Banks bet on AI to deliver digital efficiencies

In the face of shrinking budgets and rising customer expectations, banks are increasingly relying on AI, according to a recent study by consulting firm Publicis Sapiens.

The Global Banking Benchmark Study 2024, which surveyed more than 1,000 executives from the banking sector worldwide, found that almost a third (32%) of banks’ budgets for customer experience transformation is now spent on AI, machine learning, and generative AI. Around 42% percent of banks rely on personalized customer journeys to improve the customer experience.

As the study’s authors explain, these results underline a clear trend toward more personalized services, data-driven decision-making, and agile processes. Banks hope these shifts will enable them to innovate faster and work more efficiently in a rapidly changing market.

Even beyond customer contact, bankers see generative AI as a key transformative technology for their company. According to the study, the biggest focus in the next three years will be on AI-supported data analysis, followed by the use of gen AI for internal use.

Interestingly, developing existing talent is the third most cited focus for digital transformation — a sign that leaders recognize the importance of preparing employees to work with gen AI. This is even more true as banks look to tackle internal and customer-facing use cases despite regulatory concerns.

According to the study, key areas where banks are currently focusing on gen AI include:

• Transactional use cases: Three out of five (61%) banks use the technology for transactional use cases such as credit analysis, portfolio management, risk assessment, legal contracts, offers, tenders, and pitch documents.
• Employee productivity: In 55% of banks, gen AI supports employees, for example in the form of assistants.
• Marketing and customer service: Nearly half (49%) of bankers surveyed said they use gen AI within their marketing or customer service operations.

Digital transformation harder than ever

Despite that emphasis on making the most of AI, banks continue to struggle with digital transformation. Depending on how far banks are developed in the areas of customer leadership and operational leadership, the study’s authors divided the banks surveyed into four groups. The proportion of “transformation leaders” — the most advanced group — has halved to 11% compared to 2022, while the proportion of “slow starters” has increased from 57% to 66% over that two-year period.

Many banking executives said regulatory challenges, lack of operational flexibility, and outdated technologies were the biggest obstacles to their organization’s digital transformation over the past 12 months. In addition, budget constraints were cited as an obstacle by 32% of executives.

That budget environment is not only influencing the progress of banks’ digital journeys, but even dictating their direction. According to the study’s authors, two years ago the most important goals of managers were: improving customer experience, increasing profits through new products and services, and increasing sales of existing products.

Today, improving the customer experience, especially for existing customers, is still an important goal. But earnings improvements such as higher margins and efficiency gains are now at the top of bank executives’ priority list for digital transformation. They say that reducing costs through increased efficiency and greater flexibility are among their most important goals. In short, now it’s about getting better — and AI is viewed as a means for getting there.

AI as differentiator

According to the study’s authors, banks that are strategically positioned in AI and agility can achieve transformative growth and efficiency. There are big differences in the way transformation leaders use AI compared to laggards: Not only do they invest more; they also invest differently. Banks that are ahead of the pack focus their investments on laying the foundations to better leverage the benefits of AI. For example, 44% of transformation leaders give priority to the internal use of AI, but only 25% of slow starters do the same.

At the same time, 84% of transformation leaders believe it is better to develop customized AI tools than save time by using off-the-shelf solutions. Among laggards, only 70% think so.

“The effectiveness of AI depends on the quality of the processedDataand competence in dealing with the technology,” explains Alexander Schroff, Financial Services Leach DACH at the consulting firm Publicis Sapient. Data integration allows deeper insights into customer behavior and the development of innovative products. These technological advances enable banks to position themselves agilely and future-proof in an increasingly dynamic market environment. “AI is therefore the key to reaching the next level of digital transformation,” says the banking expert.