Few leaders would dispute the fact that business today is driven by data and smart algorithms. Yet, rather than real digital transformation, many instead pursue digital incrementalism, using automation to cut costs or, worse -- cut jobs. Doing so might buy you some time from impatient shareholders, but it will be short-lived unless you can face the challenge: How do you reimagine what you do for a new era of AI-powered competition? The high unemployment numbers of the Covid-19 recession have obscured a systemic problem: the accelerating effect of automation on the workforce. We have been here before.

Banks and insurance firms are planning to increase their artificial intelligence-related investment into technology by 2025, according to research from The Economist Intelligence Unit. The report, commissioned by AI-analytics and search firm ThoughtSpot, surveyed 200 business executives and c-suite leaders at investment banks, retail banks and insurance companies in North America, Europe and Asia Pacific. It found that while a large majority (86 per cent) of respondents had a strong degree of confidence in the benefits of AI to shape the future of financial institutions, more than half of respondents said the technology was not yet in use in the business' processes and offerings, with just 15 per cent saying the technology is used extensively across the organisation. However, despite relatively low levels of implementation, the research found that many institutions are beginning to invest in AI over the next five years, with 27 per cent saying it will spur new products and services, a quarter believing it will open up new markets or industries and the same amount saying it is paving the way for innovation in their industry. Looking to the future, 29 per cent of respondents expect between 51 per cent and 75 per cent of their workloads to be supported by AI technologies in five years' time, as processes become increasingly automated.

In this report, we highlight the AI applications retail banks should be looking at right now. Over 3.3K startups across every major industry have raised equity to sell AI software-as-a-service or AI-enabled products. Meanwhile, public company executives are increasingly discussing AI on earnings calls. But banks are still lagging behind in AI adoption. In this report, we look at what's holding banks back, and how can retail bank execs can break through the AI hype to find solutions that will help them today.

When you consider the timeline of artificial intelligence (AI), the emergence of the technology as a viable means to automate retail banking services has only come about in the last few years. Progress with machine learning algorithms, increases in computing capacity coupled with decreases in cost, as well as the generation of vast amounts of data have made the development of conversational AI possible. Many banks are only beginning to use this technology now, but over the coming years we are going to see a proliferation of AI-powered banking assistants. The first modern conversational AI-powered virtual assistant came in the form of Apple's Siri, which was introduced as a feature on the iPhone 4S in 2011. Today, Siri is used by 500 million monthly active users around the world.

How can retail banks generate curated experiences? They use a cloud platform that orchestrates experiences from omni-channels to devices using data collected from various touchpoints. The data is combined and analyzed with Microsoft Azure Machine Learning technology. With these technologies, retailers can now understand the shopping behavior of a customer and offer them products that that are most relevant. Retailers deliver engaging in-store experiences by digitizing the store to deliver a curated experience to the shopper at every point in their shopping journey.

For almost a century, movies and literature have explored the possibility of technology beginning to think for itself--often with a dystopian spin. Consider that today, artificial intelligence is known far and wide as AI--which also happens to be the title of the 2001 Steven Spielberg drama (based on a 1969 short story) where indeed, machines inherit the world from their human creators. And just months ago, at least two billionaire visionaries, Tesla Founder Elon Musk and Dallas Mavericks owner Mark Cuban, spoke out about the potential evils. Musk has called AI "our biggest existential threat" while Cuban, for his own part, used much stronger language to express his anxiety. Fears of the future are one thing; the present reality, however, represents quite another.

Digital transformation is by no means a new topic. It is a trend that we have seen gradually evolve across all industries in the past few years, with the retail banking space having to adapt to changing customer expectations, and new regulatory requirements. It is therefore no surprise that in GFT's annual Banking Expert Survey, it was revealed that all UK retail banks now have a digital transformation programme in place. This is a positive sign and shows that digital transformation strategies are perhaps now just part of'business-as-usual' in what is a rapidly evolving digital landscape. What is important, however, are the specifics of these strategies.

Along with others such as machine learning and robotic process automation--once little more than alien jargon--these concepts have entered the traditional banking business lexicon. Taken together, they're more or less subsets of one overarching term: artificial intelligence (AI). And with AI, the banking industry is now pressured to dive into the data pile it's sitting on to harvest meaningful insights about existing and prospective customers. Yet the dive has its rewards. In retail banking, AI adoption is reaching a more mature state as it moves to banks worldwide.

Consumers have been paying their bills online and managing their finances for a couple of decades now, but big banks still remain laggards when it comes to adopting AI solutions that can improve their service to customers, a group of panelists who spoke about fintech at MB 2017 said. "Banks have a giant base of customers, and it's hard to move them all. Many people still prefer to go a bank branch to do their banking," said Dion Lisle, VP of fintech at Capgemini. "I hate to say this, but I think we're seeing a lot of'innovation theater.'" Some banks are moving faster than others, but even the laggards will feel pressure to adopt more AI features soon enough.

David Gyori, CEO at Banking Reports, outlines the biggest issues affecting banks today and outlines what he believes the bank of the future will look like. What are the biggest challenges facing retail banks today? There are four major strategic challenges banking executives have to solve simultaneously: low-rates; overregulation; the fintech revolution; and millennials. Each of these challenges are opportunities as well. Even though permanently low rates decrease the profitability of major incumbent banks, they also enhance operative efficiency, cost-consciousness and productivity and these things will be handy in a later expansionary phase.