Latin American banks daring to innovate with AI

Artificial intelligence has recently become a buzzword in the tech industry and many studies claim the technology is set to transform many industries. But how much of this promise has been fulfilled to date?

Strands, a fintech software company that develops solutions for banks and merchants to help increase customer engagement and generate new revenue, has been working with banks in Latin America, such as Argentina's Banco Galicia.

BNamericas spoke to Leandro Gimeno, global head of sales, who said that while the adoption of AI has started with chatbots, there is potential for a lot more from offering tailored services to creating alerts about certain financial behavior.

BNamericas: To what is the adoption and exploration of artificial intelligence technology by banks in Latin America attributed?

Gimeno: Latin America is as innovative as some countries in Europe. The ease of access to talent allows Latin American banks to have teams of data scientists, as well as investments in innovation technologies. Latin American banks are very competitive and very consolidated in a few frontline banks with large volumes of clients. Preparing for the arrival of open banking in the region, where Brazil and Mexico take the lead, forces banks to invest in artificial intelligence as a way to stay competitive.

BNamericas: I understand that the first wave of AI use was chatbots for customer service. What have been the results?

Gimeno: Actually, there have been no major advances in AI in chatbots. Examples like Bank of America show that even chatbot tools fail to interpret the semantics of clients as a whole. For sure, this technology can be more efficient, but the most difficult thing is not talking but knowing what to ask. That’s why tools like Strands’ Engager allow banks to alert customers about financial situations that arise, regardless of the client's financial knowledge. Strands launched Engager in 2018 and already has eight client banks globally.

BNamericas: What other uses of technology could emerge? Are there more uses of back office, in the area of operations? Can you also take advantage of data to get to know customers better and offer them customized products through the analysis of their spending?

Gimeno: The pressure on the margins and the rigidity of legacy systems are forcing banks to create their own digital versions. Initially, unconventional digital banks such as Wilobank emerged, but today we see examples such as Galicia Move, a digital bank that competes in segments where digital customers demand digital banks. These banks take as an example Revolut, N26, banks that are 100% user-centric and therefore adopt AI and PFM [personal finance management] as the nerve center of their user experience. In this sense, Strands has five references in Latin America.

BNamericas: Where could artificial intelligence be used in the coming years?

Gimeno: The segment that leads innovation within the banking sector is payments, and their integration with APIs and the adoption of open banking. The value chain will be automated, and banks can interact in real time within digital commerce. The aggregation that open banking brings will generate new digital financial services, or rather, the same banking services as always but digitized and in real time, such as factoring, applying AI to be able to anticipate cash flows and offer financial services within the digital value chain.

BNamericas: Are you developing AI solutions internally or contracting third-party services, or a combination of both?

Gimeno: Strands has its own development teams in Barcelona and Buenos Aires. All our development resources are internal, since Strands takes care of its intellectual property and follows very high computer security standards.

BNamericas: To what extent can processes be automated and to what extent is a person's intervention still needed in the use of AI in banking processes?

Gimeno: Strands automates automatic bill payment reconciliation processes, to cite an example. By identifying cash flows between bank transfers and invoices, Strands manages to avoid human intervention to determine the current account balance of customers and suppliers of an SME. The financial decisions resulting from that process are human decisions.

BNamericas: Could AI result in lower costs and charges for the end user?

Gimeno: Definitely, not only lower costs because of automatic management [for example, of payment/collection flows] but also for operational efficiency, and even more, to anticipate financial situations, such as, for example, predicting the flow of funds and anticipating a future overdraft or surplus.

BNamericas: How could one reduce the risk of fraud and cyberattacks?

Gimeno: Reconciling transactions automatically could detect inconsistencies in cash flows. Strands applies AI to understand the financial DNA of a customer [consumer or company] and to anticipate future financial situations. There are other AI providers targeting fraud or cyberattacks.