Financial institutions have a number of challenges to contend with in 2021:
- remote working;
- updating internal systems;
- operating as efficiently and cost-effectively as possible;
- and keeping their data secure.
That’s where SaaS and AI—already in use only to some extent—come in.
The World Economic Forum reports that 98% of office workers would like to work from home. With cloud-based SaaS solutions, remote collaboration is easier than ever before.
What’s more, SaaS providers handle all updates on their clients’ behalf. With nearly 50% of banks not upgrading IT systems as soon as they should, this is clearly of paramount importance.
When COVID-19 first swept the world, use of digital-first banking channels increased by 20 - 50%. This trend doesn’t look set to end anytime soon. If banks are to serve their customers in 2021, they need a digital infrastructure that can keep up.
AI, meanwhile, revolutionises internal processes while also leading to incremental value up to $1TN. And with the costs of global cyber crime surpassing $1TN for the first time in 2020, it’s imperative for banks to embrace the fraud-detection capabilities offered by AI-powered solutions.
Let’s examine these areas in more detail.
Why is SaaS so promising?
- It facilitates remote working
Remote working took off as a result of COVID-19. With European banks predicting their staff will work remotely around 50% of the time going forward, this trend isn’t set to disappear any time soon. Cloud-based SaaS tools, which drastically revolutionise the ability for disparate teams to collaborate, are therefore becoming increasingly critical.
Staff can all access the same documents wherever they’re located, collaborating together in real-time. Just because your staff aren’t together physically doesn’t mean that they can’t effectively work together.
- Easy upgrades
As things stand, banks are working with outdated and inefficient legacy IT tools.
Deutsche Bank’s merger with Commerzbank has been plagued by inadequate and outdated legacy IT infrastructure. Moreover, JPMorgan Chase is still hiring developers that work with COBOL (a programming language dating back to 1959).
Banks need to upgrade their IT infrastructure, and fast.
Fortunately, SaaS providers take this load off their customers’ chests. They handle all software updates while ensuring that their clients don’t ever need to worry about on-premise hardware. Updates are deployed centrally before being rolled out to their clients’ hosted applications.
With the pace of change increasing by the second, and banks already behind the curve, hassle-free upgrades are an invaluable benefit to 21st-century financial institutions.
Why is AI so promising?
AI has permeated every aspect of our lives, performing complex tasks more accurately and quickly than humans can. This is incredibly exciting when it comes to the banking sector. But on top of this, there are two other powerful benefits that AI-powered solutions bring.
- Cost savings
AI has the potential to realise massive cost savings. Despite the upfront costs, AI tools are actually incredibly smart investments. AI is predicted to save the financial industry around $1TN by 2030, leading to a 22% reduction in total costs. In 2019, AI-powered chatbots alone saved banks a reported $127M.
With AI-based tools, banks can expect higher quality work delivered more accurately than ever before—all while achieving significant cost-savings.
- Fraud detection
In the fight to prevent fraud, banks must turn to AI-powered solutions.
By leveraging cognitive fraud analytics that analyse transactions, delve into customer behaviour, and identify potentially suspicious behaviour, banks can ensure that they’re always in-the-know about what their customers are up to. If you want to ensure that fraud is kept to a minimum, you need to introduce AI-based tools. It’s as simple as that.
- Powerful prediction capabilities
Analysing your customers is just the first step. With the help of AI solutions, banks can take their predictive analytics, to the next level: using what they already know about their customers to predict how they will behave going forward, what they might need help with, and which services might be of value.
These predictions could play a powerful role in reducing churn, up-selling consumers, and more generally gaining a deeper understanding of your customer base.
Potential SaaS challenges
Despite their benefits, there are certain SaaS-related challenges to consider. Let’s examine two of the most common concerns before digging into potential solutions.
- Data security
The average data breach in the financial sector now costs a reported $5.9M, so it’s no surprise that data security is a top priority. Your organisation might have the latest data security protocols, but when you throw a SaaS solution into the mix, you suddenly have to share your data with an external party.
So how can you ensure that you avoid any potential data security mishaps?
Allay potential fears by making sure you ask 7 crucial questions of potential SaaS providers before signing up to their solutions: If the answers you receive are detailed and accurate, go ahead as planned. If not, look for alternative providers.
- Governance and compliance
In-house systems are entirely under your control and governance at all times.
With third-party solutions, however, this disappears. Your internal systems automatically follow external updates. Moreover, you don’t know whether your data is being stored under your government’s latest data protection regulations—you just have to trust in your provider.
However, if you ask the right questions from the get-go—and choose the right provider—then this shouldn’t be a cause for concern. The best SaaS providers know their target markets inside out, always staying fully compliant with the industry’s latest rules and regulations.
The challenges are best overcome by conducting thorough due diligence before choosing a SaaS provider.
Potential AI challenges
Similarly, there are two main challenges banks face when considering implementing AI-based solutions: job losses and a blind reliance on these tools.
- Job losses
With KPMG suggesting that 20% of all financial jobs could be replaced by AI, this fear is understandable.
But this figure doesn’t tell the full picture. It ultimately comes down to how you design the AI in question. If it’s designed to replace low-value jobs, that’s what it’ll do. If it’s designed to merely be a powerful tool in your armoury, however, then that’s what it’ll be.
AI doesn’t automatically mean that your staff’s jobs are under threat. If you choose the right solution, with the right intentions, then it’ll make their lives easier. It’ll allow them to move beyond low-value routine work and to begin using their creativity and decision-making skills to move into a more strategic role.
By communicating this clearly to your staff, you should mitigate all fears relating to potential job losses.
- Blind reliance
Some companies fear that introducing AI will only lead to a decrease in human output and effort. Staff will become so used to relying on AI solutions that they’ll become blindly reliant on them and left unable to make their own decisions.
This idea is misguided. AI is only a tool in banks’ existing processes—it’s not the process itself. AI allows teams to move beyond low-value, data-heavy tasks with confidence. Reiterate to your team that the AI is simply the first step in any process. It will augment their ability to execute complex processes with 100% accuracy.
It won’t, however, allow them to simply sit back and twiddle their thumbs all day long.
SaaS and AI have changed the business landscape for good. If banks and financial institutions are going to meet rising consumer expectations, handle new ways of working with ease, and remain compliant while doing so, then they have to keep up with SaaS and AI developments.
By growing alongside these technologies, banks can ensure that they’re always benefiting from technology’s latest and most innovative developments. Take collections, for example. With 2021 set to see a sharp rise in the number of non-performing loans (NPLs), financial institutions need to use the most effective tools at their disposal if they want to master their collections strategy.
Simply put, they need to leverage SaaS and AI.
Here at receeve, our SaaS-based offering provides customers with next-level AI-driven insights to transform their collections success. Want to find out more about how we do this? Get in touch or book a demo today.