As the banking industry races to capitalize on the transformative potential of artificial intelligence (AI), a new report from respected research firm Forrester sounds a clear warning: Rushing headlong into AI-powered customer relationship management (CRM) without proper planning and governance could lead to disastrous consequences.
The stakes are high. According to a McKinsey & Co. study, banking is among the sectors poised to gain the most from AI’s application, potentially realizing up to $340 billion in annual cost savings and revenue upsides. But Forrester’s research, based on a survey of 773 global decision-makers, paints a sobering picture of the industry’s current state of readiness.
“We found that many are embracing AI-powered CRM without ensuring they have the necessary data infrastructure, making them more vulnerable to undesirable outcomes,” the report states bluntly.
The report’s central message is clear: Banks eager to leverage AI for CRM must first address fundamental data management challenges before deploying the technology. Unleashing AI on disorganized, siloed customer data could lead to “unchecked inaccuracies” and “unintended discriminatory behavior” – risks that financial institutions can ill afford.
“Without high-quality, well-structured, and clean data, AI algorithms will struggle to deliver meaningful insights and outcomes,” the report warns.
This is a critical point for the banking industry, where customer data is often fragmented across multiple legacy systems and organizational silos. Forrester found that two-thirds of respondents do not have a formal, company-wide data strategy, and more than a quarter have no formal strategy at all.
Yet, despite these glaring data management deficiencies, more than half of the respondents say their companies are already using AI to complete online commerce transactions and conduct marketing outreach. And more than 60% plan to develop AI tools for “hyper-personalization for one-to-one engagement using first-, second-, and third-party data” within the next year.
” AI-powered CRM is increasingly being embraced by companies without ensuring they have the necessary data infrastructure, which places them at risk of undesirable outcomes.”
— Forrester report
This disconnect between AI ambition and data reality is a recipe for disaster, according to the report. Poorly trained AI-driven CRM systems could lead to a host of problems, from “AI-generated inaccuracies, or ‘hallucinations,'” to “leaks of sensitive customer data” and “unintended discriminatory behavior.”
To avoid these pitfalls, Forrester offers five key recommendations for banks and financial institutions:
-Start with Clean and Unified Data: Siloed data is a major liability. Banks must prioritize breaking down data silos and creating a unified, high-quality customer data foundation before deploying AI.
-Establish Robust Governance: Everything that emerges from an AI-driven CRM, from chatbot responses to tailored customer solutions, should be subject to the same rigorous data governance standards as other data outputs.
-Seek Trusted External Partners: Many smaller banks and credit unions lack the in-house expertise to customize and integrate AI into their CRM systems. Partnering with experienced external vendors can help ensure security and data protection.
-Invest in Employee Training: Banks must invest in training employees on the use of AI, as even firms with company-wide data strategies struggle to distinguish between different AI capabilities.
-Rethink Collaboration and Productivity: Rather than downsizing operations, banks can find ways for customer service generalists to transition into roles like prompt engineering, helping to retain institutional knowledge and culture.
The report’s findings carry particular weight given the banking industry’s unique challenges and regulatory environment. Unlike other sectors, banks must navigate a complex web of data privacy laws, anti-discrimination regulations, and strict compliance requirements.
“Without proper governance, AI-driven CRM could create unintended discriminatory behavior such as systematically avoiding underwriting loans to specific populations,” the report cautions.
The stakes could not be higher. As banks race to harness the power of AI, the Forrester report serves as a stark reminder that the path to successful CRM integration requires a measured, strategic approach – one that prioritizes data management, governance, and a human-centric perspective.
“We’re at a critical juncture in the banking industry’s journey towards AI-powered CRM,” says Forrester analyst and report co-author Joana de Quintanilha. “The institutions that can navigate these treacherous waters will emerge as leaders, while those that rush headlong into AI without proper planning will risk catastrophic consequences.”
The message is clear: Banks must resist the temptation to chase the AI hype and instead focus on building a solid foundation of data management and governance. Only then can they safely and effectively leverage the transformative potential of AI to enhance customer experiences and drive business growth.
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