Experiences on digitalization in the field of banking
I have worked in the banking sector for the past 12 years. My first experience was a summer job as a bank clerk in a small municipality near Jyväskylä. At that time, it was quite normal for small towns to have their own bank branch. Many people used to favor the bank for cash withdrawals and paying bills. Almost every negotiation was held in bank branch.
Now, a decade later, it is very rare for small towns to still have a local branch – and if they happen to have, its opening hours are usually limited. Behind all this change is digitalization, which has transformed customer behavior. Customers seem to favor self-service based solutions and nowadays it is possible to fulfill all banking needs entirely remotely. Online banking might be the biggest revolution in the field of banking because it has enabled customers to take care of most daily banking tasks without assistance.
In my opinion, covid-pandemic accelerated the development of digital banking and changed customer behavior permanently. COVID forced banks to manage meetings remotely and manage customers to favor self-service based solutions. COVID also increased remote work in the banks. Nowadays, there are a few tasks that require constant presence in the branches. It also appears that customers prefer remote meeting to office visits.
As far as I´m concerned, the development of digitalization will continue in the banking sector, and with the rise of AI, the speed of progress is likely to accelerate even further. AI will reduce the need for human work in banks and accelerate the customers banking processes. Nowadays, artificial intelligence can serve customers in simple banking matters around the clock and even make loan decisions. Basically, AI offers great number of opportunities for innovation in the future.
GDPR and the banks
The General Data Protection Regulation, or GDPR as we know it, has been a hot topic in the field of banking since it was released. Banks usually handle a vast amount of customer data, which means that banks have had to follow the rules right from the very beginning. Based on my own experience, GDPR has made the processing of personal data much more stringent. There must always be a substantial reason when you access customer data. Customers have also more rights to know how the banks have used their customer data.
One of the main risks in banking is cybersecurity risks. Banks have attracted thieves for centuries because of money. Nowadays, money exists in digital form so thieves have turned their eye for cybercrime. Different kinds of identity thefts are everyday life in banks. Nowadays, many online services require online bank user ID so there are rising opportunities for thieves to access customer information. We can regularly read news on fake internet sites that look very familiar to original ones or so called phishing emails that try to steal customers’ online banking IDs. Even though banking systems are evolving, so do the methods of criminals.
There are also positive effects on GDPR. Banks need to invest even more in security in the future so they can response to the evolution of cybercrime. As far as I’m concerned, security and reliability will be competitive advantages in the field of banking. GDPR requires also better risk management that will benefit customers.
Artificial intelligence and the banks
Artificial intelligence is a quite new topic in the field of banking. Internet once enabled customers to manage most of their banking transactions themselves. Internet also made it possible to transfer data and money faster. Now, there is a growing debate on AI and capabilities of AI to change the banking like Internet changed it once.
I challenged ChatGPT to tell me how AI will change the banking sector. ChatGPT compiled five points how AI could change the game in banking.
- AI will reduce the need for human working in repetitive tasks. Many of the routine tasks can be handled by robots such as loan application processing, contract document preparation and money transactions monitoring. AI will reduce the amounts of errors which are typical for humans.
- AI could help banks to detect frauds and customers’ risky behavior by monitoring money transactions. AI can process a vast amount of data at once which is not possible for human workers. According to ChatGPT it is even possible for AI to prevent thefts and misconducts.
- AI will be able to serve people around the clock. AI based chats are getting more common and AI can solve the major share of customers’ problems. According to ChatGPT, AI will be able to provide investment recommendations for customers.
- AI can provide high quality data for management. AI has ability to do market analysis, process customer data and make predictions about customer behavior.
- AI can create and enable new business models for banking sector. Investment recommendations, real-time credit decisions and data-based product development are some examples how AI could change the banking world.
However, AI notice that there are some recognized issues on rapidly developing AI. GDPR is the one of the most concerning issues. Banks need to pay extra attention to GDPR nowadays, so they need to consider data protection in every phase of development. AI is not human, so there are also some ethical issues in using AI in banking sector. ChatGPT recognize also that AI will change the roles in the banks. AI develop fast and so do the skill requirements in banking sector.
For me, the overview provided by ChatGPT looked pretty good. There is no denying the fact that AI will reduce need for human work in repetitive tasks and there have been discussions among the personnel how AI will change the banking sector. To my mind, the level of automation in routine tasks has been steadily increasing for the past five years. The need for human work in routine tasks is surely decreasing but at the same time job roles are changing too. If the amount of robots increase, there is also a need for people who monitor and look after those robots. And from my point of view, customers still appreciate negotiating with people and I do not believe this will not change in the future.
Self-evaluation
All in all, this task has been very topical in my field of expertise. There is not a single day without a discussion on how someone has utilized AI in his/her work or how AI has accelerated some phase in work. So far, AI has been a nice tool that has accelerated some processes and ways of working. In the big picture AI has not been a game changer yet. Banking sector is extremely regulated so the big changes are happening with a delay. The level of regulation might also be the biggest weakness in banking sector. If the banks can’t response to the demand that other services supply, it may attract smaller players to the industry. From my point of view, this may lead to situation where customers have banking services from different financial service suppliers.
This part of the course taught me to broaden my thinking of digitalization and the evolution of AI. It was nice to read experiences from other fields. I found it a little difficult to write a text that was clear and coherent. Banking might be one of the fields that have changed the most among the digitalization, so it was challenging to find the most essential changes to write about. All in all, I am pretty satisfied for the text I wrote.
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Hi Henry!
I chose to read and comment your post because the banking field is very different from my own profession (communation and marketing). You have such a long perspective on how banking has changed in the past decade. One part that really stood out to me was your description of how COVID accelerated digital banking and permanently changed customer behaviour. The way you explained the shift from branch visits to remote meetings made the transformation feel very concrete, and it’s fascinating how quickly both customers and employees adapted to the new reality. That’s pretty much the same experience that I have in my work, but obviously marketing has been very digital to a while already (nobody goes to door from door anymore).
I also found your discussion on cybersecurity very intriguing. You highlighted well how banks have always been targets for crime, but the “battlefield” has now moved online. Your examples made the risks feel very real, and it was interesting to see how GDPR has influenced everyday work in banking. That is also something I has to face everyday in my work.
Your post gave a clear picture of how digitalisation, AI and regulation all interact in the banking sector. Thank you fo sharing such a detailed and grounded perspective!