Will self-driving accounts crash and burn? - Editor's Blog -

Artificial intelligence opens up huge possibilities for banks but also asks some difficult questions, writes Brian Caplen.

Banks desperately need a new trick. The problem is that no one wakes up in the morning desperate to check out what’s new from their bank. There are no queues around the block for the latest bank innovation.

But with the arrival of open banking and the challenge of the fintechs, banks need to up their game. Welcome to the idea of the self-driving bank account that uses artificial intelligence (AI) to predict when and in what format a customer will need funds; that takes care of routine financial transactions; that finds interest-earning opportunities for cash balances left idle for even the shortest time; and that adjusts loan rates to changing circumstances.

In some scenarios, the self-driving account starts listening and talking, advising on investment opportunities, the cheapest airline seats, the best supermarket deals and so on. But as with the self-driving car, what happens if the self-driving account goes off the road?

Who is liable if the customer becomes overdrawn, spends too much or the advised deal does not turn out to be the best?

AI presents a world of opportunities but also many risks and challenges. The self-learning thermostat in my home increased rather than reduced the heating bill until it was set to work closer to how an old-fashioned thermostat functions. Hardly a major problem but when it comes to money and bank accounts customers, are likely to be less forgiving, as are the regulators.

At a system level, we are seeing the difficulties banks are having with keeping the IT functioning and the struggle a bank has to recover when something goes wrong. An AI world will be more ambitious in scope but equally the potential pitfalls are greater. As with the car industry, banks will need to work both with their legal teams and governments to find answers to some of these questions and to ensure that the self-driving account, when it arrives, is as smooth a ride a possible.

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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