The rise of Artificial Intelligence (AI) is set to radically transform the Australian banking and investment industry.
New technology and new ideas are constantly changing and improving the way we do things. From Skype to Uber and everything in between, the recent years have seen a raft of innovations across just about every industry you can imagine. And there are more big changes on the way for the banking industry. With the rise of artificial intelligence (AI), Australians may soon turn to a robot rather than a real person for help with preparing a tax return or managing their investments. So what does the rise of AI mean for Australian banks and how can consumers benefit from this new technology? Let’s take a closer look.
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A changing world
In 2016 and beyond, Australians expect their banks to be fully digitally accessible. The days of lining up in never-ending bank queues at your local branch are long gone, with the bulk of transactions now carried out via smartphone or computer. In this digitised world, new technologies and opportunities are developing all the time, and those financial institutions that don’t move with the times will be left behind. While technology has already had a huge impact on the finance industry, soon it will be a critical part of every aspect of bank operations. The term AI refers to when machines or software are created to have human-like intelligence, and this technology already plays a big role in the banking industry. One area where the influence of AI has already been felt is in the financial advice sector. The past five years have seen the emergence of robo advice services. These digital financial advisers, such as Ignition Direct and Acorns Australia, provide automated online financial and investment advice. Once you’ve provided information about your financial goals and tolerance for risk, a robo adviser uses complex algorithms and mathematical models to calculate an investment strategy for you.
The customer experience
Customer satisfaction is key to any bank’s ability to retain existing customers and attract new ones, and AI can help in this area. Thanks to the ability of computers to process “big data”, AI can be used by financial institutions to provide customer insights, improve services and create a digital banking experience that’s seamless and easy to use. In Sweden, Swedbank’s Nuance Nina virtual assistant went live in April 2016. Nina uses Natural Language Understanding (NLU) technology to deliver a human-like, conversational customer service experience, and she can answer more than 350 different customer questions. During her first three months on the job, Nina achieved an average of 30,000 conversations per month and a first-contact resolution rate of 78%. The Royal Bank of Scotland and several other banks around the world are currently trialling similar AI customer assistance services. In Australia, Westpac announced in July 2016 that it would spend the next six months trialling AI in its digital banking systems. Westpac is investigating the use of so-called “chatbots” to respond to simple questions from customers, either submitted in writing online or spoken over the phone. Watch this space for future developments.
Self-learning machine technology is also expected to play a role of increasing importance in the coming years. Recent technological advances allow computers to analyse new information they receive and compare it with existing data. They can look for patterns, search out similarities and differences and identify relationships. Through repetition, systems become better at classifying information and predicting behaviour, allowing them to provide a better, more user-friendly banking experience for customers. This type of technology is already in use in the form of fraud detection systems that automatically flag any unusual transactions on a customer’s credit card or bank account. It’s a far more efficient process than any human monitoring of accounts, and in coming years AI could be used to grow a bank’s client base. For example, your financial institution may be able to use AI to recommend an investment product or savings account based on your past behaviour and financial activity.
The future and beyond
Ray Kurzweil, Google’s chief futurist, has famously predicted that robots will achieve human levels of intelligence by 2029. What this means for the banking industry remains to be seen, but there’s little doubt it will lead to big changes to the way we manage our money. A KPMG report released in August 2016, 2025: People, economy and the future of tax, predicted that Australians will soon rely on AI for the preparation of their tax returns. "This is beyond complex automation, which would involve picking up items in the general ledger and mechanistically using that data in the tax return," the report says. Thanks to AI and the rise of cloud robotics, which allows computers to draw on massive databases to enhance learning, a new level of rational decision-making for AI could be just over the horizon. The end result of these improvements in machine learning technology will hopefully mean that Australians can access a far more personalised range of banking services, making it easier and more convenient to manage your money.