How AI enables the new banking ecosystem

Soon, banking customers will not care who the financial provider is as long as the banking gets done.

Everywhere you look, businesses are going through enormous change. Not long ago, the automobile industry led the global sourcing model, producing where it was cheapest and selling where it was most profitable. Now, in a sort of volte-face, it is leveraging a combination of technologies to understand and anticipate demand in local pockets, design accordingly, and then prototype and manufacture where the consumers are.

Turn to high technology. Search giant Google’s parent Alphabet’s second-quarter earnings showed smart growth in “other revenues”, generating $3 billion, up 42 percent year-over-year (YoY). This includes income from its cloud, visual search and voice assistant initiatives. E-commerce and cloud behemoth Amazon rode its Alexa ecosystem hard to post a smart jump of 23 percent in first quarter sales.

The media and entertainment industry is also changing to adapt. After disrupting the way television content was distributed, providers such as Netflix and Amazon Prime are looking at changing content creation itself. They are now studying the behaviour of viewers to anticipate their likes and future trends, and incorporating that to co-create scripts.

The list goes on.

But while they may differ outwardly, all these stories of change are bound by a common thread. In each case, the business is betting on transforming itself by leveraging artificial intelligence (AI) technologies to transform its ecosystem to deliver greater value to customers. According to Infosys research, IT/business decision-makers currently using or planning to use AI technology anticipate revenues to go up 39 percent on average by 2020.

There are many lessons here for the banking industry. The most important one is also the most fundamental, since it is about the new need. Uber taught car manufacturers that consumers needed transportation but not necessarily cars; Airbnb showed the hospitality industry that guests didn’t care who owned the room as long as their lodging expectations were met. Today’s consumers care about value and experience, but little else; when they bank, it is natural that such expectations will rub off. Hence, very soon, banking customers will not care who the financial provider is as long as the banking gets done.

That preferred provider will be a platform bank, “… a business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participatory infrastructure for these interactions and sets governance conditions for them. The platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. ” (Geoffrey G. Parker, Marshall Van Alstyne, and Sangeet Paul Choudary, authors of Platform Revolution.)

By definition, a platform bank can exist only if there is a strong ecosystem enabling value-creating interactions. And the ecosystem can function only if there is strong AI supporting it.

A platform bank has more than one way to be part of an ecosystem: it can build or curate one, join an existing network, or participate in a broader marketplace offering both financial and non-financial products. AI is an important actor in each case. Take HSBC Connections Hub, a social network that the bank has curated to connect three million small-and-medium-sized business customers spanning across 71 countries. At the heart of the platform is a machine learning algorithm that matches each company with others that are most relevant to it. In the case of SkyShopper, the recently-launched e-commerce platform from Emirates NBD, an AI-based recommendation engine highlights the best offers attached to various credit and debit cards to the bank’s customers. Beside several examples like these, we can also cite the chatbots and smart virtual assistants that populate the customer service infrastructure in every ecosystem.

Today, the world is undergoing a shift towards smart banking for smart customers using smart products delivered on smart channels. A smart ecosystem powered by AI is at the forefront of this transformation.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)