The banking sector has always been data intensive. Today, AI technology has the capability to improve efficiency, increase innovation, boost differentiation, manage risk and regulatory needs, and positively impact the customer experience. While more than 80% of financial services AI adopters say that AI will be very or critically important to their business's success in the next two years, it's time for banks to move beyond the hype and consider practical applications of AI across the entire organization. On today's Banking Transformed podcast, we have Imtiaz Adam, global AI influencer and founder of Deep Learn Strategies Ltd. He will share why financial institutions must make adoption of AI technologies across the entire enterprise a strategic imperative.

AI brings the potential for disruption and transformation due to its ability to make decisions and take action much quicker than its human counterparts. It has been seen as a means of increasing productivity within a company and improving revenues through better customer engagements. But the use of AI is not without pitfalls, risks and detractors. Will AI used for good or just corporate greed? How should the use of AI be regulated?

Digital banking transformation involves the integration of data, advanced analytics and digital technology into all areas of a financial institution, changing the way work is done, priorities set and services delivered. Become a Data and Analytics Leader Enhance Consumer Experiences Foster Innovation Leverage Modern Technologies Upgrade Systems and Processes Reskill Your Workforce Align Leadership and Culture for Digital Future Unlocking the full potential of digital banking transformation requires the use of data, analytics and artificial intelligence to deliver an exceptional customer experience. The challenge that was found in research by the Digital Banking Report is that, while financial institutions understand the importance of data and advanced analytics, 75% of institutions don't consider themselves adept at using these capabilities. COVID-19 shifted consumers' use of digital technology in an instant, creating more awareness of the potential of digital apps and creating new digital habits. This has impacted the way consumers bank and the expectations consumers have around digital solutions and digital engagement.

Digital banking transformation has enabled many financial institutions to become more prepared for the future as the world was disrupted by the pandemic. For those banks and credit unions that have become the most digitally mature, the focus on improving the customer experience, increasing the use of data and advanced analytics, and deploying new technologies has positioned them at a competitive advantage. Despite the progress made, all financial institutions will need to increase investment in digital banking transformation initiatives, responding to marketplace expectations and adjusting business models to reflect a highly altered banking ecosystem. A great deal of the focus in 2022 will need to be on back-office processes that are highly outdated and have slowed the progression of all digital banking transformation efforts. The future will also see a greater involvement of banking staff in building humanized experiences for transactions that were initiated digitally.

Despite warnings for more than a decade, most financial institutions are unable to manage the data at their disposal or extract actionable insights, leaving money and opportunities on the table. To compete with fintech, big tech and the largest banks, financial institutions of all sizes will need to harness the power of data, making insight-driven decisions and delivering the level of experiences consumers and businesses have come to expect from the firms with the highest levels of data analytics maturity, like Amazon, Google, Facebook, Apple and others. In research done on behalf of Deluxe by the Digital Banking Report, it was found that many organizations have the ability to extract insights from various data sources, supporting foundational marketing decisions and creating segmented marketing programs. Where most organizations fall short, however, is in using data and artificial intelligence (AI) to power real-time decision-making throughout every aspect of the customer journey. The lack of data analytics maturity also hampers the ability create instantaneous learnings from marketing initiatives, using tools like machine learning (ML), that can improve marketing performance over time.

In research done by the Digital Banking Report, financial organizations of all sizes indicate a low level of data maturity despite an increasing array of AI solutions offered by third-party vendors. In the research, only 12% of organizations believed they were "very effective" or "extremely effective" at using data and advanced analytics. This is lower than prior to the onset of COVID-19. While legacy systems are cited as the primary reason for the shortfall, the second most cited challenge is the lack of expertise within the organization to deploy AI technology effectively. In other words, while banks and credit unions can purchase sophisticated AI solutions, there usually isn't a defined path to achieving strategic goals or increasing business value.

According to the Digital Banking Report, the use of artificial intelligence (AI) by financial institutions of all sizes continues to escalate, as banks and credit unions better understand the benefits of the technology in reducing risk, improving operations, and enhancing the customer experience. While most organizations recognize that they are in the early stages of development, the pandemic has only accelerated this deployment. Much of the activity around the use of data, AI and machine learning in the banking industry has traditionally revolved around risk and fraud mitigation. More recently, a growing number of organizations have recognized how firms within and outside the financial services industry have used AI to improve personalization, customer communication and engagement. According to research by MIT Sloan Management Review and the Boston Consulting Group, the challenge of achieving data and analytics maturity has moved from understanding the power of AI to actually recognizing the financial benefits of the technology. Unfortunately, the research found that only 10% of companies that deploy AI actually realize significant financial benefits.

As banks and credit unions pivot from managing the impact of the pandemic to reopening and repositioning business models to reflect a more digital economy, it is clear many of the changes in consumer behavior will be altered forever. From the way consumers shop for new financial services to the way they transact and interact, we are beginning to understand that consumers are expecting digital experiences to be central to all stages of their customer journey. But digital capabilities and improved customer experiences don't operate in a vacuum. In a digitally empowered world, financial institutions must leverage the power of big data, AI and machine learning to drive customer engagement and conversion. To accomplish this, many institutions are moving to the cloud, hiring data scientists and officers, and finding marketers who understand how to bridge the gap between the pace at which data is generated and the ability to create real-time engagement.

Digital banking transformation involves the integration of data, advanced analytics and digital technology into all areas of a financial institution, changing the way work is done, priorities set and services delivered. More than just a technological upgrade, digital transformation requires a cultural change that challenges legacy processes, encourages innovation, and rethinks all aspects of risk and reward. The objective of an organization's digital transformation process might be to improve the customer experience, reduce costs, streamline operations, reduce friction, become more agile or increase profitability … or any combination of these objectives. In any case, digital banking transformation will disrupt business models that have been the foundation of the organization for decades. This is why true digital banking transformation is so difficult to achieve – it's more than simply delivering the same product on a new app.

Digital banking transformation involves the integration of data, advanced analytics and digital technology into all areas of a financial institution, changing the way work is done, priorities set and services delivered. More than just a technological upgrade, digital transformation requires a cultural change that challenges legacy processes, encourages innovation, and rethinks all aspects of risk and reward. The objective of an organization's digital transformation process might be to improve the customer experience, reduce costs, streamline operations, reduce friction, become more agile or increase profitability … or any combination of these objectives. In any case, digital banking transformation will disrupt business models that have been the foundation of the organization for decades. This is why true digital banking transformation is so difficult to achieve – it's more than simply delivering the same product on a new app.