Banking Sector AI Competition: Focusing Only on Technology Risks Losing All Customers

KFTC Publishes 'Financial Payment Insights'
"Lack of Consumer Perspective in Financial AI Discussions"
Indiscriminate Technology Adoption May Lose Customers
Proper Measures Needed to Alleviate Consumer Resistance

Photo by Korea Financial Telecommunications & Clearings Institute, "Financial Clearing Insights Summer 2022 Issue"

[Asia Economy Reporter Song Seung-seop] Concerns have been raised that the artificial intelligence (AI) technology rapidly adopted by the financial sector is disconnected from financial consumers. There is also a warning that if financial companies do not change their attitude toward technology, they may end up losing financial consumers.

On the 18th, Professor Cheon Seon-yong of Dankook University’s Department of Business Administration analyzed in the ‘Financial Settlement Insight’ published by the Korea Financial Telecommunications & Clearings Institute, “While it is true that the adoption of AI in the financial industry is very active and various technical and policy supports are being attempted, discussions from the perspective of the most important end consumers are still lacking,” adding, “Recently, financial companies often start adopting AI to avoid falling behind new technological changes and to win in new competitions.”

Domestic financial companies are launching new services utilizing AI technology. KB Kookmin Bank offers a kiosk AI consultant through its AI Experience Zone, Hana Bank has created a product that allows customers to check credit loan limits and interest rates within one minute using AI, Shinhan Bank operates an AI consultant using Naver CLOVA engine, and NongHyup Bank has even appointed an AI banker as an official employee. New domestic fintech companies, such as asset management solution providers, are also entering the market one after another.

Professor Cheon emphasized, “Understanding AI from the consumer’s perspective is more important in the financial industry,” explaining, “because AI is expected to spread faster here than in other industries.” He added, “Choosing financial products involves very high risks for consumers, so whether to select AI-recommended financial products is a very important issue that requires a cautious approach from the financial consumer’s standpoint.”

He further warned, “In this situation, if financial companies recklessly adopt AI technology without understanding consumers, they may lose customers in the long term,” pointing out, “Financial companies armed only with AI IT technology will fail to deliver differentiated value to customers and will lose consumers to new innovative financial companies that understand their customers.”

Can I Accept the Loan Interest Rate Decided by AI?

In particular, Professor Cheon advised considering consumers’ perception of ‘fairness.’ If AI eventually develops actual loan products and decides on their execution and interest rates, controversies over unfairness may arise. Even if the algorithm has no problems or presents more rational results, consumers might perceive AI’s screening outcomes as more unfair.

Professor Cheon stated, “There will inevitably be situations where the investment returns of AI-recommended financial products are not high,” warning that “this could negatively affect the trust, repurchase, and loyalty management of customers who suffered losses.” He also said, “When financial companies introduce AI to customers with a strong tendency to avoid algorithms, more cautious preparation is necessary.”

He added, “Trust is the core of the financial industry, and if there is rejection or suspicion toward specific service technologies, it becomes a very serious problem,” emphasizing, “Along with the adoption of AI by financial companies, measures to alleviate consumers’ rejection and concerns about AI must be prepared.”

As an alternative, an ‘anthropomorphization’ strategy was suggested. Similar to Apple’s Siri, this method reduces rejection by making AI technology feel as if it has human-like characteristics. Since customers may resist if they feel their freedom is excessively restricted by AI recommendations, it was argued that systems should be designed to enhance consumers’ self-esteem and sense of efficacy.

Professor Cheon concluded, “AI technology itself clearly belongs to the field of engineering, but it is always ordinary consumers who ultimately accept and use it,” stating, “If financial companies do not focus solely on rapidly adopting AI technology but also examine AI adoption issues from the end consumer’s perspective, it will have a positive impact on the company’s long-term performance.”

This content was produced with the assistance of AI translation services.