Banks and lenders are still falling short of fully capitalizing on the AI revolution

The artificial intelligence revolution is well underway, but how ready are banks and lenders to leverage the full breadth of these capabilities? The jury is out.

It’s a bad time for ambiguity. With bank and lending customers stuck in a malaise of persistent inflation and experiencing varying degrees of financial difficulty, customers are growing impatient, putting decades-long relationships in jeopardy. Institutions know this and are trying to find new ways to not only bolster their client offerings but supercharge their own processes and productivity.

AI should make both of those things easier to achieve. And while some banks and lenders have made these integrations to varying degrees of success, others are struggling to fully embrace this next technological chapter.

Surveying the field

To get a sense of exactly where banks and lenders are with AI, EXL surveyed 98 senior executives at the leading financial services firms in the U.S. The research found that, while 80% have implemented AI to some degree and have expressed plans for continued and aggressive implementation over the next two to three years, over half (55%) are using it in a narrow band of functions.

The story is similar with generative AI (GenAI), as nearly half (47%) reported already using it, the most common uses being for product/service development (58%) and customer care/service (46%). Another 38% said they plan to incorporate it into their business within the next 24 months. Notably, among top finance firms in the study, 85% said their boards are involved in the decisions about the use of GenAI.

When it comes to where banks and lenders are using GenAI sparingly, the results are surprising. Just 29% are using GenAI to identify and track financial crime, while only 28% are using it for fraud detection, and 26% for credit/mortgage lending. The findings in the study show that these processes are ones that are primed for optimization, suggesting that there are plenty of unrealized opportunities to drive new growth.

Seizing the opportunity

It’s clear that there are nagging concerns holding some banks and lenders back. For starters, nearly half (49%) of all companies in our EXL study said they’ve encountered challenges with AI explainability and lack of leadership buy-in. Cost or budget concerns, lack of resources, and legacy systems were also noted as key issues.

But that hesitancy can inform the next step forward. For banks and lenders to overcome the current barriers and fully embrace AI, there needs to be a holistic strategy that can be incorporated on an organization-wide level.

For starters, AI initiatives can’t be ad hoc or disconnected from what the company wants to achieve overall. The best way to ensure that AI fits into a company’s plan is to have data drive how and where this technology is implemented. Leveraging AI needs a comprehensive strategy, which is why so many stakeholders are initially resistant. Leaders find themselves asking: How is this going to change our business? Is it worth the investment of resources? And will we come out the other end of an implementation a stronger organization? Having data take the subjectivity out of those conversations is key to getting leadership buy-in.

Working with the right partner is also a vital part of the equation. Every industry has unique needs. For financial services, AI needs to not only pass the litmus test at an institutional level, but it must also have buy-in from customers. Customers are only going to be comfortable with AI being at the heart of their financial planning tools or lending decisions if there is a clear benefit. Partners that understand the organizational pain points, as well as the distinct needs of a bank or lender’s customers, will drive smoother implementations.

The road ahead

There is no universal way forward for AI. Whether it’s in building better internal processes or serving clients, banks and lenders must find the right way forward that serves their unique organizational needs in a truly diverse financial services landscape.

While firms are eager to capitalize on their new technology, how they do so is going to dictate the degree of success they will have. Whether their goal is to increase revenue, improve customer service experiences, or bolster organizational decision-making, the opportunity is there. Those who work with the right partner who understands their specific needs and helps them build a comprehensive AI strategy will be the ones who find the most success.    

To learn more about how banks and lenders can ride the next wave of the AI revolution, visit us here.  Additionally, you can learn more from our Banking executives at the AI in Action livestream.

Rajeev Minocha, head of banking and capital markets at EXL, a leading data analytics and digital operations and solutions company.