooper (PwC) confirmed that 52% of decision-makers in the banking and financial industry putting substantial monies into AI. 72% of these top executives believe this technology will give them a business advantage.
- JPMorgan Chase is an example of a bank experiencing this impact through the "use of AI to streamline customer service." The same goes for Bank of America and Wells Fargo.
- The United States is a country that is significantly experiencing this impact. Through a conversational AI by a US-based company, banks in the country are using this platform to "build their chatbots and virtual assistants."
- Known as KAI, this platform uses "AI reasoning and natural-language understanding and generation that can handle sophisticated questions about finance management."
- Although blockchain as technology was first used in cryptocurrency, it is a technology that is trending in the banking sector. According to the Harvard Business Review, blockchain "will disrupt banks the way the internet disrupted media."
- Because it is transparent and highly secure, the banking sector will find the technology cheap to operate. Financial experts believe more banks will adopt this technology for their institutions, particularly in consumer banking investment products and services. This is because this technology will improve consumer satisfaction.
- This technology trend can "provide banks with greater transparency and easy accessibility while reducing the needs of third-party involvement." However, the transparency of blockchain networks to members could be a "significant barrier to adoption at scale." This is because there would be instances where banks would want to keep the identity of certain consumers anonymous.
- According to Santander bank, "blockchain can help reduce banks' infrastructure costs by between $15–$20 billion per annum by 2022."
- Blockchain solutions will impact this segment of the consumer banking industry because it can "improve security, save money, and improve customer satisfaction."
- Also, this technology will impact on this segment of the consumer banking industry because it makes use of "a distributed database that can keep track of transactions in a verifiable and permanent way." Experts also believe that the use of this technology "will become an integral part of financial institutions’ technology and operational infrastructure."
- One impact of this trend can cause in this segment of the consumer banking industry is convenience revolution. Blockchain-powered tools can lead to all-round automate banking operations, which may encompass "self-executing loans, round-the-clock deposits and transfers, and faster transactions without ever having to deal with a human."
- The expectation of blockchain technology in retail banking could be deployed to handle "blockchain’s three key strengths — data handling, disintermediation, and trust, which cover cases of remittances, KYC/ID fraud prevention, and risk scoring." In this segment of the consumer banking industry (identity fraud alone), banks lose $15-$20 billion every year. With blockchain technology, however, this annual loss from fraud will reduce by almost $9 billion.
- This technology is a trend because many experts recognize it as a potential solution to many issues in consumer banking investment products and services. More so, many banks, like JPMorgan Chase, National Bank of Canada, Royal Bank of Canada, and Scotia bank, are adopting this technology. For instance, some banks mentioned above collaborated with a fintech company to develop "a digital identity and authentication service that simplifies consumer access to online services, including digital banking."
- A country like Singapore is significantly experiencing this impact by using this technology to detect ID fraud in consumer banking investment products and services. "HSBC, Mitsubishi UFJ Financial Group, and OCBC Bank" are three banks in Singapore that collaborated with a blockchain-based data-storage start-up to create a digital identity platform for KYC. The project predicts that these banks will mitigate costs by 25%-50%.
To determine the technological trends in consumer banking investment products and services, we combed through articles and reports by financial and fintech experts. Using these experts' articles and reports, we provided robust descriptions of two technological trends in this segment of consumer banking. We also highlighted examples of companies and countries that are significantly experiencing the impacts of these trends.