Only 6% of Retail Banks Chart Path for AI Transformations

Insight reveals that 80% of retail banking executives perceive generative AI as a significant advancement in AI technology, according to the World Retail Banking Report by Capgemini Institute. However, only 6% of retail banks have developed a roadmap for implementing AI-driven enterprise-scale transformations. 

In response to macroeconomic uncertainties, retail banks are prioritizing productivity and efficiency. A survey among banking leaders showed that 70% intend to increase investment in digital transformation by up to 10% in 2024. Despite this, many banks are unprepared to effectively adopt and scale intelligent transformation initiatives leveraging advanced technologies like AI, machine learning, and generative AI (GenAI).

The report underscores an urgent need for banks to bridge this gap and prevent the "silent failure of GenAI." Merely 4% of retail banks have achieved high scores in both business engagement and technological capabilities, indicating a widespread lack of readiness for intelligent transformation. North America, Europe, and the Asia-Pacific region exhibit the most significant lag in readiness for this transformation.

To mitigate the risk of generative AI failure, banks must establish an AI observatory to monitor and report the real impact of AI and GenAI at scale. “Generative AI can be transformational when used responsibly across all operations. It is imperative to enhance efforts to ensure transparency and accountability in its usage. Now is the time to act and establish practices that foster trust and intimacy with customers,” said Nilesh Vaidya, Global Head of Retail Banking and Wealth Management, Capgemini.

GenAI holds promise in enhancing efficiency and customer experience across the retail banking value chain. With over 80% of banking employees engaged in operational activities, there is significant potential to optimize processes through intelligent transformation. By leveraging this technology, banks can automate tasks such as fraud detection, data analysis, and personalized customer communications, thereby freeing up valuable time for employees.

“Through the integration of big data, artificial intelligence, and machine learning, financial institutions are revolutionizing service delivery, making it more personalized, responsive, and inclusive,” writes Erez Saf, President, Pymes Capital for MBN. 

Additional transformative scenarios shaping the future of retail banking include front-end revolution, winner-takes-all consolidation, scattered landscape, resurgent regulators, and the rise of central bank digital currencies, according to PwC. 

PwC envisions non-traditional players from sectors like technology, media, and entertainment capturing customer relationships, while established banks transition into infrastructure providers without direct customer interaction. Possibly, the banking landscape may be dominated by a few large, tech-enabled institutions with customers preferring personalized and convenient platforms. 

On the other hand, PwC also sees a shift towards smaller, local banks amid diminishing trust in global institutions and rising nationalist sentiments.