Embedded Finance Tracker® Series Report

AI and Banking’s New Dawn: From Conversations to Conversions

August 2023

Banking’s next chapter is written in AI and bound in innovation.

PYMNTS
01

Financial chatbots are evolving into highly capable problem solvers. Advanced AI technology is steering the conversation, shaping a consumer banking future in which digital assistants not only listen but also understand and anticipate consumers’ needs.

02

Generative AI is proving to be more than just a flashy new bandwagon the financial industry is jumping on. As banks face evolving challenges from both regulation and fraud, AI is stepping in to offer enhanced detection and safeguard capabilities while reshaping traditional banking methods.

03

From Gen Z banking to a techno beat to investment banks releasing their future chart-toppers, AI is adding a powerful new tune to the financial sector’s songbook — one that signals a revolution both in experience and economics.

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    The banking industry’s lexicon is getting an artificial intelligence (AI) makeover. In this new era, “conversation” transcends a mere chat, fraud “detection” connotes foresight and “digital natives” have AI on speed dial. As industry chatbots morph into personalized tools and fraud protection turns prescient, every facet of banking is poised for a rebuild. This transformation is not merely a splash of futurism — it is reshaping everything from internal operations to consumer banking experiences.

    Conversational Banking: Not Just Chatting but Transforming

    Financial chatbots are evolving into highly capable problem solvers. Advanced AI technology is steering the conversation, shaping a consumer banking future in which digital assistants not only listen but also understand and anticipate consumers’ needs.

    65%

    surge in response efficiency with AI integration, heralding the future of consumer banking experiences.

    AI’s voice is echoing from mega banks to digital rookies.

    Going well beyond simple greetings and information fetching, today’s banking AI chatbots are shaping up to be tomorrow’s financial advisers. The Consumer Financial Protection Bureau (CFPB) paints a vibrant future in which chatbots not only facilitate transactions but also guide users in making informed financial decisions. Banking’s AI revolution is more conversation and less transaction.

    When AI talks, banking listens.

    Chatbots answering FAQs from a robotic script? Not with generative AI at the helm. Industry leader J.P. Morgan Chase is harnessing real-time “dissatisfaction data” for intuitive, humanlike interactions, with customers, while Israel’s One Zero Bank is making waves with AI21 Labs by pushing the envelope with chat platforms that mirror human engagement. Paired with data-rich back ends, these innovations are turning once clunky chatbots into engaging and effective strategic assets.

    The future of banking?

    SoFi’s leap into a smarter future has not gone unnoticed. By seamlessly integrating the empathic AI engine of Cyberbank Konecta from Galileo into the SoFi finance app, the company has revolutionized member engagement. With a 65% surge in response efficiency and an uncanny human touch, this is no regular bot but the future of consumer banking experiences. Meanwhile, Nordic bank DNB serves up a daily digital assistant treat, catering to more than 1,200 users. Banking’s digital evolution? It’s conversational, folks.

    From Guard Dogs to Oracles: AI Counters Scams and Charts Credit

    Generative AI is proving to be more than just a flashy new bandwagon the financial industry is jumping on. As banks face evolving challenges from both regulation and fraud, AI is stepping in to offer enhanced detection and safeguard capabilities while reshaping traditional banking methods.

    Mastercard’s AI is more sentinel than software.

    In a bold move to curb the menacing rise of authorized push payment (APP) scams, Mastercard unleashed its new AI-powered tool, Consumer Fraud Risk. As the United Kingdom’s top banks rally behind this innovative solution, early adopter TSB Banking Group is already reporting a notable 20% boost in fraud detection. In the face-off against fraud, AI is proving to be the ace up the financial industry’s sleeve.

    Guard Dog. Oracle. Vault.

    From countering fraud to supercharging credit analysis, AI is redefining the frontlines of banking.

    Generative AI is not just crunching but predicting.

    Data interpretation is so last decade. AI technologies are decoding the vast web of unstructured data — estimated to comprise 80% of business-relevant information. Industry powerhouses such as Bloomberg and Deutsche Bank are pioneering generative AI tools called Financial Transformers, or “FinFormers,” that do more than just read data — they actually understand it. The forecast? A seismic shift in how banks gauge credit.

    A dance on the edge of innovation.

    The banking world is abuzz with the promise of generative AI and machine learning (ML) in helping navigate compliance. While these technologies promise to untangle convoluted anti-money laundering (AML) compliance requirements and pinpoint fraudsters’ elusive tactics, there is a caveat: Walking the fine line between innovation and compliance is key.

    Generation Next: AI Paves the Future of Banking

    From Gen Z banking to a techno beat to investment banks releasing their future chart-toppers, AI is adding a powerful new tune to the financial sector’s songbook — one that signals a revolution both in experience and economics.

    $3M

    Estimated AI-driven revenue boost per front-office employee by 2026.

    Gen Z’s banking beat is set to an AI rhythm.

    When it comes to consumer enthusiasm for digital banking experiences, Generation Z is remixing the financial charts. Indeed, 20% of these digital natives are already queuing up for AI’s financial playlist. Banks, sensing the trend, are dropping new AI hits, making financial services more dynamic than ever.

    Calculations go conversational.

    Hold on to your calculators! By adopting generative AI, the top 14 global investment banks could supercharge their front-office productivity by 25%. Dive deeper and the numbers become even more astonishing: a potential revenue spike of $3 million per front-office employee by 2026. Banking’s next chapter is being written, and AI is penning it.

    AI flings open the vault to a banking experience renaissance.

    Bank vaults have swung open, revealing generative AI as the golden ticket to reshaping the industry’s software development and customer services. While McKinsey estimates a potential $340 billion windfall for the sector, Japan’s Mizuho bank is already in the vanguard, introducing AI for internal use by 45,000 of its personnel.

    Banking on the Future Is More Than Just a Conversation

    From chat rooms to high-stakes boardrooms, AI is taking center stage in the banking and financial services world. In the services gap between conversational banking and robust fraud countermeasures exists vast, untapped potential for increasing revenue.

    Executives must see past the immediate costs of integrating AI and understand the long-term value proposition. From enhancing customer journeys to fortifying against ever-evolving threats, AI is creating profound ripple effects within the financial industry.

    As AI shakes up this sector, the path forward is clear.

    • Tune in to the beat: Understand that Gen Z — the banking consumers of the future — has undeniable expectations for the use of AI. Begin laying the groundwork for advanced AI-driven interfaces to cater to their digital preferences.
    • Risk and reward: Navigate the balance between innovation and compliance. Staying ahead does not mean flouting regulation. Engage experts to ensure your AI innovations remain compliant.
    • Beyond FAQs: Reframe your view of chatbots. They are no longer just for answering simple questions. Aim for platforms that can mirror human engagement and inform users on complex financial decisions.
    • Spot the shifts: Recognize the tectonic shift in data interpretation. With the vast majority of actionable data currently unstructured, AI tools that decode, understand and predict are invaluable.
    • Invest to protect: Mastercard’s counter to APP scams is a testament to AI’s potential to combat threats. Allocate resources to AI solutions that do more than just detect fraud, but instead also prevent it. Ensuring consumer trust in these early days is critical for reputational durability.

    The months and years ahead promise to be an exciting and dynamic time for the financial sector. Executives in the industry must take decisive action to harness the full potential of generative AI. The train has already left the station. Are you on it?

    About

    Galileo is a leading financial technology company whose platform, open API technology and proven expertise enable FinTechs and emerging and established brands to create differentiated financial solutions that expand the financial frontier. Galileo removes the complexity from payments and financial services innovation by providing flexible, open API building blocks and a secure, scalable, future-proof platform. Trusted by digital banking heavyweights, early stage innovators and enterprise clients alike, Galileo supports issuing physical and virtual payment cards, mobile push provisioning and more, across industries and geographies. Headquartered in Salt Lake City, Galileo has offices in Mexico City, New York City, San Francisco and Seattle. Learn more at galileo-ft.com.

    PYMNTS INTELLIGENCE

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multi-lingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:
    Managing Director: Aitor Ortiz
    Senior Writer: Randall Brown

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