Australian and New Zealand banks embrace AI to stay competitive in a rapidly evolving market
By Jeremy Thomas (pictured), Regional Director at Backbase
The financial services industry in Australia and New Zealand is undergoing a seismic shift, with Artificial Intelligence (AI) at the core of the transformation.
Australia’s major banks are at the forefront of AI adoption, utilising the technology to improve customer experience, optimise operations, and enhance security. Mutuals in Australia are also increasingly leveraging AI to enhance member services, streamline operations, and foster personalised financial solutions.
However, while many banks remain cautious in their adoption of AI, the time for action is now as the technology increasingly reshapes customer expectations and competitive dynamics. Banks have a clear directive – adapt or risk obsolescence.
Taking the first steps
The initial hesitation among banks is understandable. Financial institutions are traditionally risk-averse, particularly when it comes to customer trust and regulatory scrutiny. However, industry experts stress the importance of starting small with targeted AI initiatives.
Even if a bank is not ready for large-scale AI adoption, starting small will allow the organisation to experiment and refine. This approach minimises risk and ensures a smoother transition while building internal confidence in AI’s potential.
One of the critical steps to successful AI adoption is defining specific business use cases. A hasty rush into AI without clear objectives often leads to wasted resources and unclear returns on investment (ROI). It is therefore important to identify the problems that AI can solve, such as improving customer lifetime value through predictive product recommendations or optimising operational efficiencies.
For example, if the goal is to increase cross-selling opportunities, AI-driven tools can help design personalised campaigns that boost product uptake among new and existing customers. By aligning AI initiatives with business goals, banks can quantify the resources required and measure ROI effectively.
Dispelling the myth of ‘AI banking’
AI is not about replacing traditional banking but rather enhancing it. There is no such thing as ‘AI banking’ versus ‘traditional banking’. Instead, AI should be viewed as a tool to improve customer service and streamline operations.
It’s also not about adopting technology for the sake of it. A bank’s ultimate goal should always be to better serve its customers. While AI can automate routine tasks, such as data entry and fraud detection, the human element remains indispensable. According to recent surveys, 63% of customers still prefer personal interactions for complex financial needs, even as AI tools gain popularity for simpler tasks.
Adopting AI also requires significant investment, however banks can accelerate the process by employing platform-based architectures. These systems offer a modular approach, making it easier to integrate AI capabilities like chatbots, fraud detection, and personalised financial advice.
Working with strategic partners to implement a platform model is an effective way to enable progressive modernisation. A platform allows a bank to automate routine tasks while continuously adapting to new trends and customer expectations. This strategy not only reduces costs but also enhances the customer experience.
Real-world applications of AI in banking
AI offers a range of applications in banking, each aimed at solving critical challenges and enhancing customer satisfaction. These applications include:
- Fraud detection: Advanced machine learning models can identify anomalies and flag potential fraud in real time, often before customers are even aware. This rapid response capability provides both financial protection and peace of mind.
- Personalised financial advice: AI-powered algorithms analyse transactional data to offer tailored recommendations on budgeting, investment opportunities, and credit optimisation. Such personalised services foster deeper customer relationships and trust.
- Enhanced customer support: AI-driven chatbots and virtual assistants can provide 24/7 customer support for routine queries, while augmenting human agents with real-time advice for complex cases. This dual approach ensures faster resolutions and higher customer satisfaction.
- Automated savings and investments: By analysing spending patterns, AI tools can suggest or automatically move funds to savings or investment accounts, helping customers achieve financial goals with minimal effort.
- Seamless digital experiences: AI enhances digital interfaces by enabling predictive search, biometric authentication, and faster payment processing. Features like voice-activated banking add a “wow” factor, setting banks apart in a competitive landscape.
Striking a balance between technology and humanity
As banks increasingly integrate AI into their operations, maintaining a balance between automation and personal touch is critical. While AI can drive efficiency and innovation, the human element remains essential in building trust and addressing complex customer needs.
For banks, the path forward involves embracing AI not as a replacement for traditional methods but as a powerful tool to enhance service delivery and operational efficiency. By starting with targeted use cases, leveraging platform models, and maintaining a customer-centric approach, financial institutions can navigate this technological evolution while staying true to their core values.
The message is clear: AI is not just a passing trend but a transformative force shaping the future of banking. The institutions that act now, with purpose and precision, will position themselves as leaders in this new era of financial services.
