Individual recommendations and protection against cybercrime: AI (Artificial Intelligence) in banking

For a long time, the search for sustainable AI (Artificial Intelligence) applications for banks yielded little tangible result.  However; the more companies integrate into the digital platform economy, the more concrete the scenarios become.  Here are some topics we will cover at the Digital Banking Days in Frankfurt am Main on 24 and 25 October 2018.

As early as 2016, an online survey of 7,000 European consumers showed that they are open to purchasing products from completely different areas of their bank. On average, one fifth were interested in energy, personal data storage, broadband and mobile phone contracts. The value of landlines and media such as television and video on demand was slightly lower. The Eastern Europeans and the Spaniards proved to be particularly open-minded with values of around 40 percent. In some cases, the British clearly exceeded the 30 percent mark, while the Swiss and Germans tended to stay below average.

The providers recognize this potential. According to the Handelsblatt, in its offer for Millennials announced for October of this year, Deutsche Bank plans to offer “services that are not solely related to banks”. “The digital platform should not work with our own products and should not have its own balance sheet; it should communicate selected products of others, as we already do with the interest rate market,” explains Markus Pertlwieser, Digital Director of the Private and Corporate Clients division. “With this platform we want to create easier access to compete with the big tech companies.”

AI forecasts what the customer needs

Of course, an institution such as Deutsche Bank has the specialist banking and advisory know-how. Added to this is a new quality of intelligent data handling. Because it is only the quality of the product recommendations that will determine the future of such a financial services platform. Netflix teaches us how to use AI to predict what the customer most likely wants to see next. Both Netflix and financial institutions have a large amount of customer data. Algorithms are able to learn from theoretically infinitely large amounts of data and from information on past transactions and external socio-demographic data to derive astonishingly precise future behavior – related to each product.

AI is superior to human intelligence. It would take years for a person to determine the purchase probability per product, even if neither the product range nor the customer base were particularly large. algorithms, this is achieved in almost real time. In addition, they are better at “thinking around corners” and are not irritated by (pre)judgments. The specialist for investment products for old-age provision recognizes when the conditions for the Riester pension change, which customers benefit from it and who must change his investment strategy. AI not only selects the affected customers, but also makes individual suggestions: Customer A has financial leeway. Based on the overall situation, he is identified as a middle-income family man. A special repayment of the real estate mortgage would now be an option for him. Alternatively, the bank can offer him long-term investments for the three children.

For customer B, the monthly charge increases.  As the bank sells a wide range of third-party products, the AI-controlled platform presents a particularly cost-effective electricity tariff.  The trick: The energy supplier does not use fossil fuels.  This is a perfect match for customer B, who lives with her boyfriend in a trendy neighborhood and moves in a milieu in which sustainability is part of the good tone.  With such precise and appropriate proposals, AI helps banks to deliver on their value proposition in a new way: they offer customers the solution they need at the right time.  As an orchestrator, the financial institution can also succeed in generating additional income.  It is relatively arbitrary which products it includes in its portfolio – but never what it offers to the individual customer.  This has to be right to the point, otherwise the customer will not buy it.  AI paves the way for a thoroughly customer-centric business model.

Cybercriminals Stop Crafting With AI

Another value proposition in the financial sector is: “Your money is safe with us.”  However, digital and mobile banking is particularly susceptible to cybercrime.  Banks and Fintech respond with interesting AI-based approaches. The keyword is behavioral biometrics.  This is a form of tracking which must of course be carried out in accordance with the DSGVO.  Sensors record how a certain user behaves at his terminal:  How does he use the keyboard?  How does he wipe the screen?  How does it react when the cursor disappears briefly from the screen?

The Royal Bank of Scotland records more than 2,000 different transactions when a customer logs into his account and can thus establish his identity beyond any doubt.  If user behavior deviates, the account will be blocked immediately. The software registered something remarkable a few months ago: During his visit to the account of a wealthy investor, the user used the mouse scroll wheel, which the account holder never did.  Then he used the numeric keys above the letters instead of the numeric keypad on the right side of the keyboard.  Fortunately, the bank was able to prevent the transfer of a seven-figure sum into criminal channels in time.

AI at the Digital Banking Days

Although the big picture is not yet clearly visible, there are signs that AI will be well received in the financial industry and will play an important role in digital scenarios in particular.  The days when the use of AI was limited to developing chatbots that could not reasonably answer simple questions are definitely over.  At the Digital Banking Days in Frankfurt am Main on October 24 and 25, 2018, we will look in more detail at the question of how AI will affect the banking world.  Claus-P. Praeg from the Fraunhofer Institut für Arbeitswirtschaft und Organisation (IAO) shows how Artificial Intelligence will affect the world of banking.  I would also like to invite you to a workshop on the subject. Register now for the Digital Banking Days and develop “approaches for the bank of the future” together with us!