The consulting firm, known for its bold calls in global banking, is outlining the bank of the future. Making it a reality is another matter.
Banks pay McKinsey handsomely for audacious, frequently transformative strategy ideas. Mega-mergers and acquisitions or a complete pivot of business models aren't uncommon. McKinsey's consultants are banking on technology and specifically artificial intelligence or AI, in its most recent study.
Specifically, banks should bake the emerging technology into their processes, in a bid to set free as much as $1 trillion in annual savings, McKinsey said. «To compete successfully and thrive, incumbent banks must become 'AI-first' institutions, adopting AI technologies as the foundation for new value propositions and distinctive customer experiences,» the study said.
Broad Toolkit
The AI tools listed by McKinsey are a combination of eight measures spread from client-facing projects to so-called back-office functions:
1. «smile-to-pay» facial scanning to start a transaction
2. micro-expression analysis with virtual loan officers
3. biometric recognition through voice, video, and print
4. machine learning for detecting fraud patterns and cyber hacks
5. chatbots for basic client service requests
6. humanoid branch robots to serve clients
7. machine vision and natural-language processing to scan and process documents
8. transaction and risk analysis in real-time
The tools equip banks with offerings that clients expect, and make firms competitive for a far more digitally-based future, according to McKinsey.
Major Weaknesses
The tools listed by McKinsey aren't new. The various technologies are already in use here and there, but artificial intelligence hasn't been widely applied by financial services firms yet. McKinsey pinpoints three main weaknesses at banks, which spend billions annually on their information technology.
Old «legacy» systems which require extensive maintenance and renewal, fragmented data, and outdated operating models that hurt collaboration between business and technology teams. The pandemic has stepped up digital engagement in general, while major technology companies entering financial services are a looming threat.
Choice Vs Necessity
The solution McKinsey proposes is difficult to roll out in an advisory-based approach. To completely bake AI into the process, banks need to transform themselves at several different levels:
1. technological set-up, to meet client needs (the key is «personalization»)
2. technological set-up to select and deliver products (the concept of intelligent algorithms working more effectively than client advisors)
3. massive renewal and reinforcement of core technology and data infrastructure (keyword: cloud)
4. establish a platform business model; technology isn't enough to break down banks' silos and hierarchies
McKinsey, which has been known for apocalyptic predictions, emphasizes that it isn't enough for banks to dabble in AI. «For many banks, ensuring adoption of AI technologies across the enterprise is no longer a choice, but a strategic imperative,» the study's authors write.
Sourced from Finews.com