Standard Chartered is pioneering artificial intelligence technology for the banking industry. Carl Friedmann talks to David Lynch, group head of consumer banking operations at the company headquarters in Singapore, about how banks are leveraging investment in mobile technology to drive customer engagement.
The 30th floor of Standard Chartered's HQ in downtown Singapore has sweeping views of the Marina, the Kallang River and, farther in the distance, Indonesia. But from where David Lynch is sitting, seeing past the horizon and into the future to reimagine how digital banking will revolutionise customer service is his immediate challenge.
As group head of consumer banking operations, and former head of technology in the firm's business unit in China, he is now pioneering the multinational's adoption of artificial intelligence (AI) as a means to create a completely new customer experience with a focus on speed, accuracy, convenience and security. However, even though its in a league of its own with technology and ambition, a public launch date has yet to be set.
The term AI has been thrown around since the 1950s, and basic forms of it have existed in transactional capabilities for many years.
"In terms of real applications, the first instance of AI we brought into the bank was probably SWIFT message repair and enrichment," says Lynch about a project that took place in 2007. "The business objective there was to enhance the customer experience; to be able to clear payments a lot faster than we had historically, which was a real pain point for customers."
Starting with a proof of concept, Standard Chartered built the enrichment engine itself, which is now live in about 15 countries and delivering positive results. That's where the fascination started, according to Lynch, but a new journey is just beginning.
Unified experience for banking
As technology and behaviour evolve, especially with the proliferation of smartphones, companies have to rapidly adapt as banking becomes more multichannel, fragmented and on-the-go. With that comes an explosion of data and the need for banks to use that data effectively.
New regulations are also a challenge in terms of a launch, and AI is a relatively new space for regulators. The ultimate goal is to create a seamless synergy of traditional banking - when there were just ATMs, call centres and branches - and digital banking, all while staying secure and compliant. AI, according to Lynch, is the way forward to help unify the experience.
"The adoption of natural language processing as a way to interact for services, like Siri or Google Voice, has had massive uptake," he says. "It may not be working perfectly but the consumers are getting used to it."
As opposed to traditional methods, something unified, instant, intelligent and close to human that can sit on every channel is starting to emerge. But banking is different from what Siri accomplishes. Many industries have adopted virtual assistants and various forms of AI, but banks are currently behind the eight ball when it comes to serving the basic needs of the customer quickly, accurately and conveniently.
Apple had post-launch problems with Siri, and Google Maps recently went through some teething problems but, while people were generally understanding in terms of them working out those glitches, they have less tolerance for unreliable digital banking. Lynch, however, sees opportunities rather than unyielding error margins.
"We don't want to create an assistant that does everything," he says. "One of the benefits we have is knowing what customers want in terms of those basic transactional conveniences, so it's fundamental to create a great experience by doing those things really well. Then you start to add some of the newer experiences that will delight customers and stretch a little outside the traditional domains of banking."
Artificial intelligence: make it work
AI is a key component of that push forward. Similar to how the brain evolves, it will be as smart as the time taken to invest in it, and the effort and resources to train it. After all, new processes will get a lot of non-banking questions and they'll have to deal with those in a way that's consistent with brand image and perception.
Plus, it has to be trained to interact with structured and unstructured data, and make use of it in a way that supports the experience. And that gets exponentially more difficult as data increases, while AI doesn't get 'smarter' by virtue of simply more data.
"If you train it to use that data better, and there's more data that can make informed decisions, then it does get more intelligent," says Lynch. "We're making certain assumptions about how the technology is evolving so, at some point, when we're ready to take something public, we have to make assumptions about network latency and speech recognition, which is quite a big issue for us here in Asia.
"If the speech engine has difficulty understanding different accents, we have to think about what that means in terms of where and how we'd launch." But once those fundamentals are watertight, it becomes easier to scale up and add more services.
"Another dimension is not just about using data and AI to serve customers better or customisation, it's also about accessing APIs and web content, like Siri, and integrating that into the banking experience and customer journeys - the ability to eventually build experiences that are not just purely based on transactional banking.," says Lynch.
But there's a point where banks can become too involved in people's lives. Some have established an online banking presence inside Facebook, the benefits of which are still being weighed, but generally, people don't want their banks to be too intrusive. On the flip side, if a bank can offer more benefits and better experiences by having customers volunteer information, and make it transparent as to how it intends to use that information, then customers are more open.
"In some analyses we've been doing, there's been a willingness to share a certain level of social information with a view to offering better services," says Lynch. "But you can cross the line easily."
Rebuilding public trust in banking
Public perception of banks crossing the line is still a raw issue, years after the worst of the financial crisis. Regaining trust is not a quick fix so customer attraction and loyalty is paramount. Lynch admits it's still early stages to regain public trust, and the primary criterion to winning it back is creating a better customer experience.
"There's still a long way to go to build that confidence and loyalty but, once they're in that ecosystem, it's hard for a customer to justify going elsewhere if you've made the proposition so compelling," he says, adding that even though Standard Chartered has a lead in AI development, technology evolves very quickly and a competitive edge is merely a point in time.
"So, when products in AI start to become commoditised, adoption will become much wider. There's obviously a first-mover advantage if it's done right, of course, but underestimating the risks and challenges is done at a bank's peril; beta testing has never been a banking strong point.
Managing money, protecting investments and being constrained by regulations entail that the freedoms that enable a Silicon Valley start-up to flourish don't exist for banks. But as technology gains pace, people's expectations of banks to keep up with the speed and agility of other online industries increase as well. And with that dilemma, and recent history of banking headlines, comes a focus on 'non-negotiables' such as security and customers' intolerance for poor service.
"I think, by and large, banks are not offering world-class experiences," admits Lynch. "It's easy for customers to say all banks are as good as each other, but we don't want to be in that bracket. We want to differentiate based on experience, but we also recognise that the ability for customers to switch is becoming easier."
Customer feedback through social media
Customer feedback, either through traditional channels, Twitter or warts-and-all staff input, has been a valuable resource in helping to rebuild trust and strengthen the Standard Chartered brand.
"Creating a buzz through social media may be an area where we get into the fine-tuning of how we might do a launch," says Lynch. "I think social media will inevitably play a big role because you have a large chunk of your consumer base out there that is happy to beta-test technology provided you're up front with them on what the experience will entail, and you provide a channel for feedback. They're pretty excited to be part of something like that."
However, considering Standard Chartered's broad demographic base, Lynch has to reach people who, on one hand, demand the most innovative and sophisticated technology and, on the other, those who are reluctant to commit to online and digital banking.
"We recognised that, through online and mobile, we had to make our brand strong and relevant to a younger demographic," he says. "It's interesting, though, that we have a fairly traditional brand, but technologies like the iPhone and iPad have had phenomenal appeal with an older demographic because of their absolute simplicity.
"The reality of today's business is that we have a lot of customers who bank with us through branches and contact centres. If we could redesign the banking experience to make it so simple, instant and personal, I think we could be tremendously successful in getting the next wave of conversion in that older demographic."
Who next for artificial intelligence?
No bank yet has carried out a public launch of this new ramped-up AI. Citi has announced an alliance with IBM's Watson; BBVA has partnered with the Stanford Research Institute, the makers of Siri; and USAA is enabling Nuance and announced its voice assistant as a commoditised product. It may be early days, but it's only a matter of time before a bank is ready to make a big leap forward.
"In the old days, it was the war for talent and to convince everyone that your organisation was the best place to work," says Lynch. "We may get to a point where the most intelligent brain becomes a major source of competitive advantage. It's hard to know where that's going to land."