Conference Opening Remarks

Transcription:

Penny Crosman (00:12):
Good Morning. Thank you all so much for coming to Boca Raton to spend a couple days with us. It's been about a year and a half since OpenAI made ChatGPT Public and upended a lot of things about the way people make technology decisions and make technology plans. It changed the expectations of shareholders, board members, employees, and customers. Generative AI can do many things quickly and easily, like draft emails, summarize phone calls and meetings, help write software code. Jamie Diamond says, advances in artificial intelligence will create a three and a half day workweek. I don't know about you, but I'm very ready for that to happen. But there's also much potential for harm. Last month, Google Gemini, the AI model that powers AI overviews advise people to put glue in their pizza sauce to keep cheese from falling off their pizza. It told people that eating the right rocks can be good for you because they contain minerals that are important for your body's health. Generative AI models can provide decisions that are colored with the biases of the past. They can hallucinate, they can fetch out of date or irrelevant information or get data from improper sources and over-reliance on generative and more traditional AI combined with diminishing human oversight could fail customers just when they need financial services the most when they're the victim of a fraud, for instance, or when their account is falsely flagged for money laundering.

(01:50):
And if banks don't put the right guardrails in place, their regulators will try to do that for them. There's also issues around customer trust. In a recent FINRA foundation survey, only 5% of respondents said that they used AI when making financial decisions. And when presented with financial information, nation consumers were far more likely to trust the information if they believed it was coming from a human than if they were told it was coming from an AI model. Another aspect of responsible AI use is the impact on jobs. And Klarna said earlier this year that it's AI models are doing the work of 700 customer service reps. This is going to have repercussions throughout the industry as entry level jobs become subsumed by AI. So this environment creates opportunities and a competitive advantage for banks and fintechs that can get the balance of human and machine intelligence right, and master handoffs from one to the other.

(02:56):
These are some of the stories we've been covering at American Banker. Other tech stories have been about cybersecurity and our technology reporter, Carter Poppy has been doing a lot of that coverage. We've been writing a lot about FinTech partnerships and the risks and issues that can arise with that. And Miriam Cross has done a lot of our coverage of that. They're both right here. We've also been covering fraud a lot. That is a topic of high interest to everyone here. So these will all be threads in many of our discussions over the next couple of days. We have experts from banks, from tech companies, consulting companies like McKinsey here to help offer constructive guidance on these and many other topics. Speaking of McKinsey, we have Vik Sohoni, Senior Partner and Global Leader of McKinsey's Banking Digital Analytics Practice, and he's here to say a few words. So please welcome Vik Sohoni.

Vik Sohoni (04:05):
Hello, on behalf of McKinsey and Company, I want to welcome you to American Bankers Digital Banking Event. My name is Vic Shoney. I'm a senior partner with McKinsey, and I'm the Global Leader for our Digital Analytics Practice for Financial Services. We're very happy to be here standing alongside American Banker as the knowledge partner for this fantastic event. But this is a momentous period that we're going through. The last year has been a challenging one for the industry as obviously all of you know better than anyone else, and it's a testament to your and your bank's resilience that the industry has endured. Indeed, even through these times. Some of the industry's technology and AI advances have been remarkable. This is both above the glass with remarkable mobile experiences that folks like you have launched, and that's the majority of consumers now interacting with banks through that channel as well as below the glass with cybersecurity and fraud advances using AI that many of you have made.

(05:05):
But with the challenges of the next decade in front of us, our research shows that digital bankers are being asked three major questions. The first is, how do we show real ROI on our tech investments? And as this shows that more revenue in the industry is very, very strongly correlated with more manual work. And this calls into question the almost a hundred to $200 billion of technology spend that banks spend in the United States alone as a CIO recently said to me, once I know about half my spend is unproductive, I just don't know which half. So the second question is then take all that spend. How are we going to make sure we differentiate ourselves from the rest of the bank? In the last five years, only 15% of banks were able to improve the efficiency ratios from below the median to the median. 85% of the industry either stayed where they were relative to their peers or they worsened.

(06:05):
And then third, our research has found that only 30% of transformation succeed fully. This has been true for transformations that are non-digital, and this is true for transformations that are digital in nature. So how does your coming AI transformation stand a better chance of success in a nutshell, in a challenged macroeconomic environment that forces us to rely less on tailwinds and more on organic actions? How do we change the odds? Well, you're all here today because one obvious path is through the smarter and better application of technology and ai, but if tech ROI is unclear and transformation is hard, how does doing more of that actually help? Here's the secret. Turns out that it's from going beyond the technology that truly delivers the results from the technology. You need the strategy culture and change management to align as well. 60% of executives tell us that skill gaps are a significant obstacle to their digital transformation.

(07:05):
70% of executives site fundamental resistance to change in their organizations to any transformation. And then a strong value orientation is needed as well. Some research we will soon publish that our folks have conducted, identified just five drivers of differential shareholder performance across banks. Targeting those in a more strategic way with your technology and AI portfolio can make a real difference. And this is why we came up with this concept called rewired, and we published a book about it. The concept of rewiring the organization means fundamentally changing how you go about doing business. It means deciding where to play differentially. Back to the point I was making earlier about where value is created. It means building capabilities, clarifying roles and responsibilities, breaking organizational silos, changing the underlying processes, taking rapid action around talent. Wrapping all this in a change management construct that's hardened and robust, and creating a vision within investors and stakeholders that drive that focus and motivation and create the urgency and a burning platform to change.

(08:15):
In fact, a rule of thumb that some successful firms we've worked with use is that for every dollar spent on technology, it takes a dollar of change management and capability building to generate valuable outcomes. This reflects how McKinsey itself has evolved in the last few years. We've actually, from the other side of the spectrum, we now have thousands of colleagues in our advanced engineering and AI delivery capabilities, and we are blending both. So we've made a fundamental shift from being strategy advisors to being impact partners. And what that means is we underwrite the risk, we conduct the change management, we work side by side with our clients to deliver advanced technology and AI capabilities and we the value creation. And this is also why we at McKinsey believe that events like this are so important. We hope you'll be able to use the next several sessions, the next few days to look at the opportunities that tech and AI create for your companies through a more integrated strategic lens. Because capturing the value from technology requires the technology and not just the technology. Thank you very much and welcome again to this great event.