Why This CTO Says the Bank of the Future Is Already Here

Digital banks have long eschewed physical branches in favor of direct, digital customer engagement.

Digital banking’s convenience has been a competitive advantage for challenger or neo banks, increasingly allowing their customers to do their banking tasks on a smart phone or at the kitchen table. This approach not only aligns with contemporary digital lifestyles but also ensures accessibility and convenience for bank customers.

And artificial intelligence (AI) is giving these digital banking conveniences a shot in the arm.

“AI assistants are the next step in the digital banking evolution, allowing customers to interact with their finances through natural language,” Kåre Kjelstrøm, CTO of Lunar, told PYMNTS during a discussion for the “AI Effect” series.

This represents a significant shift from traditional user interfaces (UIs), enabling users to gain deeper financial insights in ways that are intuitive and come naturally to them.

“It is a journey toward hyper-personalization,” said Kjelstrøm, noting that traditional banking systems often provide generic and impersonal services, which can leave users feeling disconnected from their finances — despite the fact that banks commonly possess extensive data about their customers, which, when effectively leveraged, can transform the user experience.

“Banks actually have a lot of information about you that can be leveraged to help you take control of your finances,” he added.

But only some of them are using AI solutions to activate it.

The Benefits of AI for Personal Financial Management

The integration of an AI assistant into the digital banking experience represents a new era of tailored financial advice and insights that can be based on individual user data.

For instance, as Kjelstrøm highlighted, if a bank customer returns from a vacation, the AI assistant can analyze their spending during the trip and provide a detailed breakdown — all conveyed via easy to digest natural language.

Given the limitations of traditional AI technologies just a year or two ago, providing this level of personalization tailored to specific financial information is a brand new possibility that wasn’t previously possible. Advancements in AI and machine learning over the past few years have been critical in enabling future-fit sophisticated solutions. These advancements mean that AI can now analyze vast amounts of data, identify patterns, and provide actionable insights more efficiently than ever before. This is particularly beneficial in banking, where large datasets and complex transactions are the norms.

“AI in itself isn’t anything without a massive amount of data … it is a lot of things coming together, the compute power, the [AI] algorithms and natural language processing, and then this vast amount of big data — that’s really why the ketchup suddenly came out of the bottle,” Kjelstrøm said.

He envisions a future where AI-powered hyper-personalization is the norm in banking. “Hyper-personalization means the application knows enough about you to give you insights you need about your finances on a day-to-day basis,” he said. This could range from reminding users about upcoming expenses to providing customized financial advice based on spending patterns.

Another example Kjelstrøm cited is the AI assistant’s capability to warn users about potential overdrafts by comparing current spending to previous months and suggesting adjustments. This proactive approach can help users manage their finances more effectively, reducing financial stress and promoting better financial health — similar to how wearable fitness devices support users’ health and wellness goals.

The Two Sides of AI Within Banking

But the benefits of AI in banking aren’t solely reserved for giving customers greater control of their finances by leveraging technology to create a seamless, user-friendly banking experience.

AI is also transforming the internal operations of banks. One significant area is customer support. Kjelstrøm said Lunar is integrating its AI assistant with customer support systems to handle basic inquiries, allowing human agents to focus on more complex issues. This not only enhances efficiency but also improves the quality of customer interactions.

AI also plays a crucial role in business-to-business (B2B) services. For example, Lunar uses AI for automating the onboarding process for business clients. By leveraging AI for document scanning and optical character recognition (OCR), banks can streamline onboarding, reducing the time and effort required to process new clients. Additionally, AI aids in credit scoring and transaction monitoring, providing deeper insights and more accurate assessments than traditional methods.

Looking forward, Kjelstrøm emphasized the importance of convenience in financial services. He predicts a future where users can interact with their finances seamlessly, whether through integrations with other systems or simply by speaking to their AI assistant. This convenience, coupled with the automation of mundane tasks, will redefine user experiences and expectations in banking.

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