Personetics Explores How To Make AI Banking Work For The Bank

As financial institutions (FIs) invest in technology in an effort to position themselves more competitively against FinTech firms, the development of so-called chat bots and “robo advisors” has accelerated. Projects from Wells Fargo, JPMorgan Chase and RBS have all surfaced in recent years, as FIs deploy artificial intelligence (AI) solutions that both meet their customers’ needs for digitized services and save those financial service providers money at the same time.

With small business (SMB) as a notoriously less lucrative enterprise for banks, many of these innovations have focused on consumer clients. However, Personetics CEO David Sosna said SMBs may not only need AI-powered advisory services more than consumers, but could be adopting such solutions at a faster pace. Since releasing Personetics’ latest solution (its Self-Driving Finance platform, a solution for FIs to implement AI advisory services for their consumer and small business clients), Sosna said the reaction from SMBs has been strong.

“I can tell you, the ratings we’re getting on small businesses are even higher than consumers,” he told PYMNTS. “And I think the reason for that is, they need help.”

Small businesses have greater volumes of transactions and more complex financial management needs than the average consumer, he noted. Not to mention, small businesses often find their current banks’ offerings to be subpar, with recent data showing more SMBs are switching their financial service providers and finding their current ones lack the products and services they want. Research from FIS, released last year, found 48 percent of SMBs think their banks’ services are lacking, with analysts concluding that the figure suggests small businesses need more from their FIs than loans.

At the time, FIS Chief Operating Officer of Banking and Payments Anthony Jabbour said small businesses are “long on complaints and short on love for their banks.”

From this perspective, it’s clear why offering small business clients an advisory service, developed on sophisticated technology, would please these customers. The flexible functionality of AI also presents opportunities for clients, said Sosna, who noted that cash flow management services are the most popular features of the platform for SMBs.

Clients can gain advice on whether to accelerate or decelerate payables or receivables, or obtain a line of credit if analysis reveals a cash flow crunch ahead. Regardless of the advice given, what’s critical to such an advisory service for small firms is that the bank not only provides guidance, but places that recommendation within context, added Sosna.

“The idea is to use algorithms to look at and understand where you are right now, determine cash flow and anticipate things you can’t see on your own,” he noted.

However, for such a solution to work as it should, FIs need to get on board with putting the data they have to work. Sosna said that many banks won’t be willing to link their data into a third-party solution, despite a recent movement toward open banking.

“At least today, in 2018, most banks won’t share data with a third-party solution,” he said. “That’s not 100 percent the case, and we have a few examples of mostly younger banks and emerging banks that are looking at implementing cloud-based capabilities. It’s an area peaking more and more interest, but it will take time.”

Open banking may be gradually moving the needle in third-party data sharing, but to make an impact on small business banking today, Sosna said, service providers that offer FIs the opportunity to deploy AI must meet their clients in the middle, providing the option of a cloud-based solution or an in-house tool. The latter option, he explained, means that third party does not have to handle or see any of the data a bank stores.

Another important approach to supporting AI-powered banking services adoption is to emphasize that the technology does not have to be an encompassing, disruptive force. Instead, FIs can implement AI tools that make a meaningful — yet smaller — impact, one that gives banks greater control over where and how disruption occurs.

“Not all banks are ready today to go all in and offer these high-end solutions,” said Sosna. “We’re trying to show banks that there is a set of capabilities they can start looking at. Some of them could be pretty simple.”

Indeed, banks are all at different points in their digitization journey, and have differing views as to how AI can and should be deployed. A Financial Times survey of 30 top banks earlier this year found “little consensus” about the path to AI adoption, and that the financial services space is “feeling its way forward,” taking small steps to implement the technology.

According to Sosna, that is why it’s critical for AI solutions to be deployed at different degrees — targeting an array of customers, services and infrastructure within a financial institution.

“Some banks are very innovative. Others don’t have the data,” he said. “But the question is: Can you actually start, and how quickly can you go?”