Banks are missing out on benefits of GenAI in client engagement: Bain & Co
Banks are falling behind other industries in deploying generative artificial intelligence (GenAI) to differentiate their products and services, leaving vast monetisation opportunities untapped, according to management consultancy firm Bain & Company.
That is especially true in the areas of marketing and customer engagement, where retailers and consumer goods producers have excelled, said Andreas Dullweber, the firm's global head for marketing and customer experience based in Munich.
"There are a lot of opportunities amplified by recent technology developments on GenAI for financial institutions to learn from those industries," he said during a business trip to Hong Kong. Higher productivity created by GenAI can boost revenue and trim costs, he added, citing its global study involving financial institutions.
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Banks and other financial institutions have used GenAI in the back office to optimise processes and fraud management, Dullweber said. They have only recently started experimenting with it gradually in client-facing services, he added.
Andreas Dullweber, global head of marketing and customer experience at Bain & Company. Photo: Handout alt=Andreas Dullweber, global head of marketing and customer experience at Bain & Company. Photo: Handout>
GenAI describes algorithms that can be used to create new content, including audio, videos, codes, images, texts and simulations.
Only two out of 16 financial institutions interviewed by the Hong Kong Monetary Authority (HKMA) said they utilised GenAI solutions to create tailored marketing plans or customised pitches for distinct client segments, according to a research published by the regulator on Friday.
"By incorporating GenAI, financial institutions can overcome the challenges of standardisation and lack of differentiation," according to the research paper. "This hyper-personalised approach ultimately drives higher success rates, allowing financial institutions to capture previously untapped or under-tapped monetisation opportunities."
Higher productivity resulting from the use of GenAI can potentially lead to cost reduction across functions, Bain said, based on an analysis of 20 global financial institutions.
It can trim costs by 20 to 30 per cent in the customer service area over a two- to three-year period, and by 10 to 15 per cent in marketing. The same analysis also showed that revenue could be increased by about 5 per cent.
A general view of Hong Kong's financial district. Photo: May Tse alt=A general view of Hong Kong's financial district. Photo: May Tse>
To be sure, deploying GenAI in the financial services industry is challenging due to the sweeping changes it brings to existing structures.
"To get to the full potential benefits of GenAI, you have to completely rewire the way people do their jobs, from back office to frontline," said Priscilla Dell'Orto, a partner at Bain. This will take "a lot of change and will necessarily encounter a lot of resistance."
The high-level, principle-based rules could also bring uncertainties to the highly regulated financial sector when it comes to GenAI applications and use cases, she added.
The HKMA issued GenAI guidelines in August that focus on four major areas of governance and accountability, fairness, transparency and disclosure, and data privacy and protection. It followed the launch of a GenAI sandbox in the same month to let banks trial use cases.
"The financial institutions typically have a collaborative relationship with the regulators on the topic of AI to shape and interpret things in the right way," said Dell'Orto. "The open ecosystem will foster a lot of innovation in the region."
Banks and insurers can use internal and external data sources to better tag their customers for personalised marketing content, and put targeted advertisements on the right websites. They can avoid the one-size-fits-all approach that can annoy some clients, such as a credit line that they do not need.
For example, a global bank in Hong Kong uses GenAI to translate its marketing languages and generate conversation prompts for relationship managers to engage with clients, according to the HKMA research paper. A major local bank uses it to generate marketing outreach materials for relationship managers to provide personalised messages to clients.
In wealth management, 74 per cent of rich clients in Hong Kong said they are comfortable with AI guiding their decisions, including a quarter who are "extremely comfortable" with the idea, according to a survey published last month by consultancy Capco.
Some financial services firms are realising the "significant financial benefit from deploying GenAI", Dullweber said. "We see more and more personalised information on the marketing side, [such as] personalised copies, adverts and images."
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