AI To Impact

PODCAST: COVID 19 | Redefining Digital Enterprises

Episode 7: The Impact of COVID-19 on Financial Services & Risk

Listening time: 12 minutes

The Impact of COVID-19 on Financial Services & Risk Management

In this episode of AI to Impact Podcast, Ashwini Agrawal delves into the implications of COVID-19 on the financial services industry. With reduced disposable incomes, customer defaults are at an all-time high, and several banks are reeling under productivity and efficiency challenges. Additionally, institutions are finding it difficult to forecast trends, as historical data isn’t relevant anymore. Despite these pressing concerns, COVID-19 has accelerated digital transformation. The financial services industry needs to be adept at providing seamlessly integrated omnichannel experiences to maintain competitive advantage. Tune in to know how AI can help financial services adapt to the post COVID-19 world. Don’t forget to subscribe!

Melita Menezes: Hi everyone, you’re listening to AI to Impact by BRIDGEi2i, a podcast on AI for the digital enterprise. My name is Melita Menezes, and I’m a consultant at BRIDGEi2i. I collaborate with multiple stakeholders across many global companies enabling high impact business transformation strategies, and guiding them in their analytics journey. In our AI to Impact podcast, we have been chatting with reputed AI and analytics leaders, digital transformation advisors, and BRIDGEi2i business heads to gather their point of view on the current crisis, its impact on various industries, and tactics and strategies to address the business challenges of our times. And we have with us Ashwini Agrawal, who leads the Financial Services BU at BRIDGEi2i. He has extensive experience in designing solutions for clients using advanced ML techniques to harness information from different forms of data. His current focus is to develop and make Next Gen AI solutions real for enterprises in different areas like intelligent automation, credit, and operational risk, omnichannel personalized recommendations, fraud management systems, and integrated digital customer experience. Thank you, Ashwini, for making the time.

Ashwini Agrawal: Always a pleasure, Melita.

Melita Menezes: Ashwini. As you know, and are already aware of the magnitude of change the world is undergoing at the moment. And the financial sector is the backbone of any economy and it has been hit during this difficult time. What, according to you, are the top challenges financial services companies are juggling with right now?

Ashwini Agrawal: Yes, the world is definitely going through a situation of its kind with the spread of the COVID-19 virus, which hasn’t found any vaccine or medicinal cure yet. Moreover, almost more importantly, since this virus is contagious and spreads very fast, traveling needs to be restricted and maintaining social distance is the need of the hour. This means that while a few industries like pharma and hygiene-related firms find increased demand, specific industries based on supply chain, travel and tourism, manufacturing, etc. see a direct adverse impact. Anything that needs physical presence either of their customers or their employees in a branch or site is seeing such impact. This impacts firm’s revenue and also people’s pockets leading to a recession like scenario. And then there’s uncertainty on when this will come back to normal, what will it settle down as, etc. What this means for financial services firms? It really means:

  1. Impact to customer behavior. You know, their incomes are shrunk, disposable income is reduced, leading to customer default.
  2. The workforce isn’t available at full capacity; who’s working is working from home, productivity and efficiency is a challenge. Compliance is another.
  3. The firms are having to think through how to stay relevant to current situation. As past data isn’t relevant anymore, current models aren’t going to work. For current portfolio, collections is a big problem for example. I can’t exactly forecast my losses, cross sell and growth hence becomes tougher decisions to make. And investment decisions become difficult leading to reduced skeptical growth.

Government is announcing schemes like moratorium which is good for customers but not so good for the bank, per se. But not all is bad, the government is also announcing some accommodation packages economic stimulus like the CARES Act in the US which is also being seen as opportunity. Now, the other shift is also the digital shift where all the customers are going digital, they are forced to as they can’t go to shops, branches and ATMs anymore. And banks and FS firms have been trying to drive digital for years now, for a few years now for their customers as well as for their own processes and technology. Right. So this almost seems like Melita, a nice opportunity for these firms to focus on that.

Melita Menezes: Ashwini, you did mention digital. And that seems like the catchphrase right now. How do you think the adoption of digital will take shape in the future?

Ashwini Agrawal: Nicely framed question, Melita. See, most companies had some form of digital transformation as part of their strategy projects even earlier. And those projects are only becoming more important now. As firms try to react to the situation with COVID-19 on priority, preparing for business as we emerge out of the situation is key and focusing on digital is the way to go. Now going digital can be seen with two broad pillars.

One, more customer facing – So customer needs to see a seamless digital experience across his/her journey and interaction with the bank. So, the bank needs to acquire and grow digitally. What that means is right from application underwriting, onboarding, renewal upgrades, etc. banks need to make sure all of this becomes digital and available to the customers, and then interact, engage and serve digitally, which is across transactions, queries that a customer has on statement, card block, limit increase, etc. All of these need to be served in an omni channel, seamless manner across IVR, call center, email, chat etc. To the extent that the customer journey is connected, not just inside the bank but also outside the bank like from e commerce, websites, etc.

The second aspect is the enterprise itself. So creating more connected systems for seamless processes and context transfer and integrated data for omni-channel cross interaction understanding of the customer at all points, and also processes and decision making made more digitally intelligent for the banks. For example, using AI on SME documents submitted digitally for automated loan underwriting. So, the banks will adapt to this faster, will have a competitive advantage over others and really stay ahead of the competition. So digital is going to be even more the name of the game.

Melita Menezes: Right, Ashwini. You mentioned how digital will be the name of the game and how it will give a competitive advantage. You also mentioned about you know, intelligent processes. Do we then see a major role of AI and analytics and helping companies navigate through this? Do you have some use cases you could mention?

Ashwini Agrawal: Sure. Yeah, as firms are looking to navigate through these challenges, they’re looking to use the whole data, algorithms, technology process paradigm and see how AI can help them to some specific areas that find focus.

Now, the first of those areas is definitely risk and portfolio management. So, understanding emerging areas of stress and risk is the key focus, getting signals from internal and external data to assess risk of portfolio and industry is the key. Now, bureau information may not be reliable anymore, right. The traditional sources of information may not be best information sources to understand areas of stress. So alternate sources of data would start to become more important like location sensitivity data, industry impact data, customer income surrogates, etc.

Then, being able to validate models to see if they’re holding, understand how to incorporate signals in a nimble fashion to read and recalibrate existing or position models as a stress on loss. Understand loss forecasts adjustments, that needs to be made, plan for collection based on emerging patterns. All of these need some sense of algorithmic sophistication as well to be able to incorporate some of the signals that we talked about. So, both data and algorithms become important as we look to assess risk and portfolio management. And it continues to be important for the areas next as well.

So, second area, for example, is digital customer engagement. Using it as a theme to drive both digital engagement with customers and see how we can make the bank systems tuned to provide the best digital experience with our customers is finding a lot of focus. Right, all three, customer engagement leading to retention, then assisting them to help them do more with the bank, and eventually grow.

The third is digital sales enablement or sales continues to be more important in today’s timeframe as well, because human touch still is important. So, enabling RM conversation remotely and enabling them with the ability to understand customer persona and personalized interactions and also offering from the bank to the customer in those discussions is a key theme that banks are focusing on.

Fourth, is intelligent automation, the way we call it. So, digital transformation is finding the right focus and letting the process and decisions become truly AI driven. Using the whole data algo technology process paradigm is finding a lot of focus. So the traditional robotic Process Automation is now transforming to more intelligent automation. For example, the SME loan underwriting that I talked about where financials are submitted by SMEs and they can be directly incorporated to do automated underwriting. Call it you know financial reporting processes that need to be automated for large enterprises, etc. So, AI or artificial intelligence being used for intelligent automation is finding a lot of focus call it AI to IA, as I like to call it.

The third theme is almost digital workplace. So, we talked about employees and how do we maintain the productivity of the employees as they work from home, while maintaining information security access compliance, covering for operational risk, which is even more important for financial services firms.

And the last one is brand equity management, which will become more important in the coming time for financial services firms. So, you’d see financial services firms focusing a lot on branding in the coming months and years, making marketing a focus on digital ads, TV, and media more than before, along with traditional one-on-one customer campaigns on SMS, emails, calls, notifications, etc. So those are some of the themes that will become important, not just now but as we emerge out of COVID-19.

Melita Menezes: Oh, very well put, Ashwini. I see that you made the connection with COVID-19 virus-related mobility and social distancing challenges, and the connection with the financial services industry and how they will react to it. The themes of risk and portfolio management, digital customer engagement, digital sales, enablement, intelligent automation, and the digital workplace and how the data will be required to harness and make sense of the new normal. It’s really been very fascinating. And I think the catchphrase will be AI to IA. Thank you so much for being with us, Ashwini, and giving us this input.

Ashwini Agrawal: Appreciate Melita. Thanks for the interaction.

Melita Menezes: And thank you so much for listening to this episode of AI to impact podcast. That was a very interesting conversation with Ashwini, Financial Services – Head at BRIDGEi2i. If you found this interesting, do subscribe as we will continue the conversations with business experts and thought leaders in the upcoming episodes. They will be discussing the business impact of COVID-19 on various industries and how this journey looks for them in the future. Once again, thank you so much for tuning in. Bye-bye. Stay home. Stay safe!

2020 will long be remembered for the pandemic that wreaked havoc on the global economy and disrupted communities and businesses in unprecedented ways. In our latest podcast series: COVID19 | Redefining Digital Enterprises, we will be interacting with several thought leaders, BRIDGEi2i Business Heads, Domain Experts, and reputed AI and analytics leaders to understand the various challenges emerging out of this crisis and the way forward for enterprises in the new world order. Tune in to know more!

Meet the Speaker

Ashwini Agrawal

Ashwini Agrawal, Director – Financial Services, BRIDGEi2i

Ashwini Agrawal leads Financial Services BU at BRIDGEi2i and has extensive experience in designing solutions for clients using advanced ML techniques to harness information from different forms of data to power AI actions across customer acquisition and growth, risk management and customer service. Current focus is to develop and make next-gen AI solutions real for enterprises in areas of Intelligent Automation, Omnichannel Personalized Recommendations, Holistic ML-based Risk Decision Engine, Fraud Management Systems & Integrated Customer Experience Management with last-mile integration for real-time end-user consumption. Ashwini has previously worked with HSBC, Capital One, and [24]7 in different roles. He holds a Masters in Physics from IIT Kharagpur.