By Ray Birch
CHICAGO—Banks and credit unions are expected to become leading users of artificial intelligence in the next few years, according to a new report that outlines wide-ranging applications for AI among FIs, including addressing compliance and incidents of anti-money laundering.
Kim Neuwirth, director of product management at Narrative Science, spoke with CUToday.info and described a future for AI in financial services that goes well beyond robo-greeters in lobbies.
Narrative Science recently released the report: The Rise of AI in Financial Services. Neuwirth’s insights are part of a series being published by CUToday.info that examines how artificial intelligence will manifest itself at CUs.
“AI can improve communications with staff and customers, analyze data in multiple disparate locations to find patterns or connections that a human couldn’t find and answer questions about investments in real-time via natural language,” Neuwirth said. “Everything from business operations, customer service and marketing, to risk management and compliance is starting to benefit from the applications of AI.”
AI Use Quickly Growing
Neuwirth explained that while AI has been around since the 1950s, its usage is increasing dramatically as computational power has increased and the amount of and access to data has exploded.
Neuwirth said that while AI is in its “early days” of use among banks and credit unions, competitive pressures will drive its greater usage.
“Our survey shows that roughly 10% of the financial services companies are using AI to compete with peers and identify opportunities in their data that would otherwise be missed. While this may seem like a small percentage today, it is going to grow,” she said. “Of our survey respondents, 32% confirmed using AI technologies such as predictive analytics, recommendation engines, and voice recognition and response.”
The company’s study surveyed more than 100 financial services executives and also was combined with Narrative Science’s own research. Narrative Science is a technology company that invented Quill, an advanced natural language generation platform driven by artificial intelligence.
Personalizing communications at scale is a primary reason for AI use among survey respondents whose institutions are using AI. Neuwirth said the uses here begin with robo advisors—online wealth management services that provide automated, algorithm-based portfolio management advice without the help of a human counterpart. Using AI, they collect information from users online and then develop an appropriate portfolio, usually using low-cost ETFS and passive index funds from companies like Vanguard.
Another example is the use of natural language generation, said Neuwirth, such as that deployed by USAA, which is applying the technology to generate tailored and actionable member communications explaining investment portfolio progress. When members interface with USAA digitally, they receive personalized write-ups detailing the performance of their individual portfolios in addition to top-level data about overall fund performance, Neuwirth explained.
Kim Neuwirth
“We think long term this will be an interesting area for deploying AI technology—to have personalized communication with members at scale,” said Neuwirth.
Neuwirth believes most consumers will first be exposed to artificial intelligence at financial institutions through devices they are familiar with, such as smartphones and tablets, before they bump into robots in a lobby.
“That makes the most sense, when you consider just how much can happen on your smart device today,” she said, pointing to how retailers can make offers on a smartphone based on a person’s physical location. “Financial services customers are getting used to these kinds of experiences, and they are saying, ‘Why can’t my financial institution provide me with this same kind of personalized engagement that I am finding in other elements of my life?’”
Staff Productivity
One of the largest applications ahead for AI among banks and credit unions will be to improve staff productivity, Neuwirth suggested. She noted that financial services firms have many highly repetitive processes, such as monthly account holder communications, and also internal reporting.
“This is an area where we expect AI use to increase greatly as financial services firms and regulators get more comfortable with these technologies—because a lot of efficiency can come from utilizing this technology,” she said.
Neuwirth pointed out that AI has been used for fraud detection—hacker intrusions and card compromises—and that it’s usage there is accelerating. But she expects an emerging area of use for FIs will be watching out for incidents of money laundering and in assembling Suspicious Activity Reports (SAR).
“For AML there are many AI platforms that can be used,” Neuwirth said. “When a financial institution files a SAR, they address the who, what, why, when and where related to the incident.”
Neuwirth said AI solutions, such as Narrative Science’s Quill, can aggregate the data quickly and from it generate a natural language report.
“This addresses operational efficiency and can be a big help to banks and credit unions as the volume of Suspicious Activity Reports increases,” Neuwirth said.