Borrowing from fintech’s playbook, banking leverages AI-based business monitoring

Automated anomaly detection is improving customer experience, lowering costs and aiding service consolidation

Many banks are undertaking digital transformation to improve customer service, reduce their operating costs and uncover new business opportunities. A leading new technology that promises to be a real differentiator in the banking industry is artificial intelligence (AI) built on machine learning (ML) algorithms.

A McKinsey & Company report says that to compete successfully and thrive, banks must adopt AI technologies as the foundation for new value propositions and distinctive customer experiences. Doing so could potentially unlock $1 trillion of incremental value for banks annually.

Where business intelligence tools fail

Monitoring metrics with dashboards and static thresholds based on human assumptions holds banks back from proactively meeting customer needs and operating at a large scale. When using these legacy systems, anomaly detection is a game of chance, consequently prolonging many of the incidents that hurt customer experience and brand reputation.

Traditional monitoring using static thresholds depends on a human setting maximum and minimum values for a time series metric, and getting alerts when data exceeds those limits (see Figure 1). The area in red falls within the shaded blue area representing normal data patterns but still tripped the static threshold, sending a false positive alert. However, the area in orange fell outside the normal baseline but failed to trigger an alert as it didn’t exceed the thresholds – commonly known as a false negative. This represents a lost opportunity for course corrections that can preserve revenues.

The highest rewards from using advanced AI come from monitoring business data. According to Business Insider Intelligence research, the majority of potential cost savings for banks from AI applications are in front-office and middle-office use cases such as customer interactions and payments. This information can greatly improve customer experience, reduce costs and more easily consolidate services. Here are just a few examples:

Customer experience

Customers’ needs and expectations for personal banking are changing quickly, and their options for service providers are expanding as fintech companies take their offerings into areas served by traditional banks. AI can help banks do a deep and fast analysis of every individual customer to get better insight into their behaviours and respond with programmes or services to enhance their customer experience and reduce churn.

Operational costs

AI is a critical technology for keeping tabs on KPIs and receiving alerts when something is off. By monitoring factors such as the cost of acquiring new customers, the success of marketing campaigns, infrastructure operations and more, banks can lower their overall operating costs. Personal finance company Credit Karma uses Anodot’s Autonomous Business Monitoring to identify revenue anomalies in real time so they can be resolved before negative impacts occur.

Consolidation of services

The scale of business and the complexity of workflows are changing because applications now require extensive API communications to third-party services – for example, for affiliate marketing programmes. Banks need to monitor the performance of the APIs and the vast amounts of data flowing through them to understand whether a service is cost-effective or not. Only AI and ML can analyse this data and produce alerts in real time.

There are many different areas where AI can produce the critical insight to give a competitive edge in banking services. By automating revenue monitoring, banks can provide better customer experience, reduce costs and consolidate services to give them an edge in what has become an increasingly competitive market.

Visit Anodot to learn about the Autonomous Business Monitoring platform that Payoneer, Credit Karma, eToro, and other leading financial services companies use to proactively monitor their business.