28 May 2018
Vaibhav Grover


Vaibhav Grover - Genpact

3Posts 20,990Views 0Comments
Finextra community

Disruption in Retail Banking

Growth in internet and mobile technologies has transformed many industries and economies. The market forces and competitive landscape has completely changed in many sectors. iTunes has fundamentally changed music industry, Amazon has driven most big brick and mortar book sellers out of business, Expedia is one of the worlds' biggest travel company….. the list goes on. Internet and mobile technologies are big disrupters for most industries. What started (and tapered a bit!) with the dot com boom of 2000 has become a lethal threat to most business models today. Powered by mass adoption in mobiles phones, proliferation of smart phones and cheaper band-width, internet and mobile technology have changed many industries. The banking industry in has been dominated by a handful of big global or regional banks for 100s of years. While the credit crisis has shaken this industry, the core market forces for the industry have not changed. Will Innovation in Internet and Mobile technologies disrupt retail banking? Will there be 5 new names in global top 10 retail banks in 2020?

Bot-Advisor as your Banker - Are you ready?

28 September 2017  |  5278 views  |  1

Banks across the globe are investing big dollars into Intelligent Bots. HSBC has recently announced a low-cost online investment service that uses algorithms to match customers to an investment portfolio. American financial services provider Raymond James ­Financial said it would offer bot-advisers to clients by the year end. NatWest recently launched its Invest service to its existing customers and is planning to launch a full Bot Advice service by end of 2017. According to U.K. based Juniper Research, this technology could save businesses $8 billion annually worldwide by 2022, up from $20 million this year.

There are some clear cut benefits that Bots deliver: They are very precise - they do exactly what they have been taught to do. They don't have any vested interests (sales targets!) and they can turn around huge volumes compared to humans. All this comes at a much lower cost as well. A bank can afford to provide a bot-advisor to a mass market customer, whereas hiring a human advisor will be expensive.

But, are customers willing to take the bot advice?

According to consumer research conducted by Accenture across 18 countries, the majority of customers are open to receiving advice from a bot for certain banking and insurance products. Consumers are open to bot-advice to help them determine which bank account to open (71%), which insurance coverage to purchase (74 %), and how to plan for retirement (68 %). Nearly four out of five consumers (78 %) said they would welcome bot-advice for traditional investing.

This all looks very compelling. So what are the challenges?

Whilst the research indicates that customers are open to bot-advice for less complex and traditional products, they still rely on human advice for more complex products like mortgages and mutual funds. Face to face meetings in brick and mortar branches still have a role to play for now. The fear of getting it wrong plays strongly on the mind of customers. Who will be held accountable if the bot-advice goes wrong? Will banks take responsibility if customers end up losing money? Consumers need to have faith in the organisation that developed any robotic financial advice tool that they use. But, today customers do not have this level of trust and banks don't provide this level of transparency. Also, bots are obviously not known for their interpersonal skills. While they are excellent at making complex calculations, they can't empathize or build a rapport with the client based on their circumstances and personal goals - yet. This makes them harder to embed into a seamless customer experience.

These points illustrate some of challenges for banks. Banks need to ensure that they can reassure customers that the quality of advice they will get from a bot-advisor is on par with what they can get from a human. Customers need to be given the confidence that their financial data is secure and advice is personalized. As algorithms become more sophisticated and banking industry travels this learning curve, I believe this is achievable. For now, we can say that the door for bot-advice is open and banks are pushing in the right place.

Do you agree? Would you invest your money based on advice from a bot-advisor? 

TagsArtificial IntelligenceRetail banking

Comments: (1)

A Finextra member
A Finextra member 03 October, 2017, 09:08

Good post Vaibhav, agree with how you have articulated the limitations of embracing robo advisory  by customers

1 thumb up! 1 thumb up!
Comment on this story (membership required)

Latest posts from Vaibhav

Are Banks only in 'Banking' business?

10 March 2018  |  9472 views  |  0 comments | recomends Recommends 0 TagsRetail bankingInnovationGroupDisruption in Retail Banking

Responsible Lending Guidelines- Threat or Opportunity for Banks?

07 February 2018  |  6241 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationRetail bankingGroupBanking Regulations

Bot-Advisor as your Banker - Are you ready?

28 September 2017  |  5278 views  |  1 comments | recomends Recommends 1 TagsArtificial IntelligenceRetail bankingGroupDisruption in Retail Banking

Vaibhav's profile

job title Assistant Vice President
location Gurgaon
member since 2017
Summary profile See full profile »
Assistant Vice President - Consumer Banking Practice with Genpact. Specializes in Design and implementation of Consumer Banking and Core Banking Solutions. Has experience in Product development in Con...

Vaibhav's expertise

Member since 2017
1 posts0 comments
What Vaibhav reads

Who's commenting on Vaibhav's posts