25 Jan AI for greater sustainability
Banks face evolving challenges: profitability strains, digitalization, and sustainability shifts.
Volksbank pur‘s partnership project illustrates boosting bank profits while enhancing corporate sustainability.
With the launch of the chatbot ChatGPT by US tech startup OpenAI last year, digitalization has reached new heights.
Generative artificial intelligence (AI) can create texts, images, music, videos, codes, or other files upon request by recognizing patterns in vast data sets and continuously learning.
Its purpose isn’t merely to create “fun” content or deepfakes but to efficiently process and utilize large volumes of data, catering to specific user requests in commercial and industrial settings. AI aims to support rather than replace humans, expediting processes, and spawning new applications and business models.
In industries like finance, AI adoption can be transformative.
According to Deloitte’s “Digital Banking Maturity” study, German banks lag behind in digital customer engagement globally, indicating a pressing need for change. The pandemic has heightened customer expectations for digital banking services, yet many German financial institutions feel the pace of digitization is sluggish.
Cost pressures drive digitalization in Germany, whereas customer needs steer foreign financial service providers. Traditional German banks hold an advantage due to consumers’ trust, as revealed in YouGov’s “The Future of Financial Services Report 2022“.
Leveraging this trust and prioritizing customer-centric digital strategies can bolster the success of traditional banks amidst evolving market dynamics.
The importance of customer data
Traditional banks possess a valuable asset that new digital financial firms, like fintechs, must painstakingly cultivate: customer trust.
This applies not only in retail banking but also in corporate banking. This foundation of trust, established over decades, can be effectively leveraged within a digitalization strategy.
This conclusion was reached by Volksbank Karlsruhe Baden-Baden—now Volksbank pur due to mergers—when it began collaborating with our consulting and software company ILI.DIGITAL.
The first step focused on how Volksbank could digitally expand its business model to generate additional revenue streams in the future. Beyond-banking services—services that go beyond the traditional banking scope—emerged as a viable option.
In addition to its longstanding relationships with retail and corporate customers in the region, the comprehensive customer data and associated data pool were identified as another intangible asset. One thing leads to another. Through the relationships built with its customers over many years, Volksbank has been able to continually expand its database, which it uses in compliance with data protection regulations and only for internal purposes.
Demand for More Transparency
Sustainability has become a significant driver for every company.
It is the management’s responsibility to adopt a forward-thinking approach, manage costly resources, reduce energy expenses, and transparently disclose the corporate carbon footprint to customers. Moreover, regulation significantly influences sustainability.
The European Green Deal of the European Union mandates Europe’s climate neutrality by 2050, with several legislative packages within the deal.
The Corporate Sustainability Reporting Directive (CSRD) significantly expands the number of companies required to publish a sustainability report. This also affects cooperative banks. For instance, all institutions with over 500 employees are now obligated to produce an ESG report.
The CSRD practically elevates the sustainability report to the same level as the annual financial report, as it must be integrated within the management report in the future.
Due to the growing transparency obligations under the CSRD and the self-interest in minimizing (energy) costs and meeting customer demand for sustainably produced products, companies will need to have a clear understanding of their carbon footprint in the future.
Creating this transparency is typically costly and time-consuming, requiring internal resources and often outsourced services. Volksbank pur and ILI.DIGITAL established the following equation: financial service providers possess economic data enabling them to derive the corporate carbon footprint of their corporate customers. Every purchase made by a company – whether for electricity, paper, water, fuel, IT, PCs, clothing, or cleaning supplies – is reflected in the business management analysis (BWA) and processed in balance sheets.
By combining these individual corporate data with existing production data and the carbon emissions associated with purchased products and services, a valid picture emerges of how much carbon dioxide each company emits annually.
Sustainable Success:
The Critical Role of Corporate
Carbon Footprint in ROI
In October 2023, ILI.DIGITAL experts published a study to demonstrate how the ROI of a company is impacted by the corporate carbon footprint, and propose a guidance on how digitalization can reduce the greenhouse gas emission.
