When we compare the speed of innovation in banking and new services offered in banking with other industries, the banking industry has traditionally lagged behind. Online banking became mainstream almost a decade after the advent of IT – most other businesses shifted to the internet before the banking industry. The same seems to be true for the services that banks offer. Many industries provide instant, real-time services while banks still make their customers wait for transactions, loans, and account openings to be approved and finalized.
The banking industry is just as focused on innovating and providing better services to their customers as any other industry, but it is held back by unique limitations other industries do not have to contend with. However, the industry doesn’t have a choice anymore – changing market trends and business realities are acting as a catalyst for banking innovation.
Why Banks Need to Innovate
Banks need to innovate because the slow speed of banking services has resulted in people looking for alternative services. Until a decade ago there was almost no alternative to banking – anyone who wanted to keep their money safe, make payments online, or ordering anything over the phone would need to have a banking account. Since there were no alternatives, banks did not have to worry about losing customers to other types of services.
Over the last decade we have seen the rise of numerous payment services and apps. Apple Pay and Venmo are the two biggest and most successful examples. Apple Pay is favored by customers who want to be able to pay through their phone instead of carrying a wallet with credit cards on them. Venmo is favored by people who need to make instantaneous payments to people they know without having to make a bank transfer which can take time to reach the recipient.
A.I. powered banking governance solutions can bridge the gap between the speed and efficiency of banking and tech-based payment services. Click To TweetObstacles to Innovation in Banking
This begs the question – if banks want to innovate, and customers want the banks to innovate, then why are banks not able to quickly deliver new and improved services? Remember that banks are much better positioned to deliver these services. It would be trivial for the banking industry to introduce instantaneous payments and contact-less payments since the banking industry has decades of experience in the domain.
The answer, in simple terms, is that banks need to comply with a complicated set of regulations and laws. Apple Pay and Venmo do not act as banks and thus the rules and regulations that apply to banks do not apply to these services. Banks cannot deliver the same services as these apps at the same speed because when a transaction goes through the banking system, the bank must ensure that it complies with financial regulations and anti-fraud laws.
These rules and regulations are so complicated that changing them is like playing a game of Jenga. Each banking service (retail banking, online banking, mortgages, lending, and more) has its own sets of rules and regulations. The bank’s compliance and risk management departments must ensure compliance with all the different set of regulations across different banking channels. Since different banking processes are interconnected, changing one process may mean introducing instability into the whole system.
Banks may even have to audit the whole system multiple times anytime they make a major change to ensure that the change does not cause a conflict with any bank processes or banking regulations.
Bridging the Gap with A.I.
A.I. powered banking governance solutions can bridge the gap between the speed and efficiency of banking and tech-based payment services. The critical problem that banks must deal with has always been the same – other non-banking payment providers and other similar such services can innovate at a faster pace without worrying about compliance, so how will banks match their pace in innovation while still ensuring compliance? Artificial intelligence powered solutions are proving to be the perfect solution to this problem.
A.I. powered compliance and risk management solutions automate most parts of risk and compliance management. The absence of requiring manual approvals and checking of every document can allow banks to offer services that can match the speed and ease of use of services offered by some of their born-digital competitors. A.I. powered banking solutions can continuously monitor the banking risk and management framework for problems and instantly highlight anything that needs the attention of the risk or compliance teams. Instead of spending the majority of their time combing through documents to ensure compliance, the compliance team can instead rely on A.I. powered solutions to instantly highlight problems.
If you want to see how an A.I. powered solution can serve your organization, get in touch with our risk and compliance experts. Our A.I. powered compliance solution has been endorsed by the American Bankers Association, and once you see a demonstration of its capabilities you will be able to see how useful it can be for your bank.