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Overcoming modern banking challenges with AI adoption

In today’s rapidly evolving financial landscape, banks face unprecedented challenges and opportunities with the emergence of artificial intelligence (AI). While some banking leaders are eager to experiment with innovative capabilities, others are cautious about deploying AI in a highly regulated industry.

I recently moderated a webinar exploring AI’s transformative potential in banking. I was joined by Huard Smith, Principal Analyst at Forrester, who examined how data, AI, and innovation are reshaping the industry. Smith outlined methods for seamlessly integrating these elements into established tech environments. Industry experts from Equifax, Smarsh, and Finxact were also invited to join our panel. The panelists provided fresh perspectives on the latest developments in generative AI, emerging data trends, AI’s future in banking, and best practices.

This post highlights the key takeaways from the webinar, including the panel discussion.

Key findings from Forrester

Huard Smith presented research revealing several important trends:

  1. Strategic priorities: Financial institutions are focusing on improving system interoperability, enhancing security, and driving digital transformation.
  2. AI innovation: Forty-four percent of organizations consider developing new AI-driven products, services, or features a critical priority.
  3. Adoption stages: Sixty-nine percent of firms are in early stages of generative AI adoption, yet seventy-seven percent consider themselves industry leaders in this area.
  4. Data challenges: Many organizations underestimate the importance of data governance and quality in successful AI implementation.

Overcoming challenges in AI adoption

The webinar highlighted several obstacles that banks face when implementing AI solutions:

  1. Regulatory constraints: Navigating complex legal and regulatory frameworks while innovating
  2. Integration difficulties: Integrating innovative solutions with existing systems and workflows
  3. Skill gaps: Lack of internal skill sets and training to support AI initiatives
  4. Data governance: Poor practices hindering effective AI implementation
  5. Security concerns: Balancing innovation with robust security measures

Our panel shared valuable perspectives on overcoming these challenges:

  1. Data foundation: David Ferber, SVP, Analytical Capabilities and Technology Consulting, Equifax, emphasized strong data governance and quality. He highlighted these as the foundation of successful AI initiatives.
  2. Regulatory navigation: Tom Lynch, Sr. Business Development Manager, Smarsh, introduced the concept of “regulatory grade AI,” focusing on transparency and explainability.
  3. Core modernization: Jim Joyce, Chief Technology Officer, Finxact, highlighted how modernizing core banking systems can facilitate smoother AI integration and enhance overall capabilities.

Future state and trends

The webinar revealed key trends shaping the future of AI in banking:

  1. Personalization: Fifty-nine percent of organizations expect generative AI to significantly impact personalized recommendations and advice.
  2. Customer service: Improved support through AI-driven solutions is a top priority.
  3. Software development: Fifty-seven percent of organizations anticipate AI will enhance development and IT operations.
  4. Investment research: Fifty-five percent of organizations believe AI will revolutionize research and insights generation.

Opportunities for growth

The panelists identified areas where AI can drive significant value for banks:

  1. Enhanced customer experience: AI-powered solutions deliver more personalized and efficient services.
  2. Operational efficiency: Automation of routine tasks streamline processes and reduce costs.
  3. Risk management: Advanced analytics improve fraud detection and credit risk assessment.
  4. Product innovation: AI helps banks develop new, data-driven financial products and services.

Key recommendations

Based on the discussions, here are five key recommendations for banks looking to leverage AI effectively:

  1. Strengthen data and security infrastructure
  2. Align technology and business strategies
  3. Accelerate strategic AI integration
  4. Drive customer-centric innovations
  5. Invest in human capital and culture, fostering an “AI-first mindset”

Panel discussion highlights

The webinar concluded with a panel discussion addressing key themes:

Theme: Regulatory and compliance | Balancing innovation with regulatory compliance:

Tom Lynch of Smarsh emphasized the need for “regulatory-grade AI.” He stressed transparency, explainability, and alignment between business, technology, and compliance teams.

Theme: Data and security | Data security and governance in AI implementation:

David Ferber of Equifax highlighted the importance of understanding data elements feeding into AI models. He also discussed Equifax’s development of explainable decisioning technology.

Theme: Future of AI in banking | AI’s impact on banking in the next 5-10 years:

Huard Smith from Forrester predicted AI would dramatically change banking operations. He foresees altered processes and roles, enabling more personalized customer experiences.

Theme: Regulatory and compliance | Challenges in understanding and controlling AI systems

Jim Joyce of Finxact emphasized banks’ need for transparency in AI implementation. He stressed the importance of understanding and maintaining oversight of these technologies.

Conclusion

AI adoption in banking presents significant challenges and immense opportunities. Financial institutions can harness AI’s power by focusing on three key areas: data quality, regulatory compliance, and strategic integration.

This approach can drive growth, enhance customer experiences, and maintain a competitive edge. As Jim Joyce noted, “AI will create opportunities for banks of all sizes to compete at new levels.”

The future of banking is intertwined with AI. Those who embrace this technology thoughtfully will be best positioned for success.

Financial institutions must prioritize data governance, regulatory compliance, and continuous innovation. This will help them fully leverage AI’s potential in transforming operations and customer experiences.

About AWS Marketplace and next steps

How can your organization begin addressing challenges like those discussed in the webinar?

There are a variety of AI based financial services solutions available in AWS Marketplace such as the ones discussed from Equifax, Smarsh, and Finxact.

AWS Marketplace is a curated digital catalog. It simplifies finding, buying, deploying, and managing third-party software, services, and data. It offers quick, easy, and secure deployment. The platform provides flexible consumption and contract models, along with streamlined procurement and billing. Over 330,000 organizations use AWS Marketplace monthly to accelerate digital transformation and improve efficiencies across their enterprises.

Forrester’s independent research shows that finding, buying, and deploying solutions through AWS Marketplace takes half the time compared to other sales channels.

Visit Financial Services Solutions in AWS Marketplace to learn more about the financial services industry (FSI) cloud solutions available in AWS Marketplace.

Watch Overcoming Modern Banking Challenges with AI Adoption on demand to explore these topics further and gain additional insights from our expert panel discussion.

 

About the author

Shaheen Kanda is the Financial Services and Insurance Leader for AWS Technology Partnerships. Before joining AWS, she founded two FinTech startups and spent a decade working as a leveraged finance banker in New York City.