Letter to Shareholders: 5 Core Themes to Anticipate from an AI-enabled bank
Dear Shareholders,
As we progress through 2024, I would like to highlight the transformative impact the various new forms of Artificial Intelligence AI are having on the banking industry; sharing our perspective and how we are shaping the future of banking.
Although these technologies are quickly revolutionizing various aspects of our operations, enhancing our efficiency, and improving customer experiences – it remains essential to maintain a prudent balance of creating shareholder value while keeping watch on potential intended or unintended consequences of these merging capabilities.
In this letter, I will outline 5 themes these advancements are transforming our bank and the industry:
1. Talent Acquisition:
a) AI-powered #recruitment tools have helped identify and attract top talent by quicker and more sharply focused analysis of candidate profiles, significantly shortening the screening process and reducing unconscious bias in the recruitment of talent.
b) LLMs are enhancing #EmployeeOnboarding, training, personalizing learning experiences and facilitating continuous skill development, ensuring our workforce remains competitive in an ever-evolving industry. Learning, training and feedback are not only being automated they are enabling curated career experiences customized at an individual level - simultaneously driving engagement, retention and employee experience.
2. Speed, Efficiency, and Cost:
a) AI-driven automation continues to streamline back-office processes, enhance customer service, and reduce operational costs, allowing us to focus on more strategic initiatives and build advanced banking products, services and broaden our reach into under-served markets.
b) #LLMs are co-piloting code generation and helping optimize software development, reducing time-to-market for new products and services, and enabling rapid adaptation to ever-changing customer needs – customized by region, industry and tailored to our customers’ scale.
3. #BankingResiliency: Loss prevention and profitability in our lending book and deposition retention in consumer banking:
a) AI-based credit scoring models are providing more accurate leading indicators of default, overall improvement in risk assessment, leading to reduced loan defaults and improved profitability in our lending book. This has also produced a market improvment in our loss reserve allocation and producing overall improvement in Return on Equity (ROE) measures.
b) Personalized marketing and tailored product design: are improving customer engagement and deposit retention, ensuring continued growth in our consumer banking segment – particularly relevant in current market conditions. We have been able to develop more customized products for the un/under-banked to help drive inclusion as well as more customized youth banking offerings to improve retention, brand-loyalty and longevity in our traditional sectors.
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4. #BankingStability: Averting real estate-related commercial banking crises as interest rates rise and Commercial Real Estate Vacancies remain high:
a) AI-driven valuation models are helping monitor commercial real estate market trends, allowing for better risk management and early identification of potential crises in this sector. We are working with our commercial real estate clients and helping them develop more creative lease and real estate use options to proactively mitigate default risk.
b) Advanced analytics are helping identify at-risk loans and clients, enabling proactive measures to mitigate potential losses and maintain stability in our commercial banking portfolio.
5. Risks of AI: addressing bias for conduct and explainability for audit and regulatory risk mitigation:
a) Our commitment to developing transparent and fair AI algorithms, addressing potential biases through regular audits and continuous monitoring of our systems. We continue to monitor not only the outputs these models produce but also to ensure analytics and sampling is done in a statistically relevant manner to ensure fair and balanced representation of inputs seeding these models. We continue to partner and frequent provide sampling statistics to regulators in order to promote transparency to our industry-leading approaches.
b) To mitigate #RegulatoryRisks, we are working closely with regulators, sharing our methodologies and ensuring our AI-driven processes meet the standards of accountability and explainability. We continue to leverage a modular approach based on industry standards. As a new initiative And added measure, we are finding new ways to proactively identify firm-wide risk by correlating conduct, compliance, regulatory and audit risk exposures - in ways that were previously simply not possible. Not only does this offer significant risk mitigation advantages but is also driving profitability.
In conclusion, the integration of AI into our operations promises a brighter future for our bank and our customers. By leveraging these technologies, we are better positioned to face challenges, adapt to changes, and continue to lead the way in the financial services industry.
Sincerely,
Elaine Glazer