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Innovation and automation - The future of retail banking

(Image credit: Image Credit: MK photograp55 / Shutterstock)

50 years ago, a new technology swept across banking, transforming the way that consumers interacted with their financial institutions and their money. The launch of the first ATM (or cash machine), in London by Barclays, heralded a new, consumer driven focus for retail banks, with customers deciding when (and later, where) they wanted to access their money. This change allowed banks to shift their focus from applying rules (you may only withdraw money at a specific time) to meeting evolving customer needs.     

Additional technological advances brought further innovation and customer benefits. Plastic started to replace the cash in consumers’ wallets, and online banking portals emerged on computers and smartphones, freeing consumers from the tyranny of opening hours, paperwork and phone calls from merchants to verify bank balances. In an increasingly competitive banking environment, consumers found themselves spoilt for choice as their banks increasingly tried to tailor their services to their customers’ changing lifestyles.

No industry can stand still, however, particularly as a new generation of consumers accustomed to smart and connected technologies has become an important market segment. This customer base has helped to drive a new technology revolution, as the retail companies they use have turned to Artificial Intelligence (AI) as a way to provide them with “always-on” service. The financial services industry must be aware: ignoring this next step forward in technology could see their organisations fall out of step with their innovative competitors working in the payments and tech space.     

Long a science-fiction mainstay, it is recent developments in machine learning and data mining that enabled AI to finally crystallise into a functioning consumer technology. AI applications can now use data taken from millions of customer interactions to map out future customer needs and identify how to respond to them. By shadowing human operators working and logging their responses, these automated systems can learn an institution’s brand and tone of voice and then apply it to their customer responses. Feedback loops constantly improve the appropriateness and effectiveness of the response, with the goal of providing consumers with a seamless customer experience.   

In terms of customer service, one effective way of operating these AI systems is as chatbots, which can unobtrusively float on top of an open website, without requiring pop-ups or new browser windows to be opened. This discrete approach is critical, as it ensures that the customer retains the ability to decide where and when they want to interact (or not) with the company in question. In addition, chatbots closely mirror the instant messaging services used by younger customers to communicate, making the interactions feel more personal and relevant.    

While providing customers with an engaging and informative service, retailers have also found chatbots can provide a range of benefits beyond the simple fact that they extend customer service hours of a brand across 24 hours. Chatbots can be overseen by customer service operators, and in contrast to AI applications using voice control, multiple chatbots can be monitored at the same time by a single person. While the majority of conversations can and will be handled automatically by an AI application (for example, we found that an insurance client could use AI to handle 67% of online customer queries), complicated questions that require more input can be handed over to a human operator.    

This ability to blend AI and human interaction should resonate strongly with financial services organisations due to their highly regulated nature. If a customer requires help with filling out an application for credit, an AI chatbot can provide discrete support. If, at any point, the customer then asks for advice or crosses a pre-configured red line, a human operator can step in to ensure compliance with financial regulations.    

As an additional benefit for retail organisations, AI applications can also provide a new customer interaction model - that of uplift. An AI system can be trained to only engage with customers that will appreciate the contact (determined by detailed data analysis of millions of online customer interactions), thereby uplifting their customer experience, while monitoring but not disturbing customers that wish to be left alone. This approach could help banks to increase conversions amongst those that are amenable to being interacted with, while not impacting on customers who prefer to do their own research or not be disturbed.      

One way to advance this idea is through the use of disruptive innovation such as virtual branches. Creating a virtual branch allows businesses to engage with potential customers on another organisation’s domain, and is an ideal way to meet evolving customer expectations. Essentially a digital version of a shop-in-shop, a virtual branch allows service providers to have a real service encounter with a potential customer browsing a partner domain. 

The service is integrated seamlessly with the purchase journey of the hosting partner, meaning that the context in which it is provided is the best form of digital service.  

To give an example, imagine a person considering an expensive home improvement project. Whilst they are evaluating the providers and options available, they could be approached with an offer for credit advice or a loan. This could be done via a variety of methods including live chat, automated loan calculators, chatbots, co-browsing or a combination of any of these features, embedded on the partner website.     

Setting up the service is relatively straightforward. The partner installs the script on their website and uses it to allow access to their partnering financial services company. The two parties involved can agree on rules regarding when and where the service is offered. For example, the financial services provider might target only those online shoppers who are looking at expensive items, such as a kitchen or bathroom, but do not proceed to order.    

There are a variety of ways in which virtual branches can be used, for example offering mortgages on property websites, embedding loan calculators into car dealer websites or reaching out to customers when they are assessing their financial situation. In addition to increasing conversion, this sort of disruptive innovation is a great way to improve the customer experience and meet evolving expectations, as the consumer receives relevant information at the right time and right place, while they are in the right mind-set.    

Technology such as AI, live chat, chatbots and virtual branches represent a wealth of opportunities for financial institutions such as retail banks. Both financial services providers and online retailers need to ensure that they are working together in these rapidly changing times by embracing and progressing these innovations.    

Ville Rissanen, CEO and Founder of (opens in new tab) 

Image Credit: MK photograp55 / Shutterstock

Ville Rissanen is CEO and founder of, which he started in 2010. Prior to this, he was the CEO of Citrus InDB, after working in sales and business development for Itella and Reachway. Ville is Finnish, and a graduate of an M.Sc. in the Digital Economy from the Helsinki University of Technology.