“Artificial Intelligence is a “Bomb” for the Banking Business”

In an interview with Bankir.ru, Dmitry Krasyukov, Deputy CEO of SAP CIS talked about why banks should go beyond the core business, the opportunities offered by marketplaces, and the impact of artificial intelligence on future services.

— What technological trends are typical for the Russian market – what do the Russian banks have a demand for?

— In Russia and the CIS, more than 70 clients of SAP are representatives of the financial sector. We are observing two obvious trends. Firstly, banks are now actively using cloud services. Here, however, we are talking about non-core activities. For example, about purchasing or personnel management. In this case, there is no need to deploy an IT infrastructure at home – you can use a solution with the vendor’s standard capabilities.

The second trend is an increase in the number of real-time banking projects. This is when a complete picture of the bank’s work in all areas of activity and branches is formed in real time. It is a convenient tool for top management who understands what is happening in the bank at all levels and what steps need to be taken to change the situation.

— There is now much talk that companies must either transform or die. To what extent does this categorical statement apply to banks?

— Banks need to be transformed – there is no doubt about this fact. On the one hand, players from other service industries are now taking over some of their functions. One of the examples is Tele2, which, together with QIWI, launched a service that allows subscribers to make payments via their phones. Today, you can carry out money transfers even in VKontakte. On the other hand, a generation is growing up which does not like routine operations and wants to receive everything from a “single window”. And it’s already hard for us to imagine that you need to go to a physical office in order to get an account statement.

The bank is a guarantee of stability and reliability for the Russian people.

The bank is a guarantee of stability and reliability for the Russian people. I will not say that those banks which won’t transform themselves into a digital format will die. But for commercial banks that seek to specialize in a niche, transformation is necessary first of all.

— Let’s define the concepts. What is meant by transformation?

In order to achieve the main goal, you need to look for other tools.

— For many, the transformation of banks is the transition to digital service channels: online and mobile applications. There are many banks in Russia which work with clients remotely, but here’s an interesting point: in some banks one can’t observe the increase in the number of clients or the number of transactions. In other words, clients perform the same operations as in the bank branches. Why is this happening? Because the banking model does not change, it is simply transferred from offline to online. And in order to achieve the main goal of selling a larger number of products or services to a client for a larger amount, you need to look for other tools.

— And what are these tools, in your opinion?

— First, a little history. It all started with text messages. Do you remember when banks started trying to cross-sell and send annoying SMS messages? For example, I am paying off a mortgage, and they offer to open a deposit. This was due to the lack of a personalized approach.

The response to the bank’s offers increased by 400%.

Then banks began to collect information about their customers, analyze it, and based on this analysis, offer the customer what they really need. A striking example is the Polish mBank, which was one of the first to use big data, monitor what customers buy, where they do it, and then make special offers to them. As a result, the response to the bank’s offers increased by 400%.

Geolocation is another tool that banks are actively working with right now. Understanding exactly where the customer is located plays an important role in the sale of banking services. In my opinion, the banks that are currently creating their own virtual mobile operators are doing this just to understand the location of their consumers. How can it work? For example, I come to the store, and the bank sends me an interesting credit offer for my card. There are many possible scenarios, and there are few “pilots” yet, although the topic is very promising.

— How else can banks attract customers?

— It is important to understand that each person exists in his own context and micro-moment. And the service industries, including the banking one, need to be able to integrate into this context. For example, within the framework of a thematic marketplace, as one of the major banks in Kazakhstan did. The bank realized that the customer does not need a loan, but a product in the first place, and created its own online store of non-food products, where you can shop on credit without wasting time on an application and approval. As a result, the average check is $300, and about 500,000 purchases are made per year.

In the USA, we have a project with Purchasing Power. The company creates platforms where employees of an organization can buy various products in their employer’s online store. The peculiarity of such a marketplace is that you, as an employee, can purchase goods at an attractive price and with the possibility of installments for several months. And another nice bonus: the installment amount will be deducted from your salary. This is an additional motivation for employees, and for the bank – an opportunity to make personal offers based on detailed information about the salary of customers.

SAP is now actively developing the concept of B2me – “business for me”.

Today, success is achieved by those banks that go beyond the boundaries of their business and launch projects at the junction of industries – retail, telecom. SAP is now actively developing the concept of B2me – “business for me”. The essence of the concept is to satisfy the ultimate human need. I’ll tell you how this can work in the industry, using the example of the bank of Central America – Credomatic. The bank’s management has realized that the end customer needs not just a product, but business development. In addition to its financial services, the bank has provided its small and medium-sized business clients with the opportunity to use the enterprise and accounting management system.

— How will the cost structure of the banking business change in connection with digitalization?

— Today, the bank has two main items of expenditure: the cost of renting space and people. If a bank is actively developing a mobile application, then one can save money on branches, for example. But the quality of customer service should not suffer, so here, most likely, one will have to maintain a huge call center.

In my opinion, the key technologies that will change the cost structure in the future are machine learning and artificial intelligence. For example, at Tinkoff Bank, 10% of all applications are already processed by robots.

We are currently developing various scenarios based on artificial intelligence, which are also applicable in the banking industry.

In the near future, one will refuse to use humans in tasks related to operations that do not require creative abilities. All simple operations, time-consuming and repetitive processes will be performed by the machine. At SAP, we are currently developing various scenarios based on artificial intelligence, which are also applicable in the banking industry.

— Do you think a chatbot or robot will be able to understand the nuances of a client’s needs, as human employees do?

— The big problem of call centers is staff turnover. First, one needs to constantly hire people and train them. Secondly, unlike a machine, a human cannot analyze hundreds of thousands of responses in order to choose the best one. Artificial intelligence, in its turn, can endlessly accumulate knowledge, self-learn, and provide high-quality answers to a wide variety of customer questions. Simply put, artificial intelligence is a “bomb” that will change the banking business. In the future, the people will not be able to compare with it in terms of quality of service.

When AI will be developed at a high level, the structure of banking costs will change. The cost items associated with the work of a large number of people will disappear. However, there will be costs for the maintenance of this intelligence.

— And what other tasks in the industry can be solved with the help of artificial intelligence?

AI is an excellent tool for detecting fraud and various abuses.

— We are talking about a whole range of tasks that could not be automated earlier, since there is no way to clearly algorithmize them. For example, assistance in decision-making. For large banking networks, artificial intelligence can be used to find the most advantageous location of a new point of sale or bank branch. Or, alternatively, to suggest how to work with the client correctly, to keep him in the sphere of influence. I will also mention the function of control. The use of AI systems to find patterns is an excellent tool for detecting fraud and various abuses. As an example, one of the most popular directions is video monitoring, which allows you to understand whether an employee did the right thing and whether he performed all the necessary procedures.

— Are there segments in the banking industry that cannot be digitized?

— Absolutely. In the corporate segment, for example, or investment banking, there often occur unique situations that only a human can understand. Areas where complex tasks need to be solved are less amenable to digitalization. Specialists’ help will always be in demand here.

— I suppose, banks without branches will not become mainstream?

— There are two extremes: banks without digital service channels and banks without branches. In my opinion, the optimal model is in the middle.

Learn more on the website bankir.ru