The increasing shift to digital channels provides banks with the opportunity to serve more clients, grow market share, and generate more income at a reduced cost. Banks that take advantage of this opportunity will also have access to the larger, more diverse data sets needed to power advanced analytics (AA) and machine learning (ML) decision engines. The artificial intelligence (AI)-powered decision-making capabilities, when used at scale, can give the bank a clear competitive advantage by delivering significant incremental value for customers, partners, and the bank.
Digital disruption is reshaping sectors and altering company operations. In today’s technology-driven environment, every industry evaluates possibilities and implements new ways to create value. The banking industry is undergoing significant changes, the most notable of which is the rise in customer-centricity.
Customers constantly exposed to innovative technology expect banks to provide a seamless customer experience. To address these demands, banks have branched out into retail, IT, and telecommunications to provide mobile banking, e-banking, and real-time money transfers. However, improvements have enabled clients to access most financial services at their fingertips, and from any location, they have come at a cost to the banking industry.
The convergence of banking and industries such as IT, telecommunications, and retail has increased the movement of sensitive data across virtual networks that are prone to cyber-attacks and fraud. These instances impact banks’ profits and undermine their clients’ trust and relationships.
Government regulations have been tightened due to internet security threats in banking transactions. These regulations are important for monitoring online financial activities, but they have limited banks’ ability to balance the digital revolution.
Banking on Artificial Intelligence (AI)
Artificial Intelligence (AI) is the way of the future in banking, as it combines the power of advanced data analytics with the ability to prevent fraud and improve compliance. Anti-money laundering activities that would ordinarily take hours or days are completed in a matter of seconds thanks to an AI algorithm. AI also enables banks to manage massive amounts of data to extract key insights quickly. AI bots, digital payment counsellors, and biometric fraud
Importance of AI in Banking:
While the banking industry has traditionally been data-driven and technology-dependent, new data-enabled AI technology can push innovation further and quicker than ever before. In addition, AI can increase efficiency, enable a growth plan, increase differentiation, manage risk and regulatory requirements, and improve customer experience.
Until recently, developing advanced AI systems was prohibitively expensive, limiting deployment to a few important use cases (e.g., high-frequency trading). However, according to a new AI survey conducted by Deloitte of IT and line-of-business executives at firms that have implemented AI technologies, cost and other hurdles to adoption are decreasing, and it is becoming easier to develop and integrate AI technologies.
1. AI Assists in the Implementation of Multiple Tasks:
AI assists us in our day-to-day activities. Similarly, AI improved bank clients’ strategic planning, such as account onboarding, digitalization of accounts receivable and owing, trade processing, and note setting, among other things.
AI is a profound intuition based on data. It generates reports that show consumers their consuming models by analyzing cash flow patterns and end-user activities. Not only that, but it also aids in the recommendation of products and services to clients based on their preferences.
2. Amplifies the User Experience:
The existing banking system does not satisfy the younger generation, especially Millenials. Artificial intelligence has ushered in a technological revolution in banking, providing access to many opportunities.
3. The Task is Easily Done:
What is the single most common complaint among bank customers? It’s because of the long lines. The problem can remedy problem with AI technologies, such as Chatbots and Virtual Assistants, which make the work easier and allow customers to complete other bank-related work from their homes. Machine Learning-based AI assistants can help customers generate personalized financial strategies, proposals, and loans based on their preferences, historical behaviour, and credit score.
4. Controlling leads with AI:
By predicting the future of banking and financial industries, AI assists in making educated decisions. External global factors were created as a result. Natural disasters, fraud, political upheaval, and currency fluctuations are factors that these businesses cannot control or influence.
Currently, AI frequently identifies potentially dangerous applications by calculating the probability of a client defaulting on a loan. By studying previous behavioural styles and data from their smartphone.
5. AI Benefits to Prevent Fraud :
In recent years, the number of cybercrime incidents has increased; AI delivers outstanding cyber-security and protects clients’ data. It also lowers the chances of fraudulent transactions or other suspicious behaviour in the customer’s account.
Internal AI-driven methods can aid in acceptance by ensuring proper internal operations processes. It can, for example, detect unfair insider trading that harms the market. As a result, the need for AI-powered safety technologies is increasing.
6. Collections and Monitoring:
A bank can use AI and advanced analytics to lessen the burden of nonperforming loans once it has used AI/ML models to automate loan underwriting and pricing. In addition, banks are increasingly engaging with customers to assist them to stay on track with payments and work more closely with those who have problems. Combining internal and external data sources can create a comprehensive report.
7. Engagement and Service:
Banks may use AI-powered decisions to develop a smart, highly tailored servicing experience based on client microsegments, allowing diverse channels to give greater service and a compelling experience with fast, easy, and intuitive interactions.
Banks can provide timely consumer analytics and tailor-made offerings for each client to help their relationship managers. They can also boost agent productivity by providing streamlined preapproved items tailored to each customer’s specific requirements. For example, based on behavioural and psychological mapping, models that assess voice and speech characteristics can match agents with clients. Similarly, transcript analysis can forecast consumer dissatisfaction and recommend a solution to the agent.
8. Decision-Making and Marketing Assisted by AI:
Usually, Banking Institutions hardly understand the data of legacy foundations and business processes. AI analytics eases gathering and examining information. Through this, they can understand the format and help interpret their analytical data.
With these AI-generated records, the user can see the problem and strengths, empowering them to repurpose their methods. It provides you with precise material marketing. AI encourages companies to expand and deliver definite marketing tactics.
Earlier, marketing tactics required lots of time. Now with big data, they can target specifically each user team. Also, it helps in expanding business operations in the banking industry.
How AI-driven Technology Encourages Competition
To conclude, the rapid advancement of AI-driven technology encourages competition in terms of speed, affordability, experience, and intelligent offers. However, banks must provide highly tailored and timely information to clients to foster loyalty to stay competitive.
Personalized offers and personalized communication given at the right moment through the customer’s preferred channel can help banks enhance the lifetime value of each customer relationship while also reinforcing their market leadership. Banks must develop AI-powered skills giving importance to the decision fed by a rich mix of internal and external data and reinforced by edge technology to accomplish these benefits. The next piece in our series on the AI-bank capabilities stack will focus on the basic technology and data infrastructure required to acquire and curate increasingly diverse and large data sources.
AI will further empower banks by automating their skilled professionals, making the entire automation process intelligent enough even to eliminate cyber dangers and FinTech competition. AI is ingrained in the bank’s processes and operations, and it continues to evolve and innovate over time without requiring significant manual intervention.
Banks will be able to best leverage human and machine skills to generate operational and cost efficiency and provide tailored services, thanks to AI. These advantages are no longer a pipe dream for banks to realize. Leaders in the banking industry have already taken steps to gain these benefits.
Banks may see increased operational profitability as an outcome of AI analytics.
Finally, AI will aid in the prevention of cybercrime in financial institutions. Artificial Intelligence can help with error inflow, transactions, customer service, customer experiences, and various other issues.