An Industry Oriented Dissertation Project Report On

“Estate Agent and Property Management System – eProperty and Customer

Feedback”

IN PARTIAL FULFILMENT OF UNIVERSITY OF MUMBAI GUIDELINES FOR AWARD OF

DEGREE OF MASTER OF MANAGEMENT STUDIES(MMS) OF UNIVERSITY OF MUMBAI

SUBMITTED TO

RAJEEV GANDHI COLLEGE OF MANAGEMENT STUDIES

(PLOT NO. 1,SECTOR 8, GHANSOLI, NAVI MUMBAI)

UNDER THE GUIDANCE OF : Prof. Bidisha Goswami

SUBMITTED BY : Nisha Kumari

BATCH : 2018-2020

ROLL NO : 56

SPECIALIZATION : IT/Systems

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 Certificate

This is to certify that the dissertation submitted in partial fulfillment for the award of MMS degree of
University of Mumbai to RAJEEV GANDHI COLLEGE OF MANAGEMENTSTUDIES is a result of
the bonafide research work carried out by Mrs. Nisha Kumari under my supervision and guidance, no part
of this report has been submitted for award of any other degree, diploma or other similar titles or prizes. The
work has also not been published in any journals/Magazines.

Date :

Place: Ghansoli

Signature Signature
Prof. Bidisha Goswami Dr. Anil Matkar
(Internal Guide) (Director)

External Signature

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 RAJEEV GANDHI COLLEGE OF MANAGEMENT STUDIES AUGUST 2019

Student’s Declaration

I hereby declare that this report submitted in partial fulfillment of the requirement of MMS Degree of
University of Mumbai to RAJEEV GANDHI COLLEGE OF MANAGEMENT STUDIES. This is my
original work and is not submitted for award of any degree or diploma or for similar titles or prizes.

Name : Nisha Kumari

Class : MMS III

Roll No . : 56

Place : Ghansoli

Date :

Students Signature :

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 Acknowledgement

I, Mrs. NISHA KUMARI student of Master Of Management Studies of Rajeev Gandhi College Of
Management Studies (RGCMS), hereby acknowledge profusely my Guide, Prof. Bidisha Goswami,
Professors and Director for all the help and guidance extended to me in the completion of my project on
(Estate Agent and Property Management System – eProperty and Customer

Feedback) in the Academic Year (2018-2020).

Date:
Signature
Mrs. Nisha Kumari
Roll No. : 56

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 TABLE OF CONTENTS

Chapter No. Particulars Page No.

1 Abstract 1
2 Introduction 1

3 Objective Of The Study 2

4 Research Methodology 2
Artificial Intelligence Overview
5 3

6 Basics of Artificial Intelligence 6

7 Applications in Banking 10-14

4.1 Analytics 10
4.2 Chatbots 12
4.3 Robotic Process Automation 13
4.4 Report Generation 14
8 Business Case for AI 15-18
5.1 Reduce Costs 15
5.2 Mitigate Risk 16
5.3 Increase Revenue / Improve CX 18

9 Areas of Impact 19
6.1 Front Office 19
6.2 Middle Office 19

6.3 Back Office 19

10 Next Steps 20-22

7.1 Become Educated and Develop Principles 21

7.2 Lay the Groundwork 21

7.3 Take Action 22
11 Human X Process X Data 23
HUMANS: AUGMENTING YOUR WORKFORCE
12 30
Findings of the Study
13 38

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Abstract
Technology has changed the businesses are done and over the last couple of years.Sector-wise, technology is riding the
horse of fortune and guiding companies to prolific growth, with ease. There is a growing need to use Artificial
Intelligence (AI) and the Indian banking Sector is gradually shifting itself towards using AI. If one talks about the banking
sector, the adoption has been gradual, when compared to other sectors. This can be due to the fact that banking is still a
manpower-led sector, with operations that require human involvement .Yet the Indian Banking sector understands the
need to cut down cost and the expenditure on redundant tasks. The Indian banking sector is exploring the ways by
which it can harness the power of AI to improve the processes and enhance the Customer Service in the long run. The
paper seeks to explore the areas where the AI is being used in the Banking Sector and its implication in the top banks in
India.

Introduction

Societies are on the verge of deep transformation due to IT developments in social networks, communications, artificial
intelligence, and big data analytics. Understanding banking in these fluctuating times is a challenge. Banks today can't
afford to be complacent. They need to constantly reevaluate their competitive advantages in light of profound changes
driven by advances in information technology (IT) and competitive pressures. In light of the statement understanding
the need to shift the focus from the traditional systems where mostly humans did majority of the back end operations
which was not just time consuming but also did not result in enhancing the customer experience. There is growing need
to adopt AI as it is not only able to retain clients, but also improves the processes and personalize the customer’s
experience. Artificial Intelligence could be the key to transforming many of these crucial customer facing processes
and retaining the competitive edge.
Artificial Intelligence (AI) has been around for decades, ever since John McCarthy
defined it as “the science and engineering of making intelligent machines”. But it is only lately that AI technology
has undergone rapid evolution and raised significant interest among the Banking Sector. Artificial Intelligence is the
theory and development of computer systems which are able to perform tasks that normally require human
intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.
The Indian banking sector is beginning to adopt artificial intelligence (AI), quite aggressively. As per a PwC FinTech
Trends Report (India) 2017, in the past year, global investment in AI applications touched $5.1 billion, up from $4.0
billion in 2015.
Artificial Intelligence (AI) is fast evolving as the go-to technology for companies across the world to personalize
experience for individuals. The technology itself is getting better and smarter day by day, allowing more and newer
industries to adopt the AI for various applications. Banking sector is becoming one of the first adopters of AI. And
just like other segments, banks are exploring and implementing the technology in various ways. The rudimentary
applications AI include bring smarter chat-bots for customer service, personalizing services for individuals, and
even placing an AI robot for self-service at banks. Beyond these basic applications, banks can implement the
technology for bringing in more efficiency to their back-office and even reduce fraud and security risks.

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Objective of the study

1. To study the areas where the artificial intelligence is being used by the banks.

2. To study about the application of Artificial intelligence in Banking Sector .

3. To study about the applications of AI in use in the leading commercial banks in India: State Bank of India, HDFC, ICICI and
Axis.

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Research Methodology

The research is descriptive by nature, a qualitative method of data collection and analysis seems relevant and the data
collected has been collected from authentic and reliable sources. The research focuses on Artificial Intelligence being used by
banks ,its application in the Indian Banking Sector taking cue from the top four commercial banks of India. Descriptive
research was conducted to know importance of using Artificial Intelligence especially in the Banks to reduce the dependency
on the human element also to understand what can be the possible implications of the use of artificial intelligence.

Scope of Research:
Since all banks follow the norms of the RBI and the computerization by banks is done as per the recommendations of
committees formed by the Central Bank from time to time, therefore their policy for implementation of the computerization
in branches of a particular bank are same anywhere. Therefore, the area of research chosen is MUMBAI city,
as it is a well developed city having branches of most of the banks.

Population:
The researcher has focused his research only on the scheduled banks. The scheduled banks are SBI & its six Associates, 19
PSU’s, OTHER PUBLIC SECTOR BANK- IDBI Bank Limited, 14 OLD PRIVATE SECTOR BANKS, 7 NEW PRIVATE
SECTOR BANKS, 36 FOREIGN BANKS, Regional Rural Banks (Total 82 Banks are their ). There are 53 Urban Cooperative Banks,
31 State Cooperative Banks, 371 District Central Cooperative Banks and 93413 Primary Agricultural Societies in India.

Sample Design:
Since the population size is very big it was not feasible to study the entire population, so the researcher decided to go for a
sample survey. In order to get a holistic representation, the researcher has used stratified sampling and scheduled banks
categorized by RBI have been divided into groups referred to as strata on the basis of the Total Turnover of the banks. Sample
Size: The total number of banks selected is 16 (Sample size- 16).

RESEARCH DESIGN

Data Collection:
The Data is collected from primary sources only. Data Collection from Primary Sources: Since all the nformation could not be
obtained from secondary sources therefore for the collection of firsthand information for primary data, the researcher
prepared a questionnaire containing various questions regarding the computerization in banking.
The branch for a bank is selected taking into consideration the size and business of the branch, which ensures that the branch
will be fully computer equipped as per bank norms. The list of selected branches in MUMBAI of selected 16 scheduled
banks. Then the researcher conducted well scheduled interviews and the respondents are asked to complete the
questionnaire by verbally responding to questions in the presence of the researcher, through a face-to face structured
interview. The Researcher also noted on-the-spot observations by visiting the branches of the banks and using their
various products and services like ATM’s, Tele-Banking, SMS Banking, Net Banking, Mobile Applications, POS Terminals, Credit
and Debit cards of various banks. Analytical Tool: The mainly quantitative data produced by this questionnaire was analyzed
through GAP analysis. Gap analysis is a tool that helps organizations compares actual state with potential state. At its core are
two questions: "Where are we?" and "Where do we want to be?”.
Gap analysis compares the Current State of banks (as per the collected data) with the Desired State of the banks (considering
the various Guidelines, Rules and Regulations of RBI, the international Guidelines as well as Data from international
organizations like World Bank etc.) and it is presented with the help of GAP Analysis Worksheets etc.

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9
Artificial Intelligence Overview

AI refers to ‗Artificial Intelligence ‗which means making machines capable of performing intelligent tasks like human beings. AI
performs automated tasks using intelligence. The term Artificial Intelligence has two key components:
• Automation
• Intelligence

Stages of Artificial Intelligence

Stage 1 – Machine Learning

It is a set of algorithms used by intelligent systems to learn from experience.

Stage 2 – Machine Intelligence

These are the advanced set of algorithms used by machines to learn from experience. Eg – Deep Neural Networks. Artificial
Intelligence technology is currently at this stage

Stage 3 – Machine Consciousness

It is self-learning from experience without the need of external data.

Artificial Intelligence (AI) is extraordinarily popular when judged by today’s banking headlines, but those headlines have
outpaced today’s practical banking reality. Relatively few banks have begun production or even full-blown research at this
stage. For those who think they’re lagging, the good news is that they’re not — there’s still some time. But make no

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mistake: lack of progress today doesn’t mean that banks can afford to ignore AI; they must formulate a strategy to deal with
the opportunities that it promises to them and to their competitors.

We should also note that AI is a big and complicated topic. This report provides an introduction to AI by focusing on six areas.
1. Foundational technologies underpinning AI.
2. Key banking applications.
3. Business cases.
4. Relative project value.
5. Areas of impact (front, middle, and back office).
6. Next step for bankers to pursue.

Bankers looking for an introduction to the uses of AI in banking will find this report a useful overview; over time additional
reports will dive more deeply into specific areas.

Celent takes a pragmatic approach that defines AI in banking as technology that makes
inferences and decisions that used to require direct human involvement.
A series of fundamental and interrelated technologies around machine learning and natural language underpin all of AI.
Crucially, AI is not just better technology. It is not faster processing, bigger data sets, or even thousands of rules rigidly
applied. These advances have yielded powerful results, but they’re performing old tasks better. That AI can respond to
ambiguous real-world inputs probabilistically is one of its critical features. Building off the fundamental technologies to apply
them in a banking context yields four main AI applications today: analytics ; bots; robotic process automation (RPA); and
report generation. Figure 1 lays out the basic AI relationships between the foundational technologies and banking
applications; all depend on massive amounts of data, the lifeblood of AI.
Figure 1: Artificial Intelligence in Banking

Arrows represent influence of source on target.

Today’s principal business justification for AI lies in cost reduction, but it can also mitigate risks and increase
revenues (primarily through the indirect route of improving customer experience). AI is an umbrella term for
a host of different technologies and applications; when discussing it, being specific is helpful in narrowing the
focus and clarifying whether a solution truly uses AI or merely performs standard tasks better with new
technology. AI, for example, has applications in the front, middle, and back office, and can be either

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customer-facing or employee- facing. Being clear about how, where, and why AI is to be used is critical for a
reasoned discussion about its pros and cons.

That being said, banks must develop an AI strategy so that they’re not left behind. As they do this,
three critical steps are necessary.

• Become educated and develop principles.

• Lay the groundwork.
• Take action.

More detail is provided in Figure 2.

Figure 2: Next Steps on AI

The line between impressive technology and true AI is sometimes blurry, and we’ll try to draw the
distinction while recognizing that, in some cases (like RPA), being overly pedantic causes more problems
than it solves. And we’re not going to cover robo advisors; our colleagues in wealth management have
done a great job of that already.

Today’s AI is not yet ready to replace humans; instead it will augment them, letting them move into more
value-adding activities, freeing them from rote actions, making them more efficient, and performing
calculations that would be physically impossible for a single person. We take an optimistic view of AI in
banking — for those who embrace it, AI will over time provide a better experience for customers and
employees while delivering real business value on every dimension.

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BASICS OF ARTIFICIAL INTELLIGENCE

Discussion of AI can rapidly turn philosophical; as much as we like a good debate, we’re going to take a very pragmatic
approach to a definition for financial services.

Banking artificial intelligence is technology that makes inferences and decisions that used to require direct human
involvement.

Cross -industry AI has been hot twice before (the term was coined in 1956). Today’s third wave has hit banking. So
it’s useful to highlight the textbook attributes of AI as taught in computer science courses.

• Reasoning
• Knowledge
• Planning
• Learning
• Natural language processing
• Perception
• Manipulating the physical world

The ultimate goal is generalized intelligence: think of the computer in Star Trek or the replicants in Blade Runner.
We’re clearly a long way from that, but there’s no doubt that we’ve made significant progress as the forces
powering AI — computing power, data, and algorithms — have all advanced to the point where the technology can
play a meaningful role in banks.
It’s also worth noting that the bar that defines which technologies qualify as AI is continually moving; optical
character recognition (OCR) used to be thought of as AI, but now it’s simply a technology that consumers can access
via scanners plugged into their home computers.
It’s also necessary to draw the distinction between AI, which infers, and brute force computing, which applies a set of
rules, sometimes a very big set of rules, to a set of inputs and returns an answer. If presented with inputs that its rules
had never encountered, the brute force method would not be able to respond; any AI worth its salt would at least have a
probabilistic answer. Some technologies, RPA in particular, are not technically AI (at least not most of them), but
advances are continually moving them closer to using AI methods. While we don’t want to be pedantic about defining AI,
the term is often used somewhat sloppily. Simply applying a lot of computing power to a lot of data is not AI, no matter
how good the initiative might be for marketing.
Key What is artificial intelligence in a banking context?
Research
Question

Technology that makes inferences and

1 decisions that used to require direct human

involvement.

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ENABLING TECHNOLOGIES
Today’s evolving AI is made possible by foundational technologies (computing power, data, and algorithms)
and the AI syntheses of those foundations, most notably machine learning and language manipulation.
Machine learning has captured a lot of press, but natural language shouldn’t be downplayed, particularly
because its implementation is often much easier. We should note that vision is a fascinating area of AI
research (e.g., a machine being able to recognize an image of a cat), but today’s banking applications are
limited.

Machine Learning
Machine learning is a centerpiece technology of true AI.

Machine learning occurs when computers change their parameters/algorithms on exposure to new data
without humans having to reprogram them.

The biggest benefit of machine learning is that, by processing more data than a human ever could, and then
using that data to teach itself by spotting patterns that, again, would be hard for humans to identify, it will be
able to draw insights that previously would have remained undiscovered. Although machine learning opens
up possibilities, banks should keep in mind three key ideas.

First, we may not know how a machine learning algorithm arrives at its conclusion. Rather than testing
hypotheses, as a human might in order to avoid “boiling the ocean,” machine learning goes ahead and
boils the ocean. It may present answers (generally couched in terms of probabilities) based on the clustering
of several obscure and potentially unrelated variables whose causal roots are difficult to describe. In other
words, the algorithm may not be able to describe how it got to its answer. This poses obvious auditability
issues and makes it difficult to justify decisions to regulators. For example, if AI decides to reject a loan
application, what would the adverse action letter say? Researchers are addressing this issue, but it’s not
solved yet.

Second is that the amount of data that a machine learns from is critical. The more data, the better the results
will be. Gathering huge amounts of input will give the algorithms more opportunities to test and learn,
thereby refining their rules and, over time, producing better results. Firms with access to more data will have
a leg up over those firms whose data is sparser. This is one area where there’s a definite size advantage that
accrues to larger banks.

Third and finally, learning can be unsupervised or supervised; having a human check in
on the results and give the algorithms nudges or feedback, based on perceptions that are
intuitive to humans but difficult for models to pick up, can generally speed up the learning
process significantly while improving accuracy.

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Figure 3: Machine Learning Ideas

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Natural Language
One of the most notable areas where artificial intelligence has progressed is in the way it deals
with human language. For many years the industry joke was that good voice recognition was
just two years away — and that was the refrain for a decade! Today, though, dictating via a
phone or giving instructions to an automated voice when calling an 800 number generally gives
good results (frustrations with Siri notwithstanding). In an illustration of how AI technologies
are mutually useful and reinforcing, many natural language platforms use machine learning to
improve their accuracy in recognizing or generating human speech. Speech analytics offer an
illustration of how AI technologies are interrelated; speech analytics use machine learning to
analyze patterns in speech, learning, for example, how to identify an angry customer.

While natural language processing (NLP) has received the lion’s share of attention,
Celent believes that natural language generation (NLG) holds immense potential as a
means of turning raw data into useful and easily consumed insights.

Processing
Natural language processing is the ability for technology to use human communication,
naturally spoken or written, as an input that prompts computer activity.

NLP is critical to AI because it gives people an intuitive way to communicate their intent to a
program. The human’s unstructured words are parsed and converted into machine-
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understandable instructions. Once the program has understood and processed the instructions,
it responds. The response can be in a computer-friendly format (think of simply showing a list of
transactions when the query is “Show me my last three credit card purchases”), a useful graph,
or spoken or written in plain language.

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Generation
Generating plain language responses is a critical component of being able to eliminate the
need for human intervention and can automate many types of routine tasks (think report
generation) that today are typically very time-consuming.

Natural language generation (NLG) is the ability of technology to produce human-quality

prose based on a wide variety of inputs.

NLG can be either written or spoken, although if spoken, the voice quality doesn’t necessarily
have to be indistinguishable from humans. NLG does not rely on a limited number of predefined
responses or fetching a single piece of data for a customer, but instead sorts through large
amounts of available data to produce a human-sounding response. It can take the form of
speech, or of a multipage report summarizing financial results, as just two examples. See Figure 4
for an example of NLG writing a story on Denny’s earnings in 2015 and compare the result to
the effort by a talented NPR reporter.

Figure 4: Natural Language Generation in Action

Source: NPR. http://www.npr.org/sections/money/2015/05/20/406484294/an-npr-reporter-raced-a-machine-to-

write-a-news-story-who-won

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APPLICATIONS IN BANKING
AI is not the brute application of computing power to huge databases using a set of static rules,
no matter how complicated. A huge set of if-then statements, for example, does not constitute
AI (however, if the algorithm constructed new if- then statements based on its prior analyses,
that would be a case of machine learning) . Remember, AI must make inferences, not just
decisions. We’ll examine four specific cases of AI in banking, touching on the highlights of each
and being mindful that each of these four is worthy of a report in its own right. Another area
adjacent to banking that we’ll mention but not examine is robo advisors, a topic covered in a
host of other Celent reports from our Wealth Management colleagues.

Key Why does AI matter to banks?

Research
Question

2 AI can help banks become more efficient and

effective by reducing costs, mitigating risk, and
increasing revenues by applying newly capable
technology in analytics, bots, RPA, and report
generation.

ANALYTICS
An area of intense banking focus for the last several years, analytics has benefited from
technological improvements even without AI. Fundamental advances in processing power
and data manipulation have given human analysts increasingly powerful tools. Couple this
with machine learning progress, and firms have the potential to uncover insights previously
undiscoverable.

AI-driven analytics test vast quantities of data to search for patterns, groupings, and
correlations by employing a wide variety of techniques, including data mining and
hypothesis testing. Moving from merely descriptive to predictive, near real-time analysis is
a key component of some analytics.

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Figure 5: Three Intertwined Technological Advances Driving Analytics

The amount of processing power required is simply beyond the ability of humans to provide.
Thousands of transactions are being submitted every minute from all over the world. For one
employee to give a timely response to a single transaction is impossible: a human simply
couldn’t retrieve and analyze the data necessary to make an informed assessment quickly
enough. Scaling makes the problem even more intractable. Similarly, analyses that used to
take days can now be performed in minutes thanks to technologies like in-memory processing.

This processing power is being brought to bear on ever greater amounts of data. Banks have a
head start on many industries in that they already possess an immense amount of information
about their customers, an asset that they still consistently underutilize, in part because of the
siloed nature of their organizations. This data, though, when combined with behavioral
information (for example, How many times does the customer interact with the bank? When
does the customer make payments?) and external data (Which websites has she been
visiting?) can yield valuable insights that can shape how the bank interacts with its customers
and make the relationship vastly more personal. And with the vast amounts of data being
ingested, there are more chances to learn from mistakes and make corrections. Data is the
lifeblood of machine learning, and analytics that rely on huge data sets are ideal use cases.

Finally, improvement in the algorithms that power machine learning happen more quickly
with more data. Every time a mistake slips through (an erroneous decline, or a missed
fraudulent transaction), a program using machine learning notes that and makes an
appropriate adjustment. Machine learning speeds the process of improving many types of
analytics algorithms, and many different sorts of analytics challenges lend themselves to AI:
risk modeling, biometric identification, fraud detection, or credit underwriting to name a
few. Each of these areas is fascinating, complex, and deep. We’ll touch briefly on credit
underwriting for the sake of focus.
The situation is familiar to any lender. Will a credit applicant receive a loan, and if so, on what
terms (amount, rate, repayment period)? And what criteria will be used to determine the
answers to these questions? A properly constructed machine learning algorithm can analyze not
only all of the underwriting data used today, but also other factors, assuming that they can be
cleanly brought into the data set. The algorithm can be taught by feeding it data from prior
underwriting decisions and analyzing which loans performed and which
didn’t. Rather than testing hypotheses, the algorithms can simply data-mine the entire
portfolio to determine which variables (or clusters of variables) are correlated with performance.
It can then reweight the importance assigned to various variables and develop revised
underwriting criteria. Each time that it learns more (based on updated performance data), it can
tweak its criteria. Of course, in jurisdictions like the US where denying a consumer credit
requires an explanation, the bank must be sure of its rationale and willing to defend it to
consumers, regulators, and the press.

CHATBOTS
Perhaps the most visible instance of AI today is the chatbot.

A chatbot is a technology service powered by algorithms that interacts with a customer

in a natural (human-like) manner, either by voice or text.

Some chatbots are given personas in the form of a virtual agent, which may be named and
given some sort of avatar and personality. Typically accessible via a bank’s own digital
properties, virtual agents are marketed explicitly to customers as non-human technology tools
that will let them interact with the bank better than IVR-powered phone trees or call centers.

Chatbots have various levels of sophistication. The more basic accept a limited range of inputs
and produce a limited set of answers (think of a host of if-then answers, which mean that
they’re technically not AI), and at their most basic may be essentially menu-driven. The more
sophisticated ones parse customer queries and can detect the questioner’s intent even when
it’s expressed in a wide variety of different ways. Whether an unassuming text interaction or
the more explicit virtual agent, the more sophisticated rely on NLP and NLG.

For example, consider the query, “What is my routing number?” A simple rules-based engine
may simply pick up on the term “routing number” and direct the customer to the page on the
bank’s site that tell them how to find it on their checks. A more sophisticated AI would
understand the difference between “What is my routing number?” and “What is a routing
number for?” In the first case it would simply give the customer her routing number, while in
the second, would provide an explanation of its function. In neither case would a customer be
directed to a site, but would instead be given the direct answer in the context of that particular
chatbot conversation.

It’s important to note that chatbots should not be left on their own. When a customer
presents a situation that the chatbot is not equipped to deal with, it must quickly hand the
interaction off to a human quickly and seamlessly so that the customer isn’t dissatisfied. In
these relatively early days in particular, it’s critical that banks make a good first impression. No
one wants a repeat of the disgust that most consumers feel toward IVR systems and their
impenetrable menus.

One other form of bot is a physical manifestation of AI, typically in humanoid form (Figure 6).
While some banks have begun to experiment with these physical robots to solve for particular
Figure 6: Pepper the Robot

Source: http://spectrum.ieee.org/automaton/robotics/humanoids/softbank-pepper-humanoid-robot-us-debut

ROBOTIC PROCESS AUTOMATION

Based on a prior caveat, there’s an argument to be made that RPA doesn’t qualify as AI.
Here’s why:

RPA uses a number of techniques to mimic routine human activities automatically,

repeatedly, faster, and more accurately.

In the most basic case, think of any set of routine bank activities performed by junior-level
employees sitting in a cube. They receive inputs (whether on paper or digitally), examine those
inputs, apply a rule to them (with no discretion in this extreme scenario), and then send the
output forward to the next step in the process. In this edge-case, there is no inference
required, no latitude allowed. RPA steps into a gray area when interpretation is required. Does
the supporting documentation from utility companies suffice to prove continued residency for
purposes of a mortgage application, for example? For us, RPA that uses machine learning to
continually improve counts as AI; that which simply has a large and ever -expanding library of
scenarios, generally accreted manually by human supervisors, is simply plain automation.
That’s not to say that RPA isn’t a valuable technique that many banks should be examining,
but simply to emphasize that much RPA isn’t in fact AI.

RPA powered by AI is nevertheless the next stage in the evolution of making back offices more
efficient. The first wave was labor arbitrage — of moving basic functions to jurisdictions to be
performed by lower-paid workers Replacing those workers with programs aims to lower costs,
increase throughput, and improve accuracy. If the first stage of RPA is simply “paving the
cowpath,” and the next is adopting new processes based on capabilities of new technology,
then AI-powered RPA will make judgments that today require humans and, eventually, begin
to suggest and implement process improvements on its own.
REPORT GENERATION
NLG can turn data into prose. As one example, the first drafts of Little League baseball stories
in local papers are being written by NLG technology based on the box scores of games.

NLG vendors tout the use cases of writing reports or synopses that synthesize large amounts
of structured data and put them into a prose narrative that highlights the key points. One
example might be a quarterly sales report that tracks results from across many different
regions and product categories. The NLG platform would ingest the raw data and then write a
report distilling the key points. Rather than a human business analyst poring through the raw
data, searching for high and low points, calculating CAGRs and rates of change, the NLG
engine would do all of this.

Another example might be constructing a spending report for a retail banking client, someone
who to date has never had any kind of prose analysis from their bank. Many clients will prefer
prose summaries, rather than a set of numbers, tables, and graphs that takes time, and some
degree of expertise, to decipher.

It’s important to note that NLG should be used to write the first draft, at least for reports that
aren’t being mass-produced for distribution to thousands of clients. Analysts will want to
ensure that what’s written reflects their emphases and voice, and also want to confirm that
they understand the conclusions!

With four key areas of banking AI laid out, let us now turn to the business justifications of AI.
BUSINESS CASE FOR AI

As daunting as AI may seem for many banks, Celent believes that most institutions should be
exploring at least the basic forms of the many technologies that fall under its umbrella. The main
and most basic benefit is reducing cost, but firms shouldn’t ignore risk mitigation (via fraud
reduction or better underwriting outcomes, for example) and revenue increases (generally via
an improved customer experience or better marketing). We offer some of the more promising
use cases that are practical today, with the caveat that this field is rapidly evolving; more
implementations may follow in the coming months.

Key How can banks use AI to improve business results?

Research
Question

3 Reducing costs and mitigating risks are the initial

benefits of AI; increasing revenue through improved
customer experience is more ambitious.

REDUCE COSTS
There are many ways that well-implemented AI can reduce costs. Several ideas follow in Figure
7; the list is by no means exhaustive. AI may handle many basic inquiries that nevertheless
require some degree of judgment. It may help humans do their jobs better or faster. And it can
prepare accurate reports that won’t miss crucial details.

Figure 7: Reducing Costs with AI

Source: Celent analysis

Of course, AI technologies never need a day off and can work around the clock. Note that while
these actions tend to augment the role of the human for rote or basic tasks, they still need
varying degrees of human supervision.

MITIGATE RISK
Risk is a huge and complicated issue in banking. Figure 8 describes the risks that banks must
manage on an ongoing basis.

Figure 8: Celent Risk Management Taxonomy

Source: Celent

Technology has, of course, been both a cause of increased risk and a way to mitigate it. While
most risk mitigation methods do not have an AI component and are instead applications of
“dumb” (but nevertheless sophisticated) algorithms and processes, AI will, over time, be
able to help mitigate many of the individual risks described above. Today, credit risk and fraud
risk hold the greatest promise for the application of AI.

For credit, origination/underwriting is the specific area that can most benefit from today’s
machine learning technology. Banks can use machine learning to evaluate historical
underwriting performance by looking for approved applications that later defaulted and
analyzing them to see if there are factors that would have had predictive power. Some
examples that appear to be predictive on an experimental basis included choice of specific
words and whether applicants apply in capital letters. Of course, rejected applications won’t
be as useful in this scenario, but even slight improvements in default rates can have a
significant impact on the bottom line.
In financial crime, much technological benefit again comes from plain old automation. AI can nevertheless improve
outcomes, particularly as the integration of data and algorithms progresses. To reduce fraud, machine learning
can assess a candidate transaction and compare it to stored transactions, both proper and fraudulent, and
make a probabilistic assessment as to whether to approve the transaction or flag it for further investigation.
As in all cases of machine learning, more data improves outcomes, and the more transactions the algorithm
ingests, the better it will perform. Improved authentication is another area where AI can help, often through
biometrics.

Figure 9: Mitigating Risk with AI

Source: Celent analysis

To implement effective anti-money laundering (AML) procedures, machine learning can

again compare candidate transactions to prior versions and make a quicker and more
thorough initial assessment of the legitimacy of the transaction. Additionally, the AI should,
assuming that it has been programmed properly by humans, always be up to date with the
latest regulations. Automation (though not necessarily AI) can provide a suitable audit trail.

For cybercrime, AI’s thoroughness and ability to adapt to new techniques can again be very
useful. And AI can improve underwriting and credit assessment, assuming that it has access to
the right data, properly configured. When assessing credit risk, the ability of the AI to data-
mine and identify potentially unrelated clusters of factors that, taken together, correlate with
an outcome is another tool in the underwriter’s kit.

Error reduction (typos, miscalculations, and misreadings) is another way that AI can help
mitigate risk. Because the AI never gets bored or tired, and can calculate flawlessly, it won’t
be subject to the kinds of errors that humans might.
INCREASE REVENUE / IMPROVE CX
Despite a great deal of hype today, AI’s ability to increase revenue and improve the customer experience
has not been widely proven at scale – though some early results are encouraging. In terms of prioritization,
at this stage there’s more potential to improve the customer experience than there is in increasing sales
directly.
Figure 10: Increasing Revenue and Improving Customer Experience with AI

Source: Celent analysis

Many observers gravitate toward using AI to increase revenue, although the challenge with
many of these customer -facing activities is that they run the risk of annoying the customer if
executed poorly. Banks should apply rigorous testing and quality assurance cycles to any
customer-facing AI deployment prior to launch to ensure they don’t alienate customers with
beta technology.

In areas where processes are working effectively today, it’s best to leave well enough alone;
focus on where things are broken or could be done appreciably better. Improving employee
effectiveness is one instance of this, particularly by relieving them of rote and non-value-added
tasks. For example, some early adopter banks say they’ve seen a reduction in calls to their
customer care centers due to customer / chatbot interactions.

Speeding up the customer experience is one more area where improvements can be made in a
relatively low-risk way. A good example is the ‘always on’ nature of AI and how this could
allow banks to extend customer support from traditional business hours to a 24/7 model.
AREAS OF IMPACT

There are many different ways of examining how AI will affect a bank. In addition to business
value drivers, another perspective is to examine the functions in the bank that will be affected.
AI has the potential to improve all parts of the bank, from front end, customer-facing areas; to
the middle office; and through to the back office. While some argue that these terms are
becoming obsolete, they’re still a useful construct to consider how AI can create business
value. In each case we’ll look at customer benefits, as well as risks for both the consumer and
the bank. The prior section covered the business benefits for the bank

FRONT OFFICE
Direct customer interactions can either be addressed by AI directly, most prominently with
chatbots or virtual agents, or by enabling employees to do their jobs better (that is, by enabling
them to be faster or more accurate, or more productive — efficiency), or by augmenting their
capabilities (effectiveness). Another area of customer interaction is through next best offers or
financial advice or nudges. And finally, AI may simply improve the employee experiences.

Customer -facing AI can be either one-way (a push of offers, for example), or two-way, where an
ongoing set of interactions takes place, initiated by either the customer or the bank. The benefits to
customers include improved advice, better offers, and saved time.

While the benefits are tangible, there are risks inherent in exposing AI directly to
customers. If the implementation is flawed, the mistakes may earn the bank or credit union
public ridicule, or it may poison the well of customer perception such that customers who
had a bad experience will not willingly interact with the AI again.

MIDDLE OFFICE
The functions of the middle office include employees supporting other employees, indirectly
supporting customers, or conducting compliance activities. Some salient examples are in report
generation, underwriting and credit decisioning, and risk and compliance monitoring. While
middle office activities are generally an effectiveness play, efficiency has a role, too, as AI
technology helps process more work at lower cost. Identifying exceptions (and becoming better
at doing so) is one example of AI helping employees become both better and faster at their
jobs.

The risks of middle office AI are relatively low from a consumer standpoint as long as outcomes
(like false positives) aren’t degraded. For all of these AI activities, human supervision is critical.
Internal reports generated via NLG, for example, should only be considered first drafts; the
responsible analyst should sanity-check them, revise them for tone and voice, and ensure that
she knows the substance of the report.

BACK OFFICE
Processing and reconciliation, typical back office functions, can use AI to detect anomalies and
exceptions. Layered on top of non-AI RPA, they can serve as a backup and a second set of eyes
to make sure that processes are proceeding as they should be. Direct benefits to customers are
hard to envision in a back-office AI situation, but the risks also aren’t as high. A great deal of
threat detection and risk mitigation will also take place in the back office. The biggest risks in
back office implementations lie in over-reliance on AI and in the cost associated with putting
initiatives in place.
NEXT STEPS

Every bank should develop a strategy for incorporating AI into its technology stack. AI can
reduce costs, mitigate risks, and improve the customer experience.

Figure 11 provides a summary of the economic rationale and areas of impact of each of the AI
areas we’ve been discussing.

Figure 11: How and Where AI Can Help Banks

Source: Celent analysis

“Think about how to implement AI” is an unrealistic and unhelpful description. AI is an

umbrella term that covers a host of specific technologies and implementations. To break this
huge task into manageable pieces, Celent offers three specific high-level steps to make AI less
daunting and more manageable:

• Become educated and develop principles.

• Lay the groundwork.
• Take action.
A summary is provided in Figure 12.

Figure 12: Next Steps on AI

Source: Celent analysis

BECOME EDUCATED AND DEVELOP PRINCIPLES

• Keep an eye on the market; learn the landscape.
Basic AI technologies are improving rapidly, and bank leaders are making great
progress in specific implementations. Monitor market developments as a cost-
effective and efficient way of conducting research.
• Assess portfolio of potential initiatives.
Based on your particular situation, evaluate the implementations that will make the most
sense for your institution given your strategic priorities. Building on your market analysis,
decide when your target technologies are mature enough to begin implementation, or at
least experimentation.

LAY THE GROUNDWORK

• Develop proper governance.
We hear questions from our banking clients on where AI should sit within the organization.
There’s not a one-size-fits-all answer, but our guidance is that it should mirror a bank’s
digital efforts. AI governance, though, must include the proper internal stakeholders,
determine the initiatives to pursue, and define and measure desired outcomes.
• Seek ways to help humans, not necessarily replace them.
AI is not a panacea, and unrealistic expectations about its capabilities can doom AI
efforts. Early AI won’t replace humans, but will help them do their jobs better and
make those jobs more interesting. Don’t expect more than that, at least not in these
early days.
• Consider using a partner.
Celent believes that there is a lack of AI skills within many banking IT departments. This is
by no means an indictment of banks, for this a new and emerging technology with
relatively few experts. Consider finding a trusted partner who can help you in your AI
journey.
• Evangelize and educate throughout the organization.
AI may cause trepidation in the bank. Develop a communications strategy that clearly lays
out objectives and keeps colleagues apprised of progress. There are fears that technology
and AI will put people out of work. You must address those concerns head on and without
platitudes; emphasize that AI can enhance productivity and improve the employee
experience.
• Put your data house in order.
AI success is directly correlated to data access; not just how much data you have, but
how well you’re able to use it. Make sure that you can leverage what you have, and
realize that if you’re a bigger institution, here’s one clear advantage of your scale.

TAKE ACTION
• Start small to gain an early win.
Succeeding with a small early implementation is more important than failing ambitiously.
Pick a well-defined and manageable project whose failure won’t be catastrophic and
whose success will be inspirational. Consider back-testing on existing data to train the AI
and to experiment. Be realistic: AI is not a panacea, nor is it even appropriate for most
technology situations. But where it can be helpful, use it, and be ready to shift course
quickly based on your learnings.
• Be upfront and transparent with customers.
Transparency is a new banking imperative that customers have learned from other
industries. Google became famous for its beta releases — customers (at least initially,
before cynicism set in) appreciated that there might be bugs, and generally understood
the rationale. Take a leaf from this book and be clear about your goals and methods with
your customers.
• Track progress and adjust.
No AI implementation will work perfectly out of the box; design your tracking and
feedback mechanisms from the beginning so that you can gauge progress from the
outset and make the inevitable adjustments based on full information.

What’s considered AI today will likely become just technology tomorrow. Remember OCR.
Banks and credit unions should nevertheless think about which specific business challenges AI
can help solve and begin to prepare today.
 [ HUMAN x PROCESS x DATA ] AI
The banks that benefit most from AI will be those that are prepared to rethink
their approach to their people, their processes and their data.

AI technologies will How should banks best make use

clearly have a huge
impact on the financial of these extraordinary new
services sector. Banks will capabilities? By constantly
redefine how they work innovating at pace and scale,
(their processes), what reinvesting as necessary, to derive
they sell (their products the optimal value from the
and services) and how technologies that underpin AI.
they interact with their
customers and employees And by using an intelligent
(their user experiences). framework that augments their
They’ll redefine their people’s work, redefines how
operating structures for they operate with intelligent
an AI-enabled workforce. automation, and unlocks growth
Humans and AI will work through data. Focusing on any one
together to drive process of these elements in isolation just
and operational won’t be enough –
efficiency. And new AI understanding the interplay
applications between all three is essential in
truly gaining the maximum benefit
will create growth from the technology.
through improved
customer and employee
experiences.
HUMAN
Transform relationships
Using AI, people will be able to spend more time on
exceptional work: the 20% of non-routine tasks that
drive 80% of value creation.

PROCESS
Re-imagine business models and processes Smart
machines will continually review end-to-end processes and
apply ‘intelligent automation of process change’ to
refine and optimize.

DATA
Illuminate dark data
Companies will apply AI to greatly enhance large data
analytics, evolve algorithms with transactional data faster, and
combine data in new ways to discover trends.
 tasks towards the more strategic
and
Crucially, a bank’s AI
goals should look beyond
cost reduction, welcome
though that is. This
technology has the innovative kinds of work that will
capacity to do much ultimately drive the industry
more. Indeed, it can completely forward.
transform an institution It will create seamless interplays
from the core. It can between customers, employees
unlock growth from the and AI-led services. And it will
huge amounts of data break through the silos and
that banking institutions hold. practices of process-driven
It can automate simple and banking, and let banks become
predictable functions, as analytics-driven entities, using data
well as augment the to dynamically inform and shape
human working what they do in real time.
experience across more Understanding both AI’s potential
complex and creative and its limitations across the value
workstreams. chain is critical. Banks must know
That will enable the that this is not a replacement for
banking workforce to employees – it’s a tool to release
move away from pressure points, and derive greater
repetitive, process-driven creativity and value from the
workforce.
UNSTRUCTURED, AUGMENT
EFFECTIVENESSMODEL INNOVATIONMODEL
VOLATILE,
HIGH-VOLUME SUPPORTSEAMLESSINTEGRATION ENABLECREATIVITYANDIDEATION
AND COLLABORATION

ACCOUNTMANAGEMENT
NEW-PRODUCT CREATION

BRANCHMANAGEMENT
MARKETINGCAMPAIGNS

SECURITYAND
DISCOVERYOFMICROSEGMENTS/
IDENTITYMANAGEMENT
CUSTOMERCLUSTERS
DATA
COMPLEXITY

EFFICIENCYMODEL EXPERTMODEL
PROVIDECONSISTENT,LOWCOSTPERFORMANCE LEVERAGESPECIALIZEDEXPERTISE

FINANCIALADVISING

CLIENT/PROSPECTDISCOVERY
BASICBANKINGTRANSACTIONS
RETIREMENTPLANNING
RISK&REGULATORYCOMPLIANCE

CONTACTCENTRES/HELPDESKS
STRUCTURED,
STABLE, PRODUCTMANAGEMENT
LOW-VOLUME PASSWORDRESET(TECHSUPPORT)

AUTOMATE ROUTINE, WORK ADHOC,

PREDICTABLE, UNPREDICTABLE,
COMPLEXITY
RULES-BASED JUDGEMENT-BASED

Figure 2
AI IMPLEMENTATION
FRAMEWORK
RESPONSIBLE AI ETHICAL DESIGN
Building trust within the Implementing AI solutions that are
organisation through the way AI ethical and build transparency
is used (e.g. compliance, into the process.
transparency).

REGULATIONAND PRINCIPLES
COMPLIANCE: Defining guidelines for deploying AI
• Building auditable and regulatory- within the organisation.
compliant AI solutions.

• Identifying illicit behaviour by

customers and employees more
accurately and more efficiently.

Figure 3
Inevitably, some may feel trepidation
about the impact of these new
technologies. But it’s helpful to look
at what happened when basic banking
functions were first offshored. Many
feared the loss of jobs and revenues
in banks’ home countries. However,
in practice, skilled and highly valuable
workers were freed to do more strategic
and creative thinking. The AI phenomenon
is no different. And demonstrating where
and how the technology could work (or is
already working) alongside human
employees will help inspire greater trust in
the technology.
It is worth noting the successful use of AI
calls for ongoing investment. The
technologies are continually evolving, and
there is a risk of creating a perpetual cycle
of legacy costs. Those banks that fail to
keep pace with the technology risk seeing
their customer proposition
disintermediated by other market
participants, particularly in the era of Open
Banking and the Second Payment Services
Directive (PSD2). This investment should be
balanced out by the efficiencies that AI can
support.
Optimal efficiencies are likely to first be
seen in back-office functions, where
robotic process automation (RPA) is
already having a significant impact.
But a greater use of intelligent automation
– that is, virtual workforces that can learn
and adapt to the needs of the business
– is already filtering through to some
middle- and front-office operations. That
includes, for example, the use of robo-
advisory services. As humans and AI start
to work together in this domain, banks will
really begin to feel the benefits of AI.
And those benefits will typically be
distributed evenly between cost reduction
and revenue growth. A bank can expect
potential savings of between 20 and 25
percent across IT operations, including
infrastructure, maintenance and
development costs.2 And it should expect
new revenues across product lines,
increased development of new products
and improvements in income per product,
volume, customer retention and
acquisition.
A bank can expect
potential savings of
between 20 and 25
percent across IT
operations, including
infrastructure,
maintenance and
development costs.
9
BANKING HEAT MAP
STRATEGY CHANNELS

CORPORATE STRATEGY EMAIL

BUSINESS UNIT STRATEGY RELATIONSHIP MANAGER

OPERATING STRATEGY WEALTH MIDDLE OFFICE

MOBILE
CUSTOMER

SEGMENTATION INTERNET / WEBCHAT

INSIGHTS BRANCH

CONTACT CENTRE
SALES

PRICING CORE-FUNCTION

ORIGINATE PRODUCTS CROSS PRODUCT SUPPORT

& SERVICES

SELL PRODUCTS & SERVICES PAYMENTS

ACCOUNT MANAGEMENT
CORPORATE-CORE
ASSET LIABILITY DEFAULT MANAGEMENT
MANAGEMENT
DISPUTE & FRAUD
REGULATORY MANAGEMENT

ENQUIRY RESOLUTION
TECHNOLOGY

RESOURCE MANAGEMENT
LOW AI POTENTIAL

FINANCE
MEDIUM AI POTENTIAL

RISK MANAGEMENT
HIGH AI POTENTIAL

HUMAN RESOURCES
VERY HIGH AI POTENTIAL

Figure 4
10
The challenges of implementation are often
cited as a barrier to the adoption of what
some see as highly advanced technology.
That said, only 23 percent of banks in the
UK and Ireland think a lack of IT expertise
explains the slow adoption of AI in the
industry. And Accenture’s latest
TechVision survey found that
78 percent of banking executives see these
technologies having an impact on the
industry over the next few years.3
Although AI technology can seem complex,
a simple and highly adaptable framework
can be used to identify the potential
benefits in a particular process: create a
measurable strategy, pilot and test it,
deploy it, then manage it.
Of course, the core bank is just the start of
this transformation. On the product side,
AI will help to bring the customer and the
bank closer together. It has the capacity to
aid retention and customer acquisition
and provide the frictionless experience
that customers increasingly expect from
all their financial services providers.
That AI is having a huge impact on the
banking industry is now beyond doubt.
Processes, products and employee and
customer experiences will be reimagined.
But how exactly? By focusing on the three
core areas that AI will impact: people,
processes and data.

In addition, the role that FinTech start-ups

can play in this area should not be
forgotten. What these specialist
technologists may lack in industry
expertise, they more than make up for in
AI-building capabilities. Banks should
engage this knowledge base to help them
build the capabilities they need, while also
recruiting and training a specialist in-house
workforce.

11
HUMANS: AUGMENTING YOUR WORKFORCE
Forget about ‘humans versus machines’ – AI is about
‘humans augmented by machines’.
The workforce has changed greatly over
recent decades. The job for life has become
the portfolio career. And with this fluidity
comes employee expectations that are now
highly geared towards a work/life balance.
The nature of their work has become an
essential part of their quality of life. That
means, if an employer gets it right, they’ll
drive higher productivity. And if an
employee is engaged, so too will be the
customer, whose expectations have also
changed over the years, and who has come
to demand ever more personalised
services at a competitive cost.
Delivering these experiences for both the
employee and the customer is at the
forefront of what AI can offer a business.
But to make that happen, banks need a
workforce strategy that maps the skills
agenda, highlights areas to improve, and
upskills their workforce accordingly. Forging
partnerships with third-party providers
where necessary, and building an ethical
approach to AI, are two steps that will help
attract skilled digital talent to their
businesses.
By changing how banks work at a
fundamental level, and incorporating AI
along the whole spectrum of a new value
chain, human capital can be redeployed
into higher-value areas. And that can begin
to build new revenue streams. Providing
the energising and motivating experiences
that employees are looking for in a career
will trickle down into banks’ product
offerings and enable competitive rates
through scalable productivity.
By changing how
banks work at a
fundamental level,
and incorporating AI
along the whole
spectrum of a new
value chain, human
capital can be
redeployed into
higher-value areas.
CASE STUDY:
THE SME BUSINESS RELATIONSHIP MANAGER

Connecting a prospective Small and medium-sized enterprises (SME)

business client with a relationship manager with the right skills and
experience is critical. The client relies on them for information about the
bank’s products, insights into how their business is running, and support
with applications for new financial products and services. A robo-advisor
could channel a new client to a suitable relationship manager for the
product or service offering they need.

It could also give critical insights into their social style and preferences before
they’re introduced, through natural language processing or tone analysis.
And it could provide detailed analytics and machine learning-driven
information in real time to make sure the relationship manager is well
informed throughout the course of their first conversation. That would make
for a frictionless introduction and increase the likelihood of onboarding or
retaining a customer.
PROCESS: INTELLIGENT AUTOMATION
Traditional automation degrades over time – intelligent automation gets
smarter all by itself. It’s time to move up the maturity curve.

Creating the more personalised services that ensure more processes are revolutionised by
today’s consumers expect requires well intelligent automation. For instance, using
trained and motivated employees to make voice recognition to assess the sentiment of a
them a success. But it also requires scalable customer interacting with a robo-advisor, and
data-driven processes alongside those switching them to
employees. Taking repetitive and easily a human well before they become
automated work away from skilled and frustrated, could ensure they see an
experienced staff means that more personal application through from start to finish
services, with a human face, can be provided across many products and services.
for customers. How many more calls and
appointments could a relationship manager fit
into their day By using the full
if they didn’t have to manually fill in a spectrum of AI
potential customer’s details each time technologies,
they took a new enquiry? through dynamic and
RPA is already being used to implement this constantly adapting
kind of operational efficiency across analytics, banks can
banking businesses. However, looking at
ensure more
broader opportunities, intelligent
automation has the potential to create processes are
frictionless experiences for the customer. revolutionised by
By using the full spectrum of AI intelligent
technologies, through dynamic and
constantly adapting analytics, banks can
automation.
CASE STUDY:
MORTGAGE APPLICATION

The experience of getting a mortgage is rarely enjoyable.

But, through the application of AI, this well-known customer pain point is on
the turn. Initially, machine learning will accelerate the component parts of
the process – faster and better affordability checks, for example. This will be
followed by more complicated processes, such as product recommendation.
While the long-term impact of AI on the mortgage journey is hard to predict,
more advanced propositions such as real-time hyper-customised product
creation could be viable.
DATA: UNLOCKING GROWTH
Unlocking trapped value will do more than save costs – it will create
entirely new products and services for future growth.
Banking providers are the custodians of vast
amounts of data. Many GAFA organisations
(Google, Apple, Facebook, Amazon), despite
their huge successes with public data,
would dearly love to be in possession of so
much customer information. A bank is, of
course, bound by a code of ethics in using
personal data, and maintaining customer
trust is paramount. However, customer
sentiment is leaning towards a willingness
to let banks use their financial data – if it
means a better service. Indeed, almost two-
thirds said they would be comfortable
letting their bank do this.4
That said, there are limitations in what
customers will accept – two-thirds also
say they wouldn’t be happy for a bank
to use social media to gather
information about them, for example.
This perhaps shows that, while many
consumers still trust their bank to do
the right thing, they have less trust in
the security of social media. This
sentiment may not last for long
• especially as customers become
increasingly happy to use services
provided by GAFAs.
The wealth of information at a bank’s
disposal represents a truly unique
advantage. It can offer insights into the lives
of customers, their ambitions, their dreams,
their needs and their challenges.
Importantly, this data can feed the analytics
which guide the development of ever more
personalised services for customers.
Breaking down the silos of data, and
creating more dynamic ways of accessing it,
will make banks the standout financial
services providers in an increasingly
fragmented industry.
The wealth of
information at a
bank’s disposal
represents a truly
unique advantage. It
can offer insights into
the lives of customers,
their ambitions, their
dreams, their needs and
their challenges.
CASE STUDY:
AN INSTANT RESPONSE TO A CREDIT APPLICATION

Risk is a key factor in any credit application. And mitigating that risk usually
starts with a credit check of a potential customer via an outside agency. While
this check may be carried out more or less in real time, the data on which it is
based is usually only updated monthly. What if, in the era of Open Banking and
cloud data storage, a machine learning algorithm could instantly draw on
multiple sources – financial services providers, utility companies, electoral
registers, say – to make a decision based on a customer’s real-time data? It
could then channel the customer towards the appropriate product for their
requirements, be it a loan, credit card or other product. What if natural
language processing technology could recognise any suspicious answers given
during an application? Or if biometric/face recognition technology could
identify fraudulent applications? AI thus offers the potential to save banks
millions
in fraudulent or poor credit applications, and ensure that genuine customers,
with good credit profiles, can receive the best possible product for their
circumstances and the most straightforward application process.
EMBRACING INTELLIGENCE
AI represents a technological revolution like no other. Unleashed from the
realm of science fiction, this is a real-world technology that is ready to be
implemented in any business – today.
And as high-powered computing becomes
ever more readily available, and as vast
data sets needed for training AI solutions
become more accessible, the capabilities
will continue to grow exponentially. The
world has barely scratched the surface of
AI’s possibilities.
That creates an imperative for all financial
services companies. The time to move on AI
is now. Low barriers to entry will bring ever
fiercer competition for AI talent,
AI patents and AI capabilities. And coming AI
advances will be so all-encompassing, and so
fast-paced, that high-performing organisations
will inevitably accelerate away and leave the
slow movers far behind.
Those high performers will use AI to transform
the way they organise, run and grow their
businesses. They’ll implement the
technology in innovative ways to reduce cost
and create better experiences for customers
and employees alike.
But to do so, they’ll need to completely
rethink how their organisations, and their
workforces, operate. They’ll need strict
guidelines to ensure AI is used responsibly
and ethically. And they’ll show their
employees that AI represents nothing like
the threat that some believe it to be.
Rather, that it’s a means to elevate
human working lives to new heights of self-
fulfilment.
And, by drawing together the core elements
of their people, their processes, and their
data, banks can position themselves to lead
their industry as it enters a new era of AI-
driven enterprises. Now’s the time for
banking to get smart and embrace the
transformational power of artificial
intelligence.
Findings of the Study

Following are some of the areas of Artificial Intelligence can be used in banking sector

Personalized Financial Services

Personalized connect will reach new heights as automated financial advisors and planners provide expertise in making financial
decisions. They analyze market temperament against the user’s financial goals and personal portfolio, and offer recommendation
regarding stocks and bonds.

Smart Wallets

Digital wallets are touted as the future of real-world payment technologies, with major players like Google, Apple, Paypal and
others, jumping on the bandwagon and developing their own payment gateways. This decreases the dependence on physical cash,
thereby expanding the reach of money to greater levels.

Underwriting

The insurance sector is also coming up with a storm as they are moving towards congruent automation. By utilizing AI systems that
automate the underwriting process, the organizations come armed with more granular information to empower their decisions.

Voice Assisted Banking

Physical presence is slowly fading away as technology empowers customers to use banking services with voice commands and
touch screens. The natural language technology can process queries to answer questions, find information, and connect users with
various banking services. This reduces human error, systemizing the efficiency.

Data-driven AI applications for lending decisions

Applications embedded in end-user devices, personal robots, and financial institution servers are capable of analyzing a huge
volume of data, providing customized financial advice, calculations and forecasts. These applications can also develop financial
plans and strategies through research, regarding various customized investment opportunities, loans, rates, fees, etc and track the
progress.

Customer support

As speech processing and natural language processing technologies mature, we are drawing closer to the day, when computers
could handle most customer service queries. This would mark an end to waiting in line and hence result in happier customers.

Digitalization instead of branch lines

Banking is a lengthy process, with past records of long queues and sluggish response marring the productivity. Even opening a bank
account was viewed in negative terms as harried consumers would run pillar to post, while getting the necessary documentation
complete. Digitization of documentation eases that pain and creates a comprehensive platform, where the consumers and
providers connect.
 AI applications within banking sector include the following:

Fraud Detection 
The banking industry is extremely vulnerable to hacks and scams and fraud detection and mitigation is the topmost priority of the banks. AI
plays its role in decreasing rates of false positives, preventing fraudulent attempts and reducing payment frauds.

According to a survey by PMNTS, 80% of fraud specialists who use AI-based platforms believe that AI technology plays part in reducing
payment frauds and prevents fraud attempts. 

AI is extremely efficient in detecting fraud with 63% of financial institutions saying that AI is capable of preventing fraud before it happens.
Through supervised machine learning, AI is able to interpret trend-based insights which joined by completely new knowledge gained
through unsupervised machine learning, makes it possible for AI to determine whether a transaction is fraudulent or not. 

Enhanced Regulatory Compliance 

As the cases of frauds and scams increase, banks come under increased pressure from regulatory bodies to have strict regulations. In order
to be properly compliant with these regulations, AI can be utilized. Relying on cognitive fraud analytics, AI observes customer behaviors,
track transactions, recognize dubious activities and keep up with suspicious accounts. 

AI can also help businesses remain up to date with compliance rules and regulations by going through the compliance requirements and
detect any changes in the requirements through deep learning and natural language processing. This enables banks to remain updated on
ever-evolving regulatory requirements and align their own regulations according to them. 

Reduction in Costs
Cost reduction is a huge advantage of integrating AI in the banking industry. It is expected that by 2023, $447 billion will be saved in costs
due to the use of AI in banks. Most of the time is spent on identifying, digitizing and onboarding document templates. Through the
automation of this process using AI, banks can reduce the time and revenue spent on this process. 

Human error is one of the leading causes of financial data breaches and unfortunately, errors are costly yet unavoidable. Since AI is a lot
better at handling unstructured data, error rates are reduced and subsequently the cost to resolve that error is saved. 

Based on data from IBM, banks spend hundreds of millions of dollars on the traditional onboarding process. According to the same report,
by using AI tools that are 80% automated, 90% of accuracy is achieved which results in reductions of about 30 to 40 percent of the original
cost spent on the onboarding process. 

Enhanced Customer Experience 

Customer experience directly affects the way a business is perceived and especially in the case of banks, people use such banks that provide
swift and easy transactions with 24/7 access to their money. Banks are now introducing chatbots and voice assistants to provide a more
personalized experience to their customers.

Since chatbots don’t follow any timezone, it becomes very easy for users to access them anytime, anywhere in the world. 

Mobile Banking
In this digital age, people prefer to perform their financial transactions on their smartphones. Through mobile banking, the entire concept
of traditional banking has been revolutionized. Mobile banking allows users to perform financial transactions anywhere in the world at any
time from the comfort of their homes.
Some of the AI applications in use in the leading commercial banks in India:

State Bank of India (SBI)

SBI the largest public-sector bank with 420 million customers has embarked on using AI by launching “Code For Bank ” for
focusing on technologies such as predictive analytics, fintech/ block chain, digital payments, IoT, AI, machine learning, BOTS and
robotic process automation. SBI has also launched SIA, an AI-powered chat assistant that addresses customer enquiries instantly
and helps them with everyday banking tasks just like a bank representative .

HDFC Bank

HDFC Bank has developed an AI-based chatbot, “Eva”, (which stands Electronic Virtual Assistant) Eva can assimilate knowledge
from thousands of sources and provide simple answers in less than 0.4 seconds. By using Eva a customers can get information on
its products and services instantaneously. It removes the need to search, browse or call. HDFC is also experimenting with in-store
robotic applications. HDFC’s IRA (stands for “Intelligent Robotic Assistant”) robot

ICICI Bank

ICICI Bank, India’s second-largest private sector bank has deployed a software robotics (robotic software) a kind of software
generally focused on automating office work . The bank is the first in the country to deploy the technology, which emulates human
actions to automate and perform repetitive, high-volume and time-consuming business tasks. It has also enabled the bank’s
employees to focus more on value-added and customer-related functions. ICICI Bank has also launched a AI-based chatbot, named
iPal( chatbot ) which has interacted with 3.1 million customers, has answered about 6 million queries, with a 90 percent accuracy
rate .The bank is also considering the process of integrating iPal with existing voice assistants such as Cortana, Siri and Assistant.

Axis Bank

Axis Bank, India’s third-largest private sector bank, launched an AI & NLP (Natural Language Processing) enabled app,
Conversational Banking, to help consumers with financial and non-financial transactions, answer FAQs and get in touch with the
bank for loan other products. Currently available on Face book and the Axis Bank website, it will soon be extended to mobile
banking channels as well..
 Case Study On Axis Bank’s
AI Chatbot Axis Aha!
This case study specifically looks at the implementation of a conversational
banking assistant (AI Chatbot), called Axis Aha! by Axis bank in India, In
its customer service automation initiatives.

1. Early development
In April 2017, Axis signed a partnership agreement with its partner to develop the AI Chatbot called Axis Aha!. About four months of
development, which began later in 2017, were required prior to the initial soft launch. To define initial use cases, Axis Bank analyzed the
top searches made by customers on its Self-Serve Q&A Platform, as well as frequent customer interactions on conventional customer
support channels. Development focused on addressing high-volume, low-complexity use cases, such as product information queries.

2. Product overhaul
In December 2017, Axis launched the first public pilot test of Axis Aha!, which went live for four hours and achieved containment scores of
51 percent.

Customers often did not behave as expected: More than half of the inquiries during the soft launch were requesting answers about the
status of customers’ personal banking actions (such as requesting a checkbook) or needing to resolve an active banking issue, rather than
simply asking for information (the chatbot’s initial purpose). In response to these goals, Axis required three to four months of further
development to allow customers to resolve issues and take action.

3. Improvements and expansions

After the soft launch in December 2017, during which the AI Chatbot stayed live for four hours, the team redoubled its efforts to add new
features and improve the chatbot’s response accuracy. Prior to full release, the chatbot gained additional functionalities, such as
transferring funds, changing credit card limits, and blocking debit cards. In May 2018, Axis Aha! was fully launched to all Axis Bank
customers.

4. Future product roadmap

Axis Bank is continuing to improve its AI Chatbot with new use cases and performance improvements:

1. Integration into mobile banking

2. Service in new languages (e.g., Hindi)

3. Seamless handover to human-enabled channels (Manual Chat and call center agents)

4. Predictive banking recommendations for customers

5. Use of customer service data from other channels (e.g., Manual Chat) as additional training data

6. Use of “micro-bots” — bots that are restricted to handling a very narrow domain — inside the main chatbot to enhance its performance
in specialized areas such as home loans

Iteration and release cycle

After the initial launch in December 2017, the AI Chatbot was updated in release cycles that added new features and improved the
algorithms’ performance. Over time, the release cycles decreased from one month to about 15 days because of higher process efficiency
and testing automation. The release cycle had four components:

Iteration and release cycle

 1. Integrate new features: New features are incorporated into regular releases of the chatbot whenever they are ready.

2. Train the existing algorithms: Axis Bank and its partner generate new training data from recent customer interactions and Axis
Bank documents. These materials are turned into training data by the AI Chatbot to drive improvements in its algorithms.

3. Review and stress test: Before a new version of the chatbot is deployed, its architecture and technical execution are reviewed for
errors. The chatbot is also tested (using both automated and human tests) to make sure no errors have been introduced and that
the chatbot has not learned any “bad lessons” from ambiguous or negative customer behavior. An example error might
be responding to “Show my balance” by displaying an FAQ rather than the customer’s balance.

4. Deploy and release the next iteration: The live chatbot is updated with latest improvements and deployed for public use.

Technical development details

Developing the AI Chatbot required attention to three major areas: preparing the raw data, interpreting and extracting the training data,
and developing the core decision engine
Axis and its partner used a range of machine learning techniques and rules-based systems in each key step of developing the AI Chatbot.

1. Preparing the raw data

Training the AI Chatbot required large volumes of data — such as interaction examples the chatbot has had or will have with customers.

Axis Bank and its partner generated training data from a number of sources: transcripts of customer service emails from Axis Bank; the
partner’s proprietary training data on banking interactions; customer search data on the Self-Serve Q&A Platform and responses available
on the Self-Serve Q&A Platform; answers to banking questions written by Axis Bank’s Digital Banking team; and Axis Bank’s banking
documents and materials, including product, process, pricing, and policy information. Manual Chat and live phone transcripts have not yet
been used as a training data for the AI Chatbot.

2. Training data extraction

Machine comprehension and deep learning techniques were used to interpret the training data for the AI Chatbot.

NLP16 was used for classification, detection, and entity extraction – determining whether certain important keywords were being used and
honing in on these. NLU17 was used for in-depth data extraction from customer interactions such as tense, semantic parse, and roles. Deep
learning (neural networks) extracted data from raw files (such as chat history and banking documents), then clustered and summarized the
data for interpretation by the chatbot.

All training data was supervised — that is, given at least some manual review or intervention from the development team. Axis reports,
however, that this process was largely automated at a later stage with patent-pending proprietary deep learning modules that the project
team used to accelerate chatbot review cycles. Members of Axis Bank’s Digital Banking team also helped the AI Chatbot understand
customer intent by writing expert interpretations of what customer requests meant so as to guide the AI Chatbot’s initial learning.

3. Core decision engine

Axis Aha!’s core decision engine leveraged both machine learning and rules-based techniques.
Axis used a range of advanced AI techniques to train the chatbot to understand and respond to customers’ needs. NLP incorporated
classification, detection, and entity extraction. NLU narrowed the chatbot response from a range of possible options based on the users’
intent. NLG was used to generate the chatbot response to a customer inquiry.18 A Sentiment Analysis Module was used for assessing a
customer’s emotional state in addition to informing the selection of chatbot responses.19

Rules-based systems were used to handle queries that were beyond the AI Chatbot’s training. This included giving programmed answers to
questions that are outside of the chatbot’s training and referring customers to other service channels when necessary.

Axis used a combination of machine learning and rules-based techniques to enable the chatbot to engage in basic small talk.20 The small
talk module was fairly scripted. For example, the chatbot replies to “How are you?” with “Wonderful, as always. Thanks for asking.” The
chatbot, however, always leads users to a banking transaction after two or three consecutive small talk messages from users (for further
examples, see Appendix.)

Observations

Business impact

The business impact of the AI Chatbot alone is difficult to isolate, as it was rolled out as part of a broader set of customer service
automation initiatives, i.e., Self-Serve Q&A Platform launch, as well as improvements to existing Interactive Voice Response (IVR) at the call
center. Despite these challenges, in combination with the other customer service automation initiatives, there are key business trends that
can be observed.

According to Axis Bank, one notable trend is a reduction in customer service costs, as the bank serves a growing number of customer
queries: Through the combination of Manual Chat, Self-Serve Q&A Platform, existing IVR systems, and Axis Aha!, costs were reduced by 26
percent year-over-year, while queries grew by 10 percent – a significant increase in efficiency, though Axis Aha! is only one component of
this equation.

New customer service automation initiatives, including launch of the AI Chatbot, also had several less-measurable — yet still important —
impacts. As a result of these initiatives, customer service volumes began migrating to automated channels (e.g., from email to Axis Aha! and
Self-Serve Q&A Platform). Because these channels offer faster service, this migration is expected to improve average customer service
scores at Axis Bank, though this has not yet been measured or attributed directly. Axis Bank also gained insights from customers’
interactions with the AI Chatbot that led to product improvements across the bank’s website, such as relocating difficult-to-find web-pages
that were often the subject of chat queries.

Cost reductions

Axis Bank reported that introducing the Manual Chat, Self-Serve Q&A Platform, and the AI Chatbot, as well as improvements to the existing
IVR system, helped reduce its third-party customer service vendor costs by 26 percent per year, despite being in a period of customer
growth of 18 percent annually. Although service volumes on both human-enabled customer service channels (email service and call center)
decreased, the cost reduction was primarily driven by a reduction in email customer service agent headcount. The size of the email
customer service team went down to about 60 from about 250 Full Time Equivalents (FTEs) – a 76 percent reduction. At the same time, to
fully understand the broader impact of the AI Chatbot and other initiatives on customer service costs at Axis Bank, it will be important to
take into consideration the associated development and maintenance costs for the new customer service automation initiatives; these
currently are not known.

Productivity impact of migration to automated channels

Axis Bank reports it was able to handle its growing customer service volumes with fewer customer service agents, driven by a migration in
volumes from human-enabled to automated customer service channels, implying an increase in the labor productivity of the overall
customer service function.21 The total customer service inquiries volume increased by 10 percent from Q4-2017 to Q4-2018, while the
total size of the vendor customer service workforce decreased by approximately 12.5 percent.22 Axis Bank’s customer service vendor costs,
associated with human-enabled channels, also decreased by 26 percent. Service volumes on both human-enabled customer service
channels (email service and call center) decreased in the same period, while the volume served by automated channels increased. This
migration in existing volumes and the new customer service demand were served by the following automated customer service channels:
call center IVR, Self-Serve Q&A Platform and a smaller but growing portion by the AI Chatbot (Axis Aha!) [see exhibit below].

Out of the 2.7 million additional customer service inquiries served by the ‘automated’ channels from Q4-2017 to Q4-2018, only 9 percent
were served by the AI Chatbot, as it was only recently launched. However, through increased adoption from Axis Bank customers and
introduction of new features and functionalities, Axis Bank expects the quarterly customer service volume on the AI Chatbot to increase to
930,000 unique chats in Q1-2019,23 a four-fold increase compared to Q4-2018.24

Migration of customer service volumes to automated channels also improved customer service quality; namely with respect to time to
serve customer service inquiries and the average response time. For example, previously, to request a printout statement, customers had
to send an email and wait up to 24 to 48 hours for an agent to trigger the statement. Now, with Axis Aha!, customers can trigger their own
printout. Through migration of these basic transactions to more automated channels, Axis reports that its customer service agents have
started to manage more complex customer inquiries.

Growing customer volumes have started migrating to automated channels

Customer service quality improvements

As customer service volumes migrate to automated channels, Axis Bank expects overall customer service quality to improve due to
improved response times and service hours. The AI Chatbot and Self-Serve Q&A Platform (as well as the non-automated Manual Chat
service) provide customers with near-instant responses, whereas email resolutions generally spanned multiple days. In addition, automated
customer service channels, the AI Chatbot, Self-Serve Q&A Platform and call center IVR, provide 24/7 service, whereas human-enabled
channels are only available during business hours. Although customer satisfaction scores are not measured comprehensively across all
automated channels today, Axis Bank reports that 80 percent of users have rated its Self-Serve Q&A content to be relevant and useful, a
much higher level than the customer satisfaction scores for human-enabled channels. Increasing the span of customer service channels also
gives customers more choices for support. In Axis’s view, this increases the likelihood that customers will have their questions answered in
the way that is most convenient for them.

Impact on project prioritization across the bank

Axis Bank gained valuable insights from customer interactions with the AI Chatbot that led to product improvements across Axis Bank’s
website. Visibility into customers’ questions to the chatbot offered insights into customers’ concerns — becoming a new source of insight
Axis Bank initially did not anticipate.
Axis also used lessons from the AI Chatbot to improve other customer service channels and vice versa. For example, the design of the Self-
Serve Q&A Platform was adjusted when the team observed that customers often asked about the status of their debit cards; Axis moved
card tracking to a more visible position on the website.

Axis Bank used customer insights from the chatbot to prioritize projects.

Workforce impact

The main workforce impact of the new customer service initiatives – introducing the Manual Chat, Self-Serve Q&A Platform, and the AI
Chatbot, as well as improvements to the existing IVR system – occurred outside the bank. For instance, Axis’s outsourced email service
team was reduced by about 190 FTEs, while more than 40 third-party technical experts gained temporary jobs contributing to Axis’s initial
chatbot development. The impact on internal Axis Bank employees, meanwhile, was limited to reassignments and minor changes in daily
activities for 6-11 FTEs.

Workforce impact cascaded externally, more than internally, at Axis Bank

Impact on third-party customer service workforce

The customer service agent workforce, primarily the email team, was most directly impacted by the Axis Aha! implementation. While the
call center and Manual Chat teams did not experience reductions,25 the number of email customer service agent positions assigned to Axis
Bank at the third-party vendor decreased from about 250 to about 60 – a 76 percent decrease in the team size. Axis reports that the
displaced email agents were re-deployed by the customer service vendor to other projects, such as elsewhere on the Axis account or
moved to other client accounts.

For customer service agents who moved to the Manual Chat team, these positions generally needed skills that differed from the email
customer service skills in several ways. First, the agents had to be able to respond to customers’ asks immediately, rather than being able to
take a few hours to research an answer and reply. Axis reports that they also needed better, more-empathetic conversational skills.
Experience in banking or broadly in the financial sector was also required.

Ongoing advancements in the features of the AI Chatbot (e.g., seamless handover to human channels when needed) will potentially lead to
retraining for existing customer service team members (email, call center, and Manual Chat) so that they can best coordinate with the AI
Chatbot. According to Axis Bank, these customer service agents are now spending more time on more-complex customer inquiries, as
routine questions have migrated to the automated customer channels, including the AI Chatbot. Going forward, more granular data on
tasks and required skills for these job types as well as data distinguishing AI-related changes from broader digitization efforts will help in
understanding how AI is driving change.

Email staffing levels decreased substantially

AI Chatbot development and challenges

Axis Aha!’s development team employed an iterative development approach through frequent reviews between release cycles.
 Axis Aha! was built in multiple iterations and pivots, rather than in one launch, and continued to be updated in 15-day release cycles.
The development cycle times have decreased from one month per cycle to about 15 days over time through increased process
efficiency and automation.
 The development team aims to further automate the manual review process and shorten the release cycles. Over time, the manual
review can potentially be fully automated leading to much shorter release cycles.
 Rather than launching a fully developed chatbot, Axis Bank saved some features for future development, including the launch of
mobile version, availability of other languages (e.g., Hindi), and integrations with other customer service channels to create smooth
handoffs to live agents.

Axis Aha! was built using a combination of machine learning and rules-based techniques.

 AI Chatbot’s training data was generated from the bank’s existing customer interactions and banking materials prepared by Axis Bank,
in concert with its partner’s pre-trained models, which relied upon other proprietary data.
 Axis Aha! used a combination of NLP for classification, NLU for customer data, and deep learning (neural networks) for extracting and
summarizing raw data.26
 Axis Aha!’s core decision engine leveraged both machine learning and rules-based techniques to understand and respond to
customers’ needs.27
 Rules-based systems handled queries that were beyond the AI Chatbot’s training, including referring consumers to other customer
service channels if the chatbot could not provide satisfactory answers.

Axis Bank overcame numerous development challenges when building the AI Chatbot.
 Teaching the AI Chatbot the language of banking in India required substantial development and manual oversight. Open-source NLP
offerings could not handle the language of banking, and customers pose the same questions in many variations. Thus, Axis’s partner
built new models from scratch with manual help from Axis Bank to understand customers’ questions.
 Developing the AI Chatbot required generating training data from ongoing customer interactions and Axis Bank’s expertise. Axis Bank
used past support interaction transcripts and banking documents, where possible, and had employees write questions and answers
for the AI Chatbot, or interact with the bot as if they were customers to generate new data.
 The development team continually adapted to the new learnings from customer interactions. In the initial four-hour launch of the AI
Chatbot the development team realized that customers wanted to do much more with the chatbot than simply receive information.
Thus, the development team worked on building additional action-taking features and capabilities before re-launching the AI Chatbot
in May 2018.
 Training the AI Chatbot required constant manual attention, review, and assistance from Axis Bank and its partner. The Digital Banking
team manually reviewed the chatbot and questions it could not answer during each release cycle.
 Axis Bank hopes to provide service in multiple Indian languages, but this will require building new banking semantic layers for the
respective languages, and also performing additional manual training. Thus, while the chatbot has largely replaced English-written
emails, it is not yet equipped to wholly reduce phone inquiries, 60 percent of which are non-English.

Business and productivity impact

As stated earlier, the business impact of the AI Chatbot alone is difficult to measure, as it was rolled out as part of a broader set of customer
service automation initiatives. Yet there are clear trends observed by Axis Bank. In combination with other customer service automation
initiatives, the AI Chatbot helped reduce third-party customer service costs by 26 percent per year, while also revealing new customer
insights.
 The net reduction in customer service headcount came despite an 18 percent per year customer growth and 10 percent customer
service inquiry volume growth during the same period.
 Net service agent headcount decreased because customer service volumes migrated from human-enabled to automated customer
service channels.
 Although the AI Chatbot’s contribution to the migration towards automated customer service channels is minor as of Q4-2018, its
impact is expected to increase rapidly as customer adoption picks up and the AI Chatbot use cases mature. This migration is expected
to improve overall customer service quality, given faster response times and more available hours of service.
 Viewing customers’ unconstrained interactions with the AI Chatbot offered Axis Bank insights into customers’ concerns and priorities.

Conclusion

Axis Bank’s AI Chatbot illuminates broader industry trends that the booming Indian economy has helped to enable, such as expanding
consumer digital engagement. Within Axis Bank, the AI Chatbot is part of a broader trend of customer service initiatives aligned with this
expansion. Related initiatives also include the introduction of Self-Serve Q&A Platform and Manual Chat as well as improvements to the
existing Interactive Voice Response (IVR) system at its call centers.

The diffusion of AI technologies in the banking sector aligns with the Indian government’s vision of a “Digital India,” in which digital
adoption, such as AI technologies, can help people overcome financial access barriers. Yet, as this case study reveals, teaching the chatbot
the context of a specific industry takes significant time and resources. Open-source language processing AI offerings were not sufficient for
Axis Bank’s needs. Offering the AI Chatbot in multiple other languages, such as in Hindi, would take significantly more development time,
meaning the call center, as one Axis executive put it, “may never go away in the Indian context.”

The AI Chatbot implementation, in combination with other customer service initiatives, improved productivity in handling customer service
inquiries at Axis Bank. Though productivity gains of AI applications and automation initiatives may not yet be visible in the broader
economy, Axis Bank’s case suggests that broader productivity gains are possible, albeit with questions about whether and how quickly
productivity gains from automation suites, including AI, could spread in the future with increased diffusion of such technologies.

While the AI Chatbot was launched recently, it has already demonstrated how automation and AI can impact labor productivity. The
chatbot was capable of handling thousands of customer inquiry volumes across multiple banking products with 24/7 availability. This
automation of customer service tasks contributed to the elimination of about 190 of 250 (outsourced) customer service email agent
positions on the Axis account, a 76 percent reduction in team size.

While external labor implications were significant, the AI Chatbot notably did not have major internal implications for Axis Bank. Building an
AI Chatbot did not require Axis Bank to invest in hiring AI experts into the bank — rather, it was able to partner with technology vendors to
develop the new AI-powered chatbot. The development of the chatbot also prompted regulatory considerations, but not new regulatory
frameworks or processes. Axis Bank and its partner actively managed compliance requirements and risks by creating multiple testbeds,
bringing in expert third-parties to review the code, and reviewing the AI’s learnings before promoting new behaviors to the public.

In many ways the migration from human-enabled customer service channels to automated ones has consequences for an emerging
economy like India’s, with a large working demographic. The specific case of Axis Bank raises questions about the future of the workforce,
especially in customer service (see Appendix for expanded further questions for future research). Axis Bank’s use of automation and AI had
far greater impact externally than internally on job losses, job gains, and reassignments. Only an estimated 6 to 11 internal FTEs saw their
jobs change within the bank. Job displacement occurred principally at Axis Bank’s customer service vendor, whereas job gains were realized
in a diverse set of more technical and specialized jobs (e.g., data scientists) within other third-party vendors.

While technical vendors have experienced temporary business gains thus far, ongoing support for the AI Chatbot requires far fewer FTEs.
The analysis, testing, and development of AI Chabot iterations are being increasingly automated. Eventually, Axis Aha! may learn to address
more complex customer service tasks and ultimately replace Manual Chat agents altogether, or significantly reduce their number. Similarly,
if Axis Aha! successfully learns to converse in multiple languages, it may also begin to reduce the number of call center employees. In these
ways, we may be seeing only the beginnings of the human-resource impact of these chatbot technologies.

These findings raise a number of questions regarding the broader impact on the workforce and labor market: How will front-line customer
service employees be impacted in the medium to long term as deployment of AI chatbots becomes more widespread? Will labor impact
remain outside the bank, or will internal implications grow as companies increasingly adopt and integrate AI? If the impacts are
externalized, who will take responsibility for the people who are impacted by those externalities? Will banks become more dependent on
technology vendors or bring AI expertise in-house? How will the broader IT and BPO sectors be impacted going forward? Further research
involving the perspectives of both workers and consumers could be particularly valuable as we collectively come to understand the nature
of AI-use in the real world.

References

• M. Bhuvana, P. G. Thirumagal and S .Vasantha, Big Data Analytics - A Leveraging Technology for Indian Commercial Banks,
Indian Journal of Science and Technology, Vol 9 (32), August 2016 .
• ―Banking in the age of disruption,‖ EY, February 2017.
• http://www.latinia.com/IF/Documentos/Intelligence_Digital_Banking.pdf
• Shivkumar Goel and Nihaal Mehta A Survey on the Role of Artificial Intelligence in FinTech, International Journal of
Innovative Research in Computer and Communication Engineering, Vol. 5, Issue 6, June 2017.
• Driving AI for Financial Services – Simularity Whitepaper
• https://www.livemint.com/AI/v0Nd6Xkv0nINDG4wQ2JOvK/Artificial-Intelligence-in-Indian-banking-
Challenges-and-op.html.
• https://www.financialexpress.com/money/8-amazing-ways-consumers-can-benefit-from-artificial-intelligences- impact- on-
banking-financial-sectors/985652/
• http://www.cxotoday.com/story/impact-of-artificial-intelligence-on-the-banking-sector/
• https://www.financialexpress.com/industry/banking-finance/sbi-turns-to-artificial-intelligence-powered-chat-
assistant-here-is-what-you-get/870752/
• https://dzone.com/articles/ai-and-the-future-of-banking
• https://www.maparesearch.com/5-use-cases-ai-banking-beyond-helpful-chatbots/
• https://www.tutorialspoint.com/artificial_intelligence/artificial_intelligence_overview.hm