Banks vs. Fintech. Traditional financial institutions can gain a huge advantage thanks to AI


According to the Digital Economy and Society Index (DESI) in 2022, Poland ranked 24th out of 27 European Union member countries in terms of digitization[1]. However, the banking sector in our country is a leader in introducing modern digital solutions. The digitalization of the industry is driven by competition from fintech companies. Artificial intelligence could play a key role in this “race”. Traditional banks could gain a huge advantage thanks to data on customer behaviour that they possess. But will they be able to utilize it?

The Industry Open to New Solutions

Eight out of ten Internet users in Poland already use online banking services[2]. In comparison with other industries, the Polish banking sector quickly realized the key role played by modern IT solutions. Polish banking ranks among the world’s leading technologically advanced financial institutions[3]. It is worth noting the integration of public services into banking apps: for example, you can use them to log into a trusted profile or the Patient Portal. The sector tries to quickly respond to market changes, so we can expect that the wide use of artificial intelligence algorithms will be the next stage in building a competitive edge in this industry.

Innovation with Caution

According to the Red Hat Global Tech Outlook 2022[4], the desire to implement innovations is a main priority for the financial industry in relation to the digital transformation. However, for traditional banking institutions, innovation always involves a risk due to compliance with numerous legal regulations. The reputation built over the years is also significant. Startups offering financial services can afford to implement new solutions more boldly. Banks have been building their market position for a long time, they have more to lose and therefore often approach innovation with more caution. However, they can successfully compete with fintech companies in terms of modern services offered to customers.

Automation as a Solution to Industry Challenges

Among the main challenges facing the banking sector, particularly in the context of competition from fintechs, is service personalization and keeping up with market changes. Customers nowadays expect tailor-made products, and their needs change very quickly. Automation, which is used by as many as 79% of companies in the Polish financial sector[5], is a huge facilitation in this case. It allows IT specialists to focus on creative aspects of work, which help build positive customer experiences. IT environment automation also helps in meeting regulatory requirements and maintaining compliance with existing regulations, e.g. in prepared financial reports.

Own AI Models = Competitive Advantage

The future of AI is not in large language models or general solutions created for many users. Companies need industry-specific tools. Therefore, models should be trained on internal data and adapted to the standards and practices of a given enterprise. Thanks to the use of AI models, it will be easier to tailor the offer to an individual recipient. Algorithms can achieve a similar level of personalization and detail much faster than if this work was done by a human. The ability to use data on customer behavior in building their own artificial intelligence models could become a key competitive advantage in the banking sector in the coming years.

Author: Witold Żukowski, Country Manager at Red Hat

[2] Internet Usage 2023. CBOS research report.
[3] Digital Banking Maturity 2022, Deloitte
[5] Monitor of Digital Transformation of Business. 2023 Edition. KPMG.