Rise of the ‘cognitive bank’


Banks have faced numerous challenges over the last decade in the hunt for both efficiency and a customer experience that meets fast-evolving expectations in the digital age. The coronavirus pandemic has accelerated the need for banks to transform. Achieving this kind of speed and agility is tough in legacy operations.

Often banks will appoint a chief transformation or chief digital officer who will work across the organisation to improve service and overall customer experience. They will tend to take a customer journey approach to, for example, opening an account, understanding the customer painpoints, and then working out how to make it better through the use of technology.

On the face of it, banking apps and websites have made significant strides. A loan can often now be approved in hours, instead of weeks, and digital onboarding of customers can be completed in minutes. But the systems that underpin them are up to 40 years old and are expensive and time consuming to change.

“Every established bank has transformed their processes, but there is a limit to how far they can go with their existing technology,” says Simon Ward, lead partner in the Global Thought Machine Practice at IBM.

“Before COVID-19, established banks were thinking about how they could get to anything near the agility and customer experience of their neo rivals. The pandemic has intensified the desire for transformation and cost efficiency. Previously, a small number of banks were thinking about radical transformation, now many more of them are and they’re speeding up.”

What they are accelerating towards is the next generation of banking platforms. Built on cloud-native technology, they’re faster and cheaper to build and operate, but remain secure. They’re also open by design and therefore able to connect easily to other companies and service providers.

These new systems are based on hybrid cloud infrastructure, easing the flow of  data and allowing the use of artificial intelligence (AI). IBM believes these cognitive banks, which infuse AI throughout all their operations and processes, are the future of banking.

“Banks will become more like software companies,” says Ward. “They will have engineers and data scientists. People will spend less time doing clerical activities, freeing them up to focus on helping customers with complex financial transactions. When you contact your bank, you will talk to a virtual agent which will be powered by AI and only if your query falls out of certain boundaries will you be connected to a human agent.

IBM believes these cognitive banks, which infuse AI throughout all their operations and processes, are the future of banking

“The AI will monitor regulation changes and then relay exactly what changes are needed to the bank’s processes. Cognitive banks will use biometrics in onboarding, so they know who is on the phone without having to authenticate in the traditional ways.”

IBM helps clients transform into cognitive banks in three ways. Firstly, IBM is the only organisation with a secure financial services cloud, allowing banks the benefits of public cloud, but with controls that mean they can feel confident their data is secure. Secondly, the company has substantial depth and breadth of skills to support banking transformations. And finally, IBM partners with an ecosystem of companies that develop key cloud-based software applications, which further assist banks in their transformation.

“We are building a services organisation across 110 countries,” says Paul Briscoe, senior partner in IBM’s Core Banking and Payments Practice. “We construct something unique for each customer. We know that each specific product might not fit every financial institution and combinations of solutions might be unique each time. These are complex, multi-year digital journeys.

“IBM’s global knowledge means we can make sure what we construct and help banks build is compliant with regulations in each individual country. IBM Cloud for Financial Services allows banks to understand what they’re doing with their data and what controls they have put in, and therefore how they can evidence that to the regulator in their particular location.”

For more information please contact Paul Briscoe, senior partner at pbriscoe@uk.ibm.com