Many have tried to downplay the impact of digital transformation with assertions such as these:
"We will need to adapt our organizations to manage change, but disruption is par for the course."
"Traditional jobs will get repurposed as different jobs in the new economy," or
"Only low-skill workers are being replaced."
These kinds of statements may be comforting, but I strongly believe quite the opposite is the case. The digital transformation we are witnessing today is unlike anything we’ve ever seen before and disruption is happening much faster and much more forcefully than we have ever experienced in human history. For example, who would have imagined a computer could drive you from point A to B? Yet today, autonomous cars drive on our roads with statistics suggesting that they are about 30% safer than average human drivers. And how about making purchases with Bitcoins? This virtual currency is moving so quickly through the marketplace that today it is worth nearly 1,000 times what it was worth only a few months ago.
We are at the dawn of new era that is bringing and will continue to bring unprecedented changes on a scale unlike anything we have ever experienced before. Starting only in the past decade, this massive shift in digital transformation is powered by three interwoven, unstoppable forces:
- Artificial intelligence
- Robotics
- Blockchain
Together, these three powers will disrupt how humankind interacts, communicates, collaborates and lives. This progress is daunting and exciting at the same time—and banks need to prepare for it.
Artificial Intelligence
Artificial intelligence (AI) is technology that permits machines to learn as human beings do, ingesting and processing massive amounts of data, deducing and proposing solutions and learning from mistakes. Machines empowered with AI are already delivering value in our day-to-day lives. AI-assisted services like Siri, Google Now and Cortana personal assistant, cars with autonomous driving features, Amazon purchase prediction, credit card fraud detection, and automated music, movies or game recommendations are now commonplace. As these technologies continue to develop, algorithms improve and computers become more and more powerful, we can expect that computers will be recommending all kinds of financial services; including loans, checking accounts, mortgages, home equity lines of credit or insurance. Robo-advising in wealth management is already here. AI technologies will be able to detect our tone of voice and emotions. Bankers at a large French bank I spoke with recently said they are seeing stunning results from auditing and scoring conversations based on content and tone of the conversation when customers call their call centers. Computers are likely to become more and more present in our lives and we might even prefer dealing with them rather than human beings, as they will be predictable and always rational.
Robotics
If AI is the brain, robotics is the muscles. There are numerous examples of banks saving money by using chatbots, rather than humans, to filter requests, engage with customers, onboard new clients and up-sell or cross-sell credit cards, loans or mortgages. Robotics already plays a key role in call centers because these departments are expensive to run and can be difficult to manage to achieve high quality KPIs, yet they remain essential for customers. Each call can cost several dollars depending on the amount of human involvement, so robots can achieve large economies in this space. Beyond call centers, we can expect to see robotics helping line-of-business departments achieve operational targets.
Blockchain
The blockchain is the last piece of the puzzle. In addition to the brain and the muscles that AI and robotics deliver, the blockchain provides knowledge. It collects a huge amount of data in unprecedented ways, allowing people to interact without the support of intermediaries. Acting as a ledger on a distributed database, the blockchain guarantees data integrity and scalability of solutions. Blockchain services will soon start to roll out beyond crypto-currencies like Bitcoins and smart contracts into services that will challenge the status quo and legacy banking systems as they exist today. These new services supported by the blockchain are likely to become big data repositories that AI and robots can leverage to offer tailored products and services to customers.
The time is coming when the technology cocktail of AI, robotics and blockchain will push legacy systems into irrelevancy in the banking equation.
Banking enterprises would do well to carefully (re)consider these trends and embrace and/or anticipate upcoming changes. Banking C-level executives I meet with seem appropriately concerned about the implications and the risks these changes bring. While a few will stand still—often caught between their conservative board and employees—most will take action. Some have set up innovation centers in prime locations such as Silicon Valley, Shanghai or London as a way to keep in touch with ever-changing technology. Others have split their teams into two parts (bimodal) to accommodate speed and agility while not compromising their core business, often placing their “garage teams” who focus on innovation, in a separate location. In ways such as these, banks can attract and retain talent to focus on digital transformation, giving these efforts the priority they deserve.
