Artificial intelligence (AI) refers to software-based systems that use data inputs to make decisions on their own. Machine learning is an application of AI that gives computer systems the ability to learn and improve from data without being explicitly programmed.

Listed below are the top artificial intelligence predictions, as identified by GlobalData.

2019 saw financial institutions explore a broad-range of possible AI use cases in both customer-facing and back-office processes, increasing budgets, headcounts, and partnerships. 2020 will see increased focus on breaking out the marketing story from actual business impact to place bigger bets in fewer areas. This will help banks scale proven AI across the enterprise to forge competitive advantage.

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Artificial intelligence will re-invigorate digital money management, helping incumbents drip-feed highly personalised spending tips to build trust and engagement in the absence of in-person interaction. Features like predictive insights around cashflow shortfalls, alerts on upcoming bill payments, and various ‘what if’ scenarios when ‘trying on’ different financial products give customers transparency around their options and the risks they face. This service will render as an always-on, in-your-pocket, and predictive advisor.

AI-enhanced customer relationship management (CRM) will help digital banks optimise product recommendations to rival the conversion rates of best-in-class online retailers. These product suggestions won’t render as ‘sales,’ but rather valuable advice received, such as a pre-approved loan before a cash shortfall or an option to remortgage to fund home improvements. This will help incumbents build customer advocacy and trust as new entrants vie for attention.

AI-powered onboarding, when combined with voice and facial recognition technologies, will help incumbents make themselves much easier to do business with, especially at the initial point of conversion but also thereafter at each moment of authentication. AI will offer particular support through Know Your Customer (KYC) processes, helping incumbents keep pace with new entrants. Standard Bank in South Africa, for example, used WorkFusion’s AI capabilities to reduce the customer onboarding time from 20 days to just five minutes.

Banks’ heavy compliance burden will continue to drive AI. Last year, large global banks such as OCBC Bank, Commonwealth Bank, Wells Fargo, and HSBC made big investments in areas such as automated data management, reporting, anti-money laundering (AML), compliance, automated regulation interpretation, and mapping. Increasingly partnering with artificial intelligence-enabled regtech firms will help incumbents reduce operational risk and enhance reporting quality.

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As artificial intelligence becomes more embedded into all areas of customers’ lives, concerns around the ‘black box’ driving decisions will grow, with more demands for ‘explainable AI.’ As it is, customers with little or no digital footprint are less ‘visible’ to applications that rely on data to profile people and assess risk. Traditional banks’ credit risk algorithms often disproportionately exclude black and Hispanic groups in the US as well as women, because these groups have historically earned less over their lifetimes.

In 2020, senior management will be held directly accountable for the decisions of AI-enabled algorithms. This will drive increased focus on data quality to feed the algorithms and perhaps limits to the use of the most dynamic machine learning because of their regulatory opacity.

This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.