Banks slowly preparing for AI, open banking: Sopra Digital Banking Experience Report

June 3, 2024

23 4 minutes read

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AI occupies executives’ thoughts in many ways, according to the results of Sopra Steria’s third annual Digital Banking Experience Report. The report, produced with Forrester and Ipsos, surveyed more than 850 senior decision-makers at global banks and more than 11,000 global bank customers.

Roughly 75% aren’t ready for open banking, either. The two are related, as open banking and emerging regulations have banks looking to AI to prepare.

First, some numbers on AI:

52% of banks say it offers a highly critical revenue stream;
63% say it will have the most significant impact on customer service;
45% plan to expand their investments in AI-enabled chatbots and digital assistants;
76% of customers would like to benefit from AI-supported loyalty programs; and
62% would like the tech’s help with budgets.

AI can help banks solidify customer support that looks strong but has a shaky foundation. Roughly half of customers believe their bank is uninterested in earning them money. Only 27% think it offers services suited to their personal and financial situations. More, 38% felt they were offered uninteresting services.

Closing the gap between AI awareness and action

While there is heightened awareness about AI’s benefits, there is a gulf between that knowledge and action; 64% of respondents know about AI-enabled, 24-hour tools like chatbots and virtual assistants, but only 18% use them.

Mathias Mercier points to a few factors to explain banks openness to collaboration.

One path to closing those numbers lies through collaboration. For Sopra Banking Software head of research Bruno Cambounet, more companies are embracing it. Banks were defensive about collaboration and open banking in the first two reports. They now view it as a way to create end-user value.

What got them over the hump? Sopra Steria chief marketing officer Mathias Mercier points to the lack of trust customers have for banks beyond being safe places to hold money. Personalization is low.

Add in fintechs and neobanks providing more responsive services, and two-thirds of customers are ready to switch brands for lower costs and more benefits.

“It means the banks are now realizing that they may lose a lot of territory here,” Mercier said.

Banks warming to open banking

Cambounet said banks realize that open banking brings the benefits of reusing personal data. Whatever their thoughts are, regulations will bring it into existence.

“It’s a no brainer,” Cambounet said. “Now that data, which is held within a bank, or any financial institution, can be shared electronically by the end user to others taking care of it to bring more value.”

Bruno Cambounet said regardless of banks’ thoughts on open banking, it’s coming, so prepare.

Open banking and the realization that they cannot be everything to everyone have opened the door for banks to collaborate with fintechs; 74% of global banks see this as crucial to their futures.

Thanks to the mass of data, banks have long thought they owned their customers. Cambounet said they now realize they cannot cater to everyone’s preferences. Leveraging all data available, regardless of who owns it, allows for better personalization.

Changing tactics to maintain relevancy

One method for banks to seize relevancy in this changing environment is to serve customers not in front but behind the scenes. Cambounet said they should become invisible by providing BaaS services for other banks or non-financial players such as embedded finance retailers.

What lessons can North American institutions take from Europe as they prepare for open banking? Cambounet said the first step is to prepare themselves to address and nurture the mass of data they will soon have access to.

Effective personalization takes work, and AI will play its part. However, institutions must be mindful of data protection issues and ensure models are bias-free. Cambounet said they’ll need to build trust with customers, proving that if they provide their data, the institution will safeguard it and deliver more value.

Open banking, AI bring great responsibility

“Here in Europe, we’ve been working very much on all the regulations to protect private life, and honestly, this is not easy,” Cambounet said. “Because when you are doing this in an ecosystem, different players can do the job. And we are no more in a situation where things are linear with a customer.”

With open banking, trust no longer means a relationship between the customer and one bank; it means the relationship between the customer and the entire ecosystem. In the coming open banking environment, more institutions are looking to AI to manage both internal processes and external relationships. They must also diligently uphold common standards for cybercrime, criminal fraud detection, and many other functions.

Zoning in on some concepts that can benefit from AI and developing clear use cases are two different concepts. Executives won’t splurge on AI without the latter.

“They are exploring every single use case,” Mercier said. “Right now, at best, we have a few internally being used, or some chatbots are going here and there. But it’s very small.”