Anticipatory Banking: Using AI to Create Advantage in a Digital World
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This document discusses how banks can use anticipatory banking and AI to create advantages in a digital world. It outlines how historic differentiators for banks like operational efficiency are eroding, shifting the competitive basis to personalized customer experiences. Anticipatory banking uses AI to understand individual customers and anticipate their needs to maximize their financial health. This improves customer acquisition, retention, cross-selling, and reduces delinquencies. The document provides examples of how anticipatory banking could work through use cases and outlines key enablers like data, AI platforms, and journey mapping. It emphasizes the importance of governance throughout the AI lifecycle to ensure fairness and transparency.
Anticipatory Banking: Using AI to Create Advantage in a Digital World
- 1. Anticipatory Banking: Using AI to Create Advantage in a Digital World 12 June 2019 RASHED HAQ Global Head of AI, Robotics & Data
- 2. Transformation of Retail Banking 2 Historic differentiators for attracting and retaining customers is eroding AI is enabling new ways to create offerings Customer Loyalty Open Banking and the emergence of banking platforms, FinTechs and distributed ledgers is reducing switching costs and exclusivity of relationships Open Ecosystems The transformation of the back office will remove operational efficiency and scale as a competitive differentiator Competitive basis is shifting to the front office Operations Transformation
- 3. 3 Anticipatory Banking is a customer-centric platform to create intelligent fortification of the core business that provides value to both the customer and the bank
- 5. Customer Centric Model 5 Confidence in BankLO HI %ofCustomersAgreeBankisDoingThisLOHI Looks after my financial well being Helps me manage my finances Communicates openly and about meaningful topics Lets me bank anytime, anywhere Source: Gallup Branch, mobile & online satisfaction Shift from being in the financial services business to being in the financial health business 6X customers say their bank is the only financial institution they need
- 6. Anticipate customer needs and personalize services at scale to each individual through their specific journey to maximize their financial health 6 Understand Customer Things about them How they will behave What their needs are Maximize Financial Health Financial health score Percent of customers who levelled up Optimize Spending Make payments on time Spend less than earnings Manage Loans Have strong credit score Ensure debt is sustainable Grow Savings Have short term rainy-day fund Grow long term savings
- 7. Business Value for the Bank 7 Bank Outcome Size Benchmark Rate Δ (N) Value / Y Customer Acquisition: Increase account openings by N% due to brand and service differentiation, growing brand value and NPS score 10 MM (total customers) $300 2% $60 MM Customer Attrition: Boost customer satisfaction and retention and decrease customers attrition by 5% 1.5 MM (15% of 10 MM) $500 ($200 acquisition cost) 5% $38 MM Products and Services: Increase cross-sales and customer lifetime value with an increase in products per customer by N% (e.g. from 1.3 products /customer to 1.5) 10 MM $100 5% $50 MM Deposits: Larger bank deposit balance per customer by N% 10 MM $50 7% $35 MM Delinquencies: Reduce delinquencies on loans and credit cards and subsequent charge-offs by N% 100 K $350 20% $7 MM Efficiency: Improved employee productivity, and drive employee engagement and retention 10 K $75 K 8% $60 MM $250 MMAnnual Financial Benefit Impact of Anticipatory Banking
- 9. 9 Anticipatory Banking Framework Engage Customer Understand Customer Data & Signals Decide Product or Service Bank Transactions User Activity (1st party) External Information (3rd Party) Machine Learning Deep Learning Natural Language Processing Machine Learning Deep Learning Semantic Reasoning Journey Orchestration Digital Content Direct Messaging
- 10. Use Case 1: Need for Increased Credit • Customer injures ankle and needs additional money to cover medical expenses • She reads about injury on WebMD • While reading an article on EPSN’s website, she sees a bank ad offering new/increased credit limit • Sustained low liquidity levels within the checking account • Customer makes several doctors visits and co-pays with credit card indicating an increase in health related spending • Increased activity on health related web articles (WebMD, etc.) • Ad impressions from sports websites • Pays debts timely • This is a bank user who is likely dealing with an unexpected health event • Does not have liquidity to manage an unexpected event • Has low credit risk to date • Offer new credit line • Offer advice for making sound credit related decisions • Show digital ad through ESPN INCREMENTAL INSIGHTS • May need advice managing credit • Enjoys reading about sports INCREMENTAL INSIGHTS • Needs a savings plan Engage Customer Understand Customer Data & Signals Decide Product or Service
- 11. Use Case 2: Need for Savings • Customer earns a promotion to Senior Architect and a significant pay increase • Customer signs into online account to pay bills • A masthead notification reminds her of prior unexpected spending spike and suggests it’s a good time for an emergency savings account. • Increase in the frequency of a higher direct deposit amount • Sustained low liquidity levels within the checking account • Lack of secondary account with funding • Previous record of an injury and unexpected financial event • This is a bank user who had an increase in her monthly income • Does not have enough liquidity to manage an unexpected event • Offer advice to build an emergency fund through a savings account • Show masthead with recommendation INCREMENTAL INSIGHTS • Customer is focused on career • She is working in a company that offers a path for career improvement INCREMENTAL INSIGHTS • She is smart about savings • She is interested in planning for the future Engage Customer Understand Customer Data & Signals Decide Product or Service
- 12. Use Case 3: Need for a Mortgage Loan • Customer starts thinking about purchasing a condo • She begins looking at home buying sites • She receives a personalized email from her bank that includes tips on buying homes in his area, mortgage calculator for how much she can afford, and how to apply for pre-approval • Increase in savings, and lower spending, for a longer than normal period • Increase in frequency of logging into bank’s online account • Web activity showing increased interest in real estate related browsing, including searching for Mortgages and comparing • Increased visits across various city neighborhoods, via location graph from his device info • This is a bank user who is actively looking to purchase a home • She is researching the financial instrument available that can facilitate a purchase • Suppress credit related marketing • Offer advice on buying a new home and provide a link to a local branch and the name of the Branch Manager • Send email with recommendations INCREMENTAL INSIGHTS • Comparison shopper INCREMENTAL INSIGHTS • Accessible during weekdays Engage Customer Understand Customer Data & Signals Decide Product or Service
- 14. Key Enablers 14 Data Aggregate sufficient data depth and bread to get meaningful behavioral signals Include sufficient 3rd party data AI Platform Build the AI platforms and processes to experiment and deploy AI models at scale Govern AI model risk for fairness, transparency and other policies at every step Journey Map out customer journeys and knowing where the insights will be used and in what way Integrate systems and processes, with pre-approved messaging, so activations can be real time
- 15. Data and Journeys 15 CRM Web Mobile Email Social Digital Ad Contact Consumer Devices Call Center Content Management Ad Impressions Journey Orchestration Journey Data Hub IntelligenceJourney Reports
- 16. Models Predict Life Event Novel Item Desire Genome User Intent Search Social Ad Imp Transactio n Brows e Offer Account Activity Call Center Recommen d Product in App Direct Send Recommended Product Direct Send Offer Improve Operations Predict Best CoSelling Products (Xsell) Propensit y to Buy Future Purchase s Customer Lifetime Value Best Recommen- dation by Channel Demand Forecast Best Offer Type by Channel Best Channel Best Offer Type Ideal Price Point Best Alternate Product (Upsell) Call Volume Forecast Call Intent Customer Churn Topic Modeling Discover Churn Reason Item Impulse Desire
- 17. AI Platform 17 Impact of AI Platform Approach Regulatory & Compliance Pressures Typical Bank Leading International Bank Digitally native company No.ofmodelspermonthperperson No. of data scientists Feature Marketplace Data collection and readiness for modeling Model Builder Model creation, refinement and validation Inference Activator Risk governance, model deployment and production activation Performance Manager Production monitoring and potential retraining
- 18. Build Model Risk Governance into Each Phase of the Project Lifecycle 18 Data Quality Data Bias Detection Protected Features Model Reproducibility Fairness Testing Model Interpretability Retraining Triggers Model Regularization for Bias Boundary Conditions & Sensitivity Testing Failsafe Circuit BreakerFair Data Preprocessing Equalized Odds Postprocessing BEFORE MODELING DURING MODELING AFTER MODELING
- 19. RASHED HAQ Global Head of AI, Robotics & Data Rashed.Haq@publicissapient.com BOOTH # AI520 Thank You“We are on the brink of the algorithmic enterprise. Today’s generation of business and technology leaders can have a metamorphic influence on humanity by catalyzing applied AI for every enterprise.”