This story originally appeared in the May 2017 edition of WSBI-ESBG News & Views.
Members of the Norwegian Savings Banks have started to incorporate robotics into their banking systems. These robots are no kind of Star Wars characters, as the association’s Managing Director Ole Morten Geving (pictured) explains. They are computers taking over standardised banking procedures in an efficient and precise way. In this interview, Geving talks more about the use of artificial intelligence in the banking sector, as well as the future of bank branches, partnerships with fintechs and the importance of cybersecurity.
Digital innovation is not a new phenomenon for savings banks. For two hundred years we have been innovating, changing our business model, adapting to the customers’ needs. Nowadays, we continue to do so, just at a much faster speed. So it’s a speed shift rather than a trend shift. What the Norwegian Savings Banks are doing is putting the digital agenda in the front, so the customers have the digital choice as their first choice. All the banking services can be provided online. We do differ from the bigger banks though in saying to the customer that there are actually people behind these digital services. There needs to be an easy bridge from the digital services to the personal advisor at the bank branch.
In Scandinavia the number of branches has dropped quite rapidly. There will still be the need for bank offices, however, where the clients can have personalised advice. In the future, they will be more based on advisory services and less on traditional banking services, and should offer a variety of products related to the financial life of customers.
In Norway, only 6% of the customers use only the digital channels. Therefore banks need to offer a variety of channels, both digital and physical ones to fulfil the customers’ needs.
It is also particularly important for banks working with small and midsize businesses to have people in the physical branch who understand the local environment.
The competitive advantage of the small, local and regional savings banks is that they are in the position to combine big data with small data. They should be as good as the big banks in technology, innovation, new products, and efficiency, but they have to be exceptionally good in knowing their customers. Then they will have an advantage over those banks that either only focus on digital channels or put all their customers through call centres. Even though they have a personal service, there is nobody on the other side of the line the customer can relate to. Smaller banks will actually fill in the gaps in the market. They are hands on with SMEs and do also deliver a personal service for the household customers. There are three things that local banks need to focus on though, which I call the three "Rs": being reliable, as the customer needs to know that these banks will be there also in the future; being relevant, providing products that people actually need; and being relational, building personal relations between the bank, the employees and the customers.
Artificial intelligence is more an opportunity than a threat. It is a tool to make the banking services more efficient and better. In several of our banks we have introduced robotics doing standardised processes in a very precise way. They are taking over boring standardised work, giving the employees the chance to have more creative and interesting work. We see that digitisation and robotics boost ‘hitpoints’ between the customers and the bank. In the old days the customer maybe would go to the bank once a week or once every two weeks. Now they are in some kind of contact with the bank almost every day. Either in mobile banking, checking their account or making payments, or watching news and advertising of their bank on Facebook. There will be more chances for the employees to increase their contacts with their customers. So robots will reduce the number of employees doing traditional banking services, but it will also open new services and new ways of contacts, which will demand people also in the future, because it generates more business opportunities.
Their physical look is extremely boring, it’s not like Star Wars’ R2D2, and they are actually just computers. They run lending processes, such as checking and gathering information from different sources, filling out documents, all the time consuming work. They can also provide chatting services for many customers at the same time and at a high speed. There is a huge amount of services they can take over.
Artificial intelligence is increasing safety as the number of failures and fraud is reduced. Cybersecurity is increasingly important in the banking sector as banking is all about trust. So it should be on top of everybody’s mind. We have to do the very best to secure our systems and of course be sure that our systems and robots are not taken over by somebody from outside that is hostile to the bank. There have been numerous attacks on digital security and so far we have been heading up with that, but it will be a continuous struggle.
I think we are leaving behind the idea that fintechs would turn traditional banks into an old fashioned business model. Many fintechs realise that even though they have good ideas, it is very hard to compete with the trust of the traditional banking sector and it is extremely costly to build a customer base. From a banking perspective, there is a shift in the mentality from looking at the fintechs as an aggressive competitor to looking at them as contributors. We should definitely collaborate with them, and there are numerous ways of doing so. Firstly, we need know who is developing the good new services. In Norway, a few banks have invited fintechs to work at their premises, letting them have access to the bank’s resources, helping them grow and also using their good ideas, for instance.