May 3, 2022

The Transformative Effects of AI: Santander – Re-humanizing Banking Thanks to AI

Humberto Domínguez Rivas, Director of Retail Banking Innovation at Santander, explains the seemingly paradoxical way that AI can help banks get back to their roots and really engage with customers.

We are in the middle of the 4th industrial revolution, where new digital technologies take center stage and profoundly reshape every area of business, none excluded.

At the very core of this revolution lies artificial intelligence, so articulated in different verticals and so pervasive that it is impossible that it won’t change financial services forever, bringing us the fourth wave of digital transformation after the electronification in the 70s, the rise of the Internet and online banking at the turn of the century, and the breakthrough of mobile banking over last five years.

How will financial services change and what is already underway thanks to AI? Where will we see the first major impacts? How is legislation expected to evolve following EU GDPR regulation? What about data? How will financial institutions compare to Big Tech in their collection and usage of data?

In these interviews, innovation leaders share their views on these important questions and more. Their experiences are invaluable as there is no silver bullet or crystal ball when it comes to innovation. And while everyone must chart their own path, no one is alone in their journey. We can leverage learnings and experiences from those around the globe who are working on these same problems. This series will provide the type of insight that community members will no doubt find valuable in their own innovation quest.

AI development is one of the hottest topics in digital transformations of the moment. For financial services, what stage of development and adoption are we at in terms of AI? Are we still in the early stages of this technology or are we further along?

AI is just a technology, it is up to the business to use it wisely to develop better products and a better relationship with their customers. In my opinion AI provides us an excellent chance to get “back to our origins”, to have more human relationships based upon insights and useful data to our customers, so they can drive their finances in an optimal way.

In this moment the industry is experiencing AI hype, but the key is to really believe that using this technology can improve the engagement and “honest advice” that banking used to provide decades ago.

In our vision, banks have been struggling to offer personalized actionable insights to customers via digital channels. Customers are overwhelmed with too much data and too many dashboards in their PFMs, with too few actionable insights that really can shed some light on their personal finance.

To solve this problem, we decided to partner with Personetics to bring into reality a new paradigm communication/advisory channel between customers and the bank they trust: SELF DRIVING FINANCE. For an early PoC we trusted top-of-class Personetics or Fabrick to leverage customers’ financial data to provide personalized customer engagement. These individual and personalized insights help customers fully understand their personal finance and the implications of their transaction decisions so they can take appropriate action.

To successfully implement this new self-driving finance solution, Santander Spain had two key areas of focus:

• We focus on the person, not on their banking products.

• To help our customers by shedding light on their financial behavior patterns so they can reach their full potential and regain control of their finances.

We felt that Personetics’ Self-Driving Finance solution, which enables banks to provide retail customers with varying degrees of guidance in managing their finances – ranging from real-time insights to personalized recommendations and automated money management – would be able to help us meet our aims.

And this is our key idea: to use what is in the market, and to embrace our digital channels to offer something with a real impact for customers.

We are currently offering two services based upon AI: insights & subscriptions and recurrent payments. It is something small, but it is widely adopted, and with very high valuation from our customers.

AI is a very articulated field comprised of many sub-areas such as ML, RPA, predictive analytics, deep data science, risk analysis, or cybersecurity. In your experience what are the verticals that are more developed and transforming the way the financial services industry is being reshaped?

In my opinion data should be exploited internally in the industry, not by third parties. The goal should not be the technology but the project (or projects) you want to create. The goal for most in the industry is to transform from incumbents to best-in-class financial providers.

In hypercompetitive times with neobanks and Big Tech fighting to win the customer’s trust, we believe we need to go back to retail banking basics: reinforcing trust between our customers and the bank.

This new digital engagement with the customer provides us with a competitive advantage vs other player’s digital channels as it is based on a customer’s financial data and thus offers a hyper personalized digital experience.

For you and your organization, what are your top priorities regarding AI projects in the near future? And how do you see its adoption in mainstream business? Is it easy? How much do organizations and IT need to change in order to get the most out of the technology? 

First, we test a PoC with real customers, and then we scale up to all customers in the country. The next step is to provide the service in the cloud for serving all of our banks in Europe. This requires a huge amount of focus and work for lots of teams, and many decisions need to be made in real time.

Currently we have achieved: 

• Available for 5M digital customers (web/app).

• +90M insight push notifications per year.

• As part of our learning algorithm, we have as of now captured an outstanding insight service rating (4.6/5).  By the end of the year we estimate overall app customer satisfaction to increase by 20%.

• 40% increase in digital engagement.

These AI-based automated insights and the project learnings are being shared and adopted by other banks from Santander Group, thus creating a global footprint in these good practices.

It makes it possible to give personalized and honest advice to our customers (not based upon products, but upon the client needs). Finally, it allows us to use and monetize the customer data, but only within the bank, thus avoiding data breaches or selling data to third parties.

Two key ingredients for our success so far:

• Collaboration
We were able to break the bank’s silos and work as one team between digital channels squads – business development innovation and technical implementation with the SAN and Personetics & Fabrik teams.

• Technology
Utilizing AI & neuronal networks, predictive analytics can analyze huge amounts of data in real time to empower our customers. Santander Spain uses deep & recent data (historical records of the client transactions, and a snapshot of the products & balances) to create predictive patterns with AI and machine learning that may impact our customers in the near future. With the pattern detected, Santander Spain utilizes digital channels to create an insight for the customer, so he/she can evaluate the possible situation, and to solve it before it really happens.

For example, based upon past transactions, our solution can create a pattern in a customer’s payments for his car insurance premium in May. In April, it can forecast that a new payment will happen (obtaining the amount from the mean of the past premium payments). Our solution creates a predictive cashflow analysis, and it may highlight a future negative overdraft in the client’s account. It automatically creates an insight (using push and a note in the timeline) to communicate with the customer to notify about the possible future overdraft.

Another example is how we are able to offer to our customers an accurate analysis of all their subscriptions and recurrent payments, giving them insights to manage their finances. If we give them valuable insights, we are giving them the power to real take control of their finances. That is the kind of solution that the industry needs to keep control of its future.

Let’s talk about AI risks and issues. What are, to you, the biggest risks brought by AI development? Will there be a need for new dedicated legislation, as the EU did with GDPR for privacy protection and consent? The EU is also working on a new dedicated AI legislative framework. How urgent is that for the industry? 

In my opinion there is no additional risk in using the existing data. But there is one risk associated with the result of the analysis. A poorly trained AI will provide insights that simply won’t work, neither the customers nor the internal processes that the industry wants to achieve. GDPR is very restrictive, and it conditions the use of AI in the industry. My guess is that massive usage of AI will challenge GDPR, or at least the way banks manage the permissions given by customers.

Eventually it will need to have specific legislation, but in my opinion, it will be best do it in parallel with the projects of the industry.

Long term, how do you see the FS industry 10 years from now? How will it be transformed by AI? How will the “human” relationship factor stay relevant (if that will still even be relevant…)

AI (among other technologies) will give the banking industry the chance to focus on their core business: to provide the best products to the best clients, and to reduce risks, and improve the engagement and satisfaction of the customers.

I have no fears that AI will affect the human factor, in fact, it should be the other way: it will be a tool for the whole industry to re-humanize their interaction with customers. An employee and a customer with a whole new set of tools that will help them make better choices, better sales, and deliver the best service ever.

Originally published on Efma, April 6, 2022: https://www.efma.com/index.php/article/17157-the-transformative-effects-of-ai-santander-re-humanizing-banking-thanks-to-ai