Is Generative Artificial Intelligence the Key to Unlocking Personalization in Banking?

 
In the realm of competitive banking, achieving true personalization has long been a coveted objective for industry leaders. Yet, this aspiration extends beyond merely matching products with customers—it entails crafting experiences and solutions that resonate on a deeply human level.
Genuine personalization in banking involves engaging with individuals’ authentic needs and aspirations, whether it’s financing a new vehicle or pursuing other life goals. Banks that excel in this endeavor are rewarded with heightened customer loyalty, satisfaction, and ultimately, increased profitability.
The Cosmological Constant of Customer Demand
Realizing deep personalization is akin to pursuing the Holy Grail—a daunting endeavor. Banks face the challenge of swiftly adapting to a trifecta of regulatory changes, technological advancements, and evolving customer demands. The ebb and flow of customer demand, intertwined with human behavior, is influenced by fluctuating interest rates and credit cycles. High-interest rates encourage savings, while lower rates promote spending, primarily through credit. Consequently, banks tend to offer products aligned with these credit cycles, resulting in personalization efforts that often fall short, such as minor adjustments to pricing. For example, during periods of high-interest rates, everyone is inundated with savings account offers—a far cry from genuine personalization.
The Inescapable Adaptability Race
The past five years have witnessed unprecedented disruptions in the banking sector. The rise of Banking as a Service (BaaS) and embedded finance, catalyzed by low-interest rates, introduced new competitive dynamics from fintech innovations like “Buy Now, Pay Later” (BNPL) schemes. However, as interest rates surged at a pace not seen since the 1980s, the landscape underwent a seismic shift. Customer preferences swiftly transitioned from credit-centric products to savings-oriented offerings, leaving slower-moving banks struggling to keep pace. This rapid evolution underscores a critical reality: banks must continually race to adapt to rapid shifts in market dynamics, often falling short in their quest for genuine personalization.
From Banks that Listen to Banks that Speak—Transformation Through GenAI
The emergence of Generative Artificial Intelligence (GenAI) technologies presents banks with new opportunities for authentic personalization. This technology shifts the paradigm from banks passively interpreting customer data to actively engaging with customers through conversational AI. GenAI enables banks to comprehend and process customer needs expressed in natural language, fostering a more intuitive and personalized banking experience. This signifies a fundamental shift in how banks interact with their clients, transitioning from reactive to proactive customer service.
Product Manufacturing with GenAI
GenAI is poised to revolutionize product manufacturing in banking. Traditional product design processes, which often span weeks or months, can be drastically accelerated through advanced analytics and AI. With GenAI, banks can swiftly prototype and customize financial products based on direct input from customers. Products are treated as flexible, code-driven entities that can be dynamically tailored to individual needs. This capability accelerates product development cycles and enhances the bank’s ability to meet specific customer requirements with unparalleled precision.
Regulation with GenAI
The regulatory landscape stands to be transformed by GenAI as well. Through the implementation of ‘Rules as Code,’ banks can automate and streamline compliance processes, ensuring that new financial products are both innovative and fully compliant with existing laws and regulations. This integration of GenAI in regulation significantly simplifies the compliance burden, allowing banks to focus more on innovation and customer engagement.
Source: temenos.com
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