Three Ways Cognitive Computing Can Transform Banks

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Bank customers’ demands are increasing. They want more personalized experiences than banks can currently provide.

Customers expect their financial services institutions to treat them like retailers do — with personalized interactions based upon such things as their lifestyles, place of residence, background and preferences.

Relationship management has become essential. That’s just one of the findings of the new IBM Institute for Business Value (IBV) study, “The Cognitive Bank Enhanced,” which surveyed more that 2,000 banking and financial C-suite executives worldwide.

Other factors affecting the balance sheets at financial services companies include sustained low interest rates, higher operational costs due in large part to compliance regulations and the commoditization of both commercial and retail banks.

Competition is fierce from FinTech companies as they offer limited solutions at lower costs and faster approval times. For new car buyers, why wait for two days to hear by phone or email if a traditional bank has approved a loan when an online service will complete the same transaction within minutes?

Incremental change is no longer enough. The financial services industry needs new ways to perform at a high level that tackles the effects of industry disruption.

The new IBV study also found that cognitive computing — if applied to banking — could solve a lot of the financial services’ industry’s current problems.

At the highest level, cognitive systems can allow banks to switch from tactical cost-cutting to strategically lower operating costs.

More importantly, cognitive computing can finally help banks to exploit their biggest advantage against Fintech competitors: data.Banks deal in lots of data, but are only now realizing how to use that data to provide a competitive edge.

Cognitive computing enables banks to set strategic priorities they could not imagine previously. It can benefit an entire bank in three ways, which are:

1) Deeper engagement with customers: The cognitive bank provides personalized services to customers by means of continually deeper insight, context and learning.

A new cognitive solution will feature customer service robots that understand speech, gestures and even customer expressions. It interprets questions and learns preferences, while scanning the bank’s information to provide personalized service that improves over time. Such direct-to-consumer cognitive virtual agents can serve, guide and advise customers via the web and mobile computing.

2) New analytics insights: Cognitive capabilities can improve applications used by customers through better decision-making capabilities. A cognitive solution, for example, would expand the use of wealth management advisors beyond ultra rich clients. Wealth managers would advise more clients more accurately based upon the system’s deeper knowledge of customers.

By tapping into a deeper knowledge base, even highly customized business processes can be accelerated. The best credit offerings can be designed for a client, as can other products suited to individual needs.

3) Transformed bank operations: The cognitive bank can make improvements that offer greater visibility into specific business challenges and support decisions across an entire organization. One example is to align policies, procedures, controls and standards across an organization to meet regulatory requirements.

Monitoring risk and compliance with cognitive capabilities enables assurance across business processes. Imagine a system that understands your entire global client base individually, with comprehensive knowledge of both existing and proposed banking regulations across continents, countries, states and provinces.

On the verge of a revolution

We asked study respondents to name the barriers restricting them from implementing cognitive information technology (IT) and related skills. Cost was named most often and cited by 45 percent of executives. Close behind was lack of IT and other skills (named by 43 percent). A distant third-place mention (25 percent) was lack of organizational support.

The leading companies outnumbered underperformers in how strongly they expect cognitive computing to affect different aspects of the business. Outperformers expect the greatest impact on IT systems architecture (68 percent), followed by a tie between operating and revenue models (60 percent), and business processes (60 percent).

With its access to new analytic insights, the cognitive bank filters and digests dynamic internal and external data from the banking ecosystem and beyond. It can capture market data, including information about industry trends, financial performance, strategic intent, merger and acquisition activity, market risks and benchmarking. Cognitive computing unifies a view of corporate intelligence based on data from diverse sources, peer connections and real-time comparisons.

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To learn more about the new era of business, join us at the IBM World of Watson or visit ibm.com/cognitive.

This story first appeared on Forbes.