The banking industry, traditionally inclined more towards embracing proven technological innovations, is on the cusp of a transformation based on a new technology. Generative AI (GenAI) stands at the forefront of this great change, promising to redefine competitive dynamics and operational efficiencies. Fatih Ogun, Head of Strategy at Akbank, explores how GenAI impacts competition within the banking sector, illustrating its potential through some examples.
The advent of GenAI in banking
Generative AI, with its ability to create content, simulate scenarios and predict outcomes, is increasingly being recognized for its potential to enhance customer experiences and streamline operations. Banks are leveraging GenAI to develop more personalized services, improve risk management and innovate product offerings, thereby intensifying competition.
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Use-cases of GenAI in banking
Although the space is quite large and ever-expanding, we can provide some examples of the leading practices in this field.
• Personalized banking services: GenAI can analyze vast amounts of data to offer personalized financial advice, product recommendations and customer service. One example is a platform developed by a global bank using machine learning to analyze legal documents and extract essential data, significantly reducing manual review time.
• Customer analysis: By analyzing customer interactions and customer experience related touchpoints, GenAI can identify areas where banks can take corrective actions. The ability to digest and make inferences from the customer contact history, the capability to make it 24/7 and to produce human-quality outputs based on the analysis are important improvements compared to existing structure.
• Operational efficiency: GenAI automates routine tasks such as customer inquiries and transaction processing, allowing banks to allocate human resources toward more complex customer service or strategic tasks.
• Product innovation: GenAI enables banks to simulate financial markets and consumer behavior to develop innovative products tailored to specific customer needs. Although this can also be done with existing methods, the use of GenAI vastly improves the field in terms of creativity and producing human quality outputs.
Impact on competition
The adoption of GenAI in banking significantly raises the bar for competitive advantage. Banks that effectively integrate GenAI into their operations can offer superior customer experiences, more efficient services and innovative products, setting a new standard for the industry. This shift not only pressures traditional banks to accelerate their digital transformation but also opens the door for fintech and tech giants to enter the banking space, further intensifying competition.
Navigating challenges
Despite its potential, the integration of GenAI in banking is not without challenges. Regulatory compliance, data privacy and ethical considerations remain paramount. Banks must navigate these challenges carefully to harness the full potential of GenAI while maintaining trust and transparency with customers and regulators.
Generative AI is redefining the competitive landscape of the banking industry, offering unprecedented opportunities for innovation and efficiency. As banks embrace GenAI, they not only enhance their competitive edge but also contribute to the industry’s overall advancement. The future of banking, powered by GenAI, promises a more personalized, efficient and innovative sector, ready to meet the evolving needs of consumers and businesses alike.
The views expressed in this article are the views of the author only. This article provides general information and a point of view; it should not be considered as professional advice.
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