In France, banking and insurance supervision is carried out by the Autorité de contrôle prudentiel et de résolution (ACPR). Created in 2010, following the 2008 financial crisis, the authority aims to supervise banks and insurance companies to guarantee financial stability, protect customers and strengthen French influence in international and European bodies. On January 14, it published the results of its study on the digital transformation in the French banking and insurance sectors.
The ACPR conducted in 2017, and published in early 2018, two studies on the digital revolution, one dedicated to the insurance sector and the other to the banking sector. To estimate the changes in these two sectors, it surveyed 12 insurance groups or organizations and 8 banking groups, representative of the French market, to measure the transformations underway and take them into account in the conduct of its own missions and in its participation in European and international bodies.
For these two studies, the organizations solicited answered a questionnaire of about fifty open-ended questions, similar to the 2017-2018 questionnaire, completed by interviews. The objective is to characterize the strategies of the players, their perception of the competitive context and the actual pace of their transformation.
Artificial Intelligence (AI), the driving force behind the digital transformation of banks and insurance companies
In the insurance sector, more than 83% of the players surveyed consider that AI will profoundly transform their internal processes. The innovations deemed most promising by insurance organizations, and therefore most often implemented, are those that allow for better data collection, value and security, particularly through increased use of AI. These technologies are already making it possible to increase internal productivity by increasing the relevance of employee decisions (augmented intelligence), by contributing to the dematerialization and automation of processes (automatic document recognition, semantic analysis). Externally, AI increases “acquisition” capabilities (better targeting of new customers). The most frequently cited use cases are aimed at digitizing and improving customer relations and service, on the one hand, and strengthening internal operational efficiency, on the other. Personalization of pricing and the fight against fraud appear to be the areas most likely to benefit from technological advances.
In the banking sector, the past four years have seen a clear maturation in the development and deployment of artificial intelligence tools: all of the players who responded to the survey have developed and deployed operational artificial intelligence tools that contribute to improving customer relations, the fight against money laundering and the fight against fraud.
the fight against money laundering and terrorist financing or to better identify risks.
Other technologies
Estimated impact of distributed ledger technologies
On average, the impact is estimated to be low or marginal at this time. While many of the insurers interviewed admit to being interested in the potential of blockchain and smart contracts to provide solutions for reducing time and costs, storing information and optimizing processes, they still have difficulty imagining the operational deployment of this technology. The example cited during the study is the following: “the project to automatically compensate the beneficiaries of a contract after the death of a person, thanks to a smart contract, could not succeed due to the following limitations: legally, the beneficiaries can be changed several times during the life of the contract, while the data cannot be modified in the blockchain. Also, the automatic triggering of the benefit payment assumes the ability to update the beneficiaries’ IBANs.”
In the banking sector, the distributed ledger technology (blockchain) is variously appreciated: 25% of the banks surveyed consider it too immature and the relevant use cases few, while nearly 40%, conversely, believe that the impact of blockchain on the banking business will be significant, even disruptive.
Development strategies linked to the innovative ecosystem
Bank customers have new expectations: easy-to-access and secure digital tools that allow them to manage their products online, instantaneous customer relations and personalized, autonomous service. When asked about the impact of these developments on the products offered, the banking institutions assure that it is their distribution or the underlying technologies that should evolve. The use of new technologies and new business models will be adopted to retain customers and counter competitors.
In the insurance sector, “insurtechs” are seen as niche partners or competitors. Quantum computing applied to insurance is still in its infancy: its fields of application and conditions of implementation remain unclear. It carries the risk of a major technological breakthrough by rendering current cryptographic methods obsolete (which could increase cybersecurity risks). Within 5 to 10 years, the autonomous car could have an impact on the insurance business model, by modifying the distribution of responsibilities and the selection of risk. The evolution of the frequency risk towards a serial risk is estimated in the order of 10 years.
Information systems face a double challenge: security and modularity
Digital transformation exposes the banking and insurance sectors to new operational risks, such as fraud and cyber attacks. Their priority is to strengthen the resilience of their information systems, while improving their modularity and interoperability, which are necessary for the development of new technologies.
Translated from Résultats de l’étude de l’ACPR sur la transformation numérique dans les secteurs français de la banque et de l’assurance
