How banks can maintain competitiveness with AI innovation

Traditional banks have a new set of market challengers to contend with. First, it was digital-only, app-based neobanks entering the industry and challenging the status quo. Now, tech giants, such as Apple and Booking.com, are embedding financial services into their existing platforms. This trend makes one thing very clear: fail to innovate, and banks will rapidly lose customers to competitors. To remain relevant, it’s crucial for banks to embrace new technologies and harness the power of data with AI.

The power of personalized AI

AI might be the technology of the moment, but it’s for good reason when looking at its many applications in the banking sector. One example is personalization. Accenture’s Banking Consumer Study 2025 found that personalization influences a consumer’s choice of bank for over seven-in-ten (72%) respondents. But only 3% are using tools offered by banks to personalize their experiences. Often, this is due to a lack of customer education from banks about the truly personalized experiences that AI can now deliver to them.

AI is transforming personalization, and it’s up to banks to both adopt these solutions and inform their customers about the value they provide. For example, banks can analyze huge swathes of customer data. That information can then be used to tailor the experience to meet individual preferences. This might include personalized content, products that suit the individual user’s tastes and timely alerts to keep customers informed of relevant updates.

Personalization enhances the experience for customers while boosting engagement and retention for the bank at the same time. But AI’s potential benefits to banks doesn’t just stop there.

Fighting fraud and freeing up staff

The second major benefit of AI adoption is security, specifically the prevention of fraud. In the UK, as many as 7,000 remote purchase fraud incidents now occur every day. Banking customers are tricked into disclosing online login passcodes to scammers. Fraudsters then use these stolen details to make purchases.

AI can provide significant value by helping to tackle this type of fraud at its source. With AI able to review data on a large scale, banks can conduct risk assessments and quickly identify any emerging incidents of fraud. BIN attacks are where fraudsters systematically test stolen card numbers with low-value transactions to discover valid ones. These can be stopped in their tracks by AI-driven 24/7 real-time detection and prevention systems that only authorize genuine transactions.

Security can be further enhanced by bringing password-less systems and biometrics into the mix. Customers can then easily confirm their identity when accessing accounts and making payments by scanning their face or fingerprint.

As well as empowering banks to fight fraud and keep customers safe, AI has the added benefit of streamlining core back-office processes in banking operations. This includes data entry and analysis. Generative AI platforms are now being deployed in banking systems. Bank staff can ask questions about documents and request other information when needed, speeding up the service that can be offered to customers.

Overcoming complex decisions

The ability for AI to enhance personalization, security and internal processes makes it an essential strategic implementation to secure the future of banking. But with any emerging technology comes the need for specialist skills. These are crucial to ensure that the solution is both implemented properly and working to its full potential.

It may be the case that some banks lack the internal expertise needed for effective implementation. Training or hiring new staff to run the new solution can be expensive and therefore an out-of-reach option for many businesses. Additionally, the different options on the market can create overwhelm and hesitation when it comes to final decision-making. Potentially transformative AI implementation projects then stall as a result.

Specialist technology partners can help guide banks navigate AI adoption. Such partners bring experience in supporting major banks, neobanks and other financial institutions across similar digital transformations. Drawing on lessons from similar projects and deep financial services industry know-how, they can listen and unpick their unique pain points. Specialist partners can work with banks to identify and overcome any specific concerns or issues that are holding back AI adoption. Together, they develop solutions that align with a business case while security, ethical and compliance aspects are all taken into account.

From risk to reward

Expertise is crucial to ensure that banks can deploy AI in a safe way. Where AI is customer-facing, the potential risks can include potential errors, biases and inappropriate responses. Customer relationships can be damaged and compliance issues can arise. Therefore, mitigating these risks with robust governance and secure design is key to unlocking AI’s value in banking.

For example, chatbots have transformed conversational banking, offering improved customer experiences and increased operational efficiency. Banking assistants leverage AI to provide personalized mobile and web banking services to users. But the influence of AI on customer experience isn’t just about automation or efficiency. To truly connect with customers, it must be able to reflect human-like qualities such as empathy and patience. Intelligent chatbots or AI support that can handle routine queries frees up employees to focus on complex or emotionally sensitive interactions

But for safe deployment, technology layers must be incorporated to anonymize personal customer data and to validate the assistant’s response to a customer query. This way, every response is approved before being sent back to the customer, ensuring compliance.

Safe and effective integration of AI can also lead to further opportunities for banks, such as unlocking the potential offered by Open Banking, driven by PSD2 and FiDA. Open Banking offers customers the freedom to control their own financial data. With this data, they can share information with regulated third-party providers to access a range of new services and apps, including insurance and lenders. AI has the potential to streamline the delivery and access of Open Banking data to users. Together, AI and Open Banking present a number of exciting opportunities for banks to create new ecosystems and maintain competitiveness.

Competing on different terms

Banks are now competing on very different terms. Neobanks and technology companies are weaving finance into everyday experiences. Differentiation will hinge on how effectively institutions use data and AI to serve individuals, safeguard and streamline operations. But to achieve these outcomes safely and responsibly, implementation should be guided by the right expertise. Strategic partnerships can accelerate the delivery of AI while maintaining accountability. This ensures that customer-facing deployments are reliable, well-governed and aligned to regulation. Now, banks must embrace AI or risk becoming laggards to more innovative and agile competitors.

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• Artificial Intelligence
• Fintech