How is 2018 playing out for the banking industry? There's more excitement, bigger regulation requirements, and more opportunity than ever. So far this year we've seen a significant amount of change already occurring from the adoption of technology in the financial services industry. Artificial intelligence is working to play a larger role than ever. Let's take a closer look at some of the key changes occurring in the last few months.
Some banks are still working on implementing solutions to the new General Data Protection Regulations (GDPR) put into place at the end of May in the European Union. The ruling has had a global reach, requiring financial lenders and leaders to make sweeping changes to the way they gather and use data. For the most part, this type of change offers good things, as it works to reduce risks associated with data breaches. Yet, for some banks, it has also required the need for tighter and more specialized focus on data use.
For artificial intelligence users, GDPR is not a deal breaker. In fact, it offers a way to take the data you do have and make better use out of it. It has never been more important to turn the page here.
We all remember 2008 and the years to follow when the financial industry saw many large banks fold or become acquired due to worrisome lending practices. In the years that followed, many new regulations went into place to tighten up lending practices. Again, we can't say these are bad rules, but they did stifle the bank's ability to make their own decisions about lending. And, just recently, Congress and federal regulators have made sweeping changes to these laws, reducing their impact. By easing financial crisis-era regulations on these higher risk lending practices, new opportunities become available.
While this opens the door to new opportunities, there's even more importance for data here. Now, higher risk loans are available, but this does not mean every borrower is still an ideal choice. And, to avoid financial costs and losses, many banks will need better information and insight to guide their lending. Artificial intelligence and better use of data will help in this way. It can provide an opportunity to make higher risk, but higher reward lending options available to organizations not otherwise able to lend.
Reports indicate that the banking industry is doing well. In fact, it has already reported record profits for the year. According to some reports, the first three months of 2018 brought profits in of about $56 billion. Much of this has come from new changes and deregulation, but it is also highly likely improved economic factors are opening the door for banks again. Consumers are spending. There is more available income to spend thanks in part to the recent tax law changes. And, the financial industry is, in fact, seeing new opportunities.
As business is doing well, many banks see this is the time to make changes and updates. They are lending to more consumers, and they are providing better products. They can do this because they have data insights. They know when borrowers are prime and ready to buy a home. They have data to show them when customers are likely to buy a new car. This is opening doors going forward.
In many ways, data is helping and will continue to play a role in top-line growth, bottom-line growth, and in customer satisfaction. In the front office, we've seen banks see a significant amount of savings brought in from adoption of artificial intelligence. This includes reductions in the scale of branch offices, distribution staff, and security. It also means better online access to customers.
In the bank office, underwriting and collections system savings are outstanding potential benefits to many organizations. There's plenty of benefit from using AI for compliance requirements and data processing. From a customer standpoint, the competition is heating up. Fintech continues to play a big role in profitability when it comes from reaching the millennial consumer.
In many ways, the trends we thought would play out – technology management, artificial intelligence, and customer centricity – are all playing out. The banking industry of 2018 continues to be dominated by disruption. The question is, will you play a role in that disruption?