What is Cognitive Banking and How Does it Work?

Artificial intelligence: Conversational bots, virtual assistants, robo advisors…are no longer the future, but a palpable present that is currently leading the brands that want to find themselves at the forefront of a digital revolution that.

All sectors are influenced by this new reality. It is a novel instrument to approach the customer. And it’s not just an innovation. But the non-adoption of these type of instruments can mean being left out of a very competitive race. That is why we’re looking at how the AI ​​efforts have reached the financial sectors. Today, the focus  of our discussion is around cognitive banking.

Definition of cognitive banking

Cognitive banking refers to the different solutions based on the technology of artificial intelligence that are applied within the banking sector. We are talking about fintech, that union between financial and technological services that the disruptive economy is making protagonists.

Because of its unique characteristics and qualities, the financial field seems to fit these tools wonderfully. Banking is one of the business sectors that, to a greater extent, needs to know, manage and be able to control the information of users in a correct way.

Not only is it possible to automate processes and operations. The repercussions of cognitive banking go further. It must be a reference in the application of the knowledge acquired thanks to intelligent technologies. The bank has a particularly sensitive commitment to its customers, manages its finances, interests and money etc…To do it correctly requires interoperability with other companies in the sector not to mention a transparency that results in greater confidence.

We can talk about the IBM Institute Business Value survey conducted by The Economist Intelligence Unit in 2016. In it, we are told that 70% of the banks surveyed will apply blockchain solutions by 2019. IBM experts say that a 25-30% improvement in the efficiency ratio can be achieved through the implementation of these new models.

The advantages of cognitive banking lie in a greater knowledge of the client, their reality and their needs. Something that will undoubtedly improve the user experience. As well as the efficiency with which banks can work with it. The precision of artificial intelligence comes from other benefits, such as the trust generated by users, who enjoy greater guarantees of having the most innovative tools.

Conversational bots and virtual agents are just two examples of processes that can be automated (to a certain extent). They are able to chat with the customer efficiently and productively, as well as capturing and processing the information and data they generate. These are the advantages of putting the customer at the center of a brand’s strategy in which the most important thing is not the product, but the experience and satisfaction of the user.

Looking for service integration will serve to meet real demands. And this, without losing sight of something that for users is fundamental: control of the risk levels of their financial movements. To give a broad service in this field: knowledge, data analysis, application of information …

Some of the processes in which cognitive banking is going to revolutionize the banking sector are: customer management, authentication of individual identity, identification of black money, compliance with regulations in force in each state or geographical area or risk control. And, of course, it will be an essential tool for companies that do not want to miss the train of innovation and digital maturity who need to evolve and adapt their business models for the sake of prosperity and efficiency.

Robo Advisors

Cognitive banking becomes clearer with a few terms we are already familiar with. One of them is automated robotization (robo advisors) of business processes. This concept refers to the development of software capable of performing the same functions that an employee performs when working with data structures. The advantages are greater speed and accuracy. In addition to the fact that it performs repetitive tasks, allowing a “human” worker to handle other functions.


Another of the words that are mentioned in relation to cognitive banking is the blockchain. It involves a secure registration system, which can not be modified. The blockchain is key in the way this new banking model operates. The data are forming a “chain” that prevents one of them from being modified without affecting the link with others. Its use is fundamental for the storage, transmission and confirmation of data.

Back office automation

This term refers to the activities that are put in place to properly manage the resources of the company. That is, the internal management processes that serve as support. It does not have to do with the client, but with, for example, the management of computer, human or accounting resources. Cognitive banking is also concerned with providing useful and practical solutions in this regard.

Some examples

IBM is one of the big companies that is betting on the development of cognitive banking. The creation of Watson is a good example. We are talking about a tool designed to understand how users express themselves. And, moreover, capable of answering complex questions.

Large financial institution BBVA has launched Chatbot, which operates on Facebook. The tool allows the customer to access their banking information. That is, a summary of your balance, your IBAN number or the amount of money paid through your credit cards.

Another of the virtual assistants we can talk about is Amelia. Created by IPsoft, the idea is to introduce it in all business areas. The banks or insurance companies would define their first steps. Among its characteristics, we find a conversation that tries to emulate human speech. But also, the contextual understanding that helps you analyze the situation and draw conclusions from it.

As well as an emotional responsiveness. Something that wants to resemble the empathy that we are able to develop by others. Swedish bank SEB would be one of the companies that would already be working with her.

The financial sector has been associated with traditional business models. This is only the beginning of the use of intelligent software capable of managing processes and dealing with clients. Welcome to the present.

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