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NTT DATA Sees Financial Institutions AI Disconnection

May 3, 2021

According to research findings by NTT DATA, senior financial services executives overwhelmingly agree that implementing Artificial Intelligence (AI) will be the key competitive driver of success over the next few years. In fact, 83% agree that AI is creating new ways to differentiate offerings and win customers, driven by access to unique data sets; however, obstacles remain and adoption lags.

Respondents report technology implementation (55%), creating new business startup culture in an established business (51%), and organizational skill changes (43%) are all top AI challenges to implementing personalized proactive services. Despite these very real obstacles, financial institutions (FIs) must find a way to overcome them. Especially considering the COVID-19 pandemic, consumers are increasingly looking to digital finance solutions and apps that anticipate their needs and proactively offer financial guidance.

“Customers provide striking testimony that they want banks to act as a strategic advisor on their major spending decisions, according to recent data,” said Matt Provencher, President, Financial Services and Insurance, NTT DATA Services. “Our research shows AI is the pathway to offering the hyper-individualized services customers crave. The data doesn’t lie – financial institutions need to double down on AI to meet rapidly evolving consumer demands, or risk handing their competitors the keys to poaching their customers.”

Key study findings include:

1) Top five challenges, in order, for FIs to attract and retain customers:

1) Using AI to provide customized advice to individual customers

2) Building trust with customers

3) Competition from fintechs and technology companies

4) Limited in-person customer interactions

5) Slow to launch new products

2) Majority of FIs see personalized proactive services as an opportunity [to attract customers], however:

• Only 16% of FIs are leveraging data to provide specific, one-to-one financial guidance to customers on how to achieve their life goals and ambitions

• 32% of firms are leveraging data to provide “broad tailoring” — recommendations to target customer segments, as a one-to-many strategy

3) Personalized proactive services deliver increased customer acquisition and retention for FIs

Overall, the main drivers for FIs investing in personalized proactive services are:

• 68% customer acquisition

• 66% customer retention

• 61% new revenue channels

• 59% enhanced emotional connection

• 58% expanded revenue in traditional channels

• 53% increased profit margins

• 35% expanded customer wallet share

4) Top AI challenges to implementing personalized proactive services

FIs report challenges with AI implementations because it requires changes on the business side, too. Top challenges for using AI to provide 1:1 services are:

• 55% technology

• 51% creating new business startup culture in an established business

• 43% organizational / skill changes

• 35% understanding the business questions to be answered

• 35% management support

• 30% building partnerships and alliances

• 30% data

• 22% justifying the ROI

“The next step in creating the true digital bank of the future is a more powerful use of AI and other digital technologies to engage in the lives of each individual customer,” said Kaz Nishihata, Executive Vice President, NTT DATA. “Financial institutions across the globe will need to focus on AI, big data analytics and processing power — as well as make the organizational change initiatives and strategic partnerships — to meet the needs of customers and truly differentiate.”

To explore how AI can enable FIs to attract and retain customers in a digital world, NTT DATA surveyed 4,807 consumers and 476 senior executives in banking, brokerage, capital markets, wealth management, and cards and payments across the U.S., UK, Germany, Spain, Italy, Japan, Brazil and Mexico in December 2020.

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