By Soren Nikolajsen, Managing Director, Alawwal bank
Let’s start by being honest. Like many of the big traditional industries, banking doesn’t have the greatest track record for leading innovation in recent years. We’re more famous for being disrupted by innovation than we are for leading it.
Of all the technological advancements that we have seen over the past few years, I think artificial intelligence (AI), with its current capabilities, represents the single biggest opportunity many businesses, including banking, have seen in a long while. It is an opportunity we simply cannot miss if we want to stay relevant.
AI, of course, has been around for decades. Many of the principles behind it remain the same, but in recent years we have seen a significant step change in its capability and scope. It has already made its way into our daily routines in ways we now take for granted. We trust it to tell us how to get to where we want to go; we trust it to tell us what to watch and what to buy. In short, it has more than proven itself to be a transformational technology.
Banks, like many big, traditional businesses, are highly complex, process-driven organisations. We have thousands of customers who give us vast quantities of data. Data that can tell us a lot about our customers’ behaviors as a group or individually. If only we had the technology to process it efficiently! That is one area in which AI is beginning to play an important role—but we are only scratching the surface of opportunities, in my opinion.
If we fully embrace the technology, AI can help us work smarter and make a positive difference in how we service our customers.
Inside the IBDA Branch everything is digitized. A customer can walk-in, order a coffee and walk out with a new account and working card within 10 mins
What customers wouldn’t want to have a bank that really treats them like individuals, not categories? To have a bank that helps them to make sure they don’t run out of money at the end of the month—a bank that offers them only things they actually need, and when they actually need them?
AI can help us do all of that. AI can also help us improve our control environment. Get better at protecting our customers, and the bank, by bringing more of our data together and using it in smarter ways.
As the use of technology increases, so does the risk of fraud from cyber-criminals. The smarter we get, the more creative they get. By using AI, we can look at more information and detect payment patterns in a much smarter way—and raise instant alerts if something does not look quite right. That’s something that I’m proud to say Alawwal bank is already benefitting from.
So why haven’t banks fully embraced AI yet? Well, the first part of the problem is that a lot of business people still don’t know what AI really is, let alone what it can do for their organizations.
If you typed AI into Google right now and then searched for images, you will see endless pictures of Terminator-style robots and digitized human brains. Is this an accurate view of what AI really is today? No, it is not—but this is the image most of us have when we think about AI.Unfortunately, AI is surrounded by a toxic mix of misunderstanding, false expectations and fear—fear that it will soon put us all out of a job. To quote one Elon Musk: “AI is a threat to our existence”.
Now, AI has gotten pretty sophisticated, but it has not replaced the human brain; it’s not even close. It does not have a conscience; it does only limited things—things that it has been told to do by us humans. We will still have jobs, just some of them may change in nature.
For me, this really sums up one of the biggest problems we have with AI—the hype surrounding it—and how it misleads us.
The IBDA Branch was used in a case study for innovation in the Middle East by University of California, Berkeley
The Financial Times recently quoted a new piece of research showing that 40 percent of AI startups in Europe do not actually use AI. Companies are simply branding themselves as “AI businesses” and literally cashing in on the hype. By using these two letters, a firm is more likely to secure higher valuations and more funding. So, the hype has blinded even the smartest of investors. The problem is that the hype surrounding it detracts us from the really useful applications the technology has to offer in every-day businesses. We are often too busy thinking about the science fiction.
So, one of the first things we need to do is educate ourselves about AI. If we do not put in the effort to learn about it, we will not be able to tell the difference between science fiction and science fact. And that is how opportunities are missed. We need to build a basic understanding of the technology across our organisations if we want to see our teams truly embrace it. Innovation, after all, does not start with technology—it starts with people.
It’s not about turning everyone into AI experts. It is about teaching people to see through the hype and understand the basics. Then you can have your entire staff looking out for opportunities—evaluating what is good with AI, what is bad, and what’s nonsense—and come up with really beneficial ideas for the organisation to get the most out of it. Also, getting any AI project off the ground takes collaboration across many teams and individuals. That’s going to be a lot easier when more people understand the technology and are open to using it.
At Alawwal bank, we have begun to do just that. Recently, we became the first company in the Middle East to offer basic training in artificial intelligence to our entire staff. We offered workshops along with an online course developed by the University of Helsinki and global tech firm Reaktor. For the workshops, we had about three times as many colleagues registering than we could accommodate—a really encouraging sign of the interest across the bank.
Probably not what you would expect from a 93-year-old bank in Saudi Arabia. However, I genuinely believe AI will play a big part in the future transformation of banking—and getting colleagues from across the bank involved is a good way to make that happen. Equipping staff with basic knowledge of AI means that we are better prepared as professionals, and as an organisation, for the next generation of banking.
Alawwal bank Digital Cafe IBDA Branch, located in Riyadh’s popular Al Nakheel Mall
We already use AI at Alawwal bank. We use it to let our customers access our mobile app through facial recognition or fingerprint identification—and we are using AI to help us better identify fraud. Chatbots in our call center will be next. But this is really only a small part of AI’s potential to improve our business.
The slow adoption of AI amongst banks highlights a few core issues about how the sector tackles innovation. But these are problems we can fix—and fix them we must. Otherwise, we will quickly lose our relevance. Along with educating ourselves and making innovation everyone’s business, we need to start making smarter decisions about how we adopt technologies such as AI.
If you look at a round-up of the region’s banking news on a regular basis, a lot of it is innovation-led stories. All too often they fall into the same category. They tend to obsess about the technology and the banks themselves for being first to use it.
This compulsion to be first really offers only a short-term buzz. Rarely do I read about the long-term, measurable benefits the proposed technology will bring for customers—or the business problems it solves. Even rarer are stories evidencing how technology has been introduced and brought a material benefit to the customers or the bank’s processes.
Introducing new technology should be looked at like any other business decision. There should be a rational business case for it. But I think the hype has led many businesses into a race to be first to use technology—creating a rush to buy “off the shelf” solutions that are rarely designed for them.
Staying competitive in an increasingly digital world means continuous investment in our digital capabilities to keep pace and stay relevant, so we have to spend wisely. We should not be innovating for the sake of innovation—it’s about understanding our customers, about offering them services they will want and enjoy using, repeatedly. We also have to stop company hierarchy from killing ideas. Often, the larger an organisation becomes, the more it loses agility. The more bosses from whom people need to seek permission, the harder it is to get an idea off the ground.
Digital innovation is happening at a faster rate than ever—so we need to be able to get new ideas to market quickly, while they are still relevant. Unnecessarily long sign-off processes will only slow us down. So, too, will seeking perfection the first time. It is much better to test early with prototypes, learn from them and evolve services based on customer reaction. That is still quite a new concept for many traditional firms.
Demand for the intuitive, user-friendly services that AI offers is already very strong in the Middle East. We have a very young, tech-savvy population with high expectations that we as banks need to live up to. Millennials make up the biggest part of our society, with 60 percent of the Arab population under 30 years old. In Saudi Arabia, we also have one of the world’s largest groups of users of social media—platforms that are all driven by AI. If we do not use technologies such as AI to live up to our customers’ expectations today, we cannot assume that these people will be our customers tomorrow.
So, in summary: innovate where it makes good business sense; get your whole team in on the idea—and don’t get carried away by the hype. We simply have to get it right when it comes to AI. If we don’t, there are plenty of other actors who will.