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Relationship Banking Empowered by Digitalization

By Stephan Erne, Chief Digital Officer, Handelsbanken [STO: SHB-A]

Stephan Erne, Chief Digital Officer, Handelsbanken [STO: SHB-A]

The Digitalization Is Driven Bottom-Up

Banks are seeking to create innovative centres to help them be proactive and stay ahead of competitors. however, for banks that possess a decentralised struture this hasn’t been a major challenge. Since branches are accountable for their own customers and profitability, they are very focused on how to meet their customers’ needs. They have a good understanding and ideas of today's and future customer needs - this is a major driving force. They are already thinking about the role of the branch in the future. The 'real' challenge for banks , is how to structure the transformation journey—which tasks and decisions should you keep local and which should be made with the help of technology or more centralisation.

If you centralise, you ensure efforts aren’t duplicated and the infrastructure is efficient. But if you are too centralised, you risk stifling innovation and can be slow to react. The only answer to this dilemma is to be very transparent. You have to create ways of interacting and knowledge sharing. The worst thing you can do is to take away responsibility from people. If you put in a central steering model, you will kill the engagement. From my experience, this is the biggest problem in a lot of companies. As I see it, the engagement is already high, so the challenge is to find the best ways to channel the energy.

Technology Hype Versus Pragmatism

There are many over-hyped areas within new technologies such as artificial intelligence (AI) and blockchain. If you don’t understand the complexity of banking, you can think there are easy solutions and these technologies are silver bullets. If only we had a team of artificial intelligence specialists, we could solve all our problems. But this is not how it works, and if that’s your expectation, when little materializes, the hype crashes.

The challenge here, is to keep the bank focused through this cycle of hype and frustration. With blockchain, the main potential will not be fulfilled by re-tooling existing processes and structures: The problem is often not solved by the technology itself. Instead, emerging technologies like AI and blockchain are a catalyst to challenge existing processes, responsibilities and ways of working. It is beyond the technology. It is a real business transformation question.

Augmenting Human Intelligence

We believe that technology will augment human intelligence rather than replace it. That’s why internally Handelsbanken calls AI “Augmented Intelligence”, rather than “Artificial Intelligence”. One field e.g. where Handelsbanken uses AI is in investment advice. We have had an increase in investment advice meetings of more than 40 per cent, which means we also need to review 40 percent more documents than before. To handle this positive business increase, we have developed and implemented an AI tool based on IBM Watson technology for more efficient handling of compliance. We combine the capability of AI to assess and analyze text with NLP (natural language processing) and the human capability to understand context and complexity to create the most efficient output.

We are developing the tool continuously and to do so we are using the feedback of our advisors to improve the application so the tool analyses and creates insights for our colleagues.

This AI application is just the first of many for Handelsbanken. Based on the experience and technology that we have built, we are now running more trials in other areas. You can create a lot of value with AI, but it is not the solution to everything. You have to filter out what is really creating value for your customers or employees, not just push out a technology because it is cool. The combination of personal relationships and digital tools is the key to success. Keeping customers’ trust in all interactions, both personal and digital, creates most value for our customers. . The potential to differentiate as a bank is to focus on security and the integrity of it's customer data.

Futhermore, as the world getting more and more complex, our customers need a trusted advisor to help them navigate through their financial life. It is differentiates onefrom other banks who are only betting only on digital channels and push their customers away from personal meetings to automated interactions. All the work with digitalisation and technology boils down to one thing—betting on customer relationships.

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