Continuous technological disruptions have changed the way the banking industry works drastically. If we compare it to the time when visiting a bank was the only way to withdraw money, to the modern banking era where one click on a mobile banking app is all you need to do is to make a payment, we know that the banking industry has come a very long way in a few years. Every few months, there is a new technological innovation being adopted to make the banking space better. Nonetheless, most of these changes are aimed at making customer experience and services better and more enriching.
A large part of development in the industry can be attributed to the adoption of Artificial Intelligence. This groundbreaking technology is the latest buzzword in the world of technological science, and it has taken top industries of the world by storm. The banking industry is one of the first industries to adopt artificial intelligence and it is expected to change its future. In less than five years, several banks have adopted robotics and related AI tools to ease their business, bring more efficiency, and ultimately optimize profits and achieve their business goals.
Artificial Intelligence: Everything You Need To Know About It
Artificial Intelligence in banking is a breakthrough that is changing the way we bank and carry out financial transactions. It is expected to empower the banking organizations that are usually burdened with a vast amount of data work, large volume transactions, documentation, analysis, and more. Let’s learn more about this technology that is transforming the world.
Artificial Intelligence is a field of computer science that attempts to simulate human intelligence and human capabilities with the help of machines, software, and computer platforms. Largely, these machines are developed to mimic human cognitive abilities such as learning, analyzing, problem-solving, calculating, decision making, and reasoning. This technology is like a dream come true for humans as it assists them in accomplishing redundant, high-volume, repetitive tasks with a superior level of accuracy and minimal chances of error. It attempts to improve efficiency and achieve time-consuming tasks in minimal time. Implementation of AI has reduced human effort and decreases the chances of human error in several fields.
Development of AI is a collaborative effort of several other branches of the scientific field. There is a multitude of applications that a typical AI uses, such as expert systems, speech recognition and machine vision, natural language processing, knowledge assimilation, and more. And a typical AI model displays at least some of the following human capabilities: Planning, learning, reasoning, problem-solving, knowledge representation, perception, motion, and manipulation and, to a lesser extent, social intelligence and creativity.
Artificial Intelligence was developed into an academic field in the year 1956 and since then, scientists have dedicated themselves to it. In the past few decades, there have been a few ups and downs, but it was only in the 2000s that the world woke up to its glory.
Today, AI is all-pervasive. Virtual assistants in your smartphones are one of the classic examples of AI we use in our daily lives. The modern-era artificial intelligence is relevant to any intellectual task. There are numerous AI techniques that are implemented these days in various industries such as knowledge engineering, machine learning, natural language processing, machine vision, expert system, deep learning, robotics, automatic programming, virtual personal assistants, internet of things, translation, simulation modeling and more. They are too many to list here.
Artificial Intelligence in Banking
History of banking began in the early days when merchants roamed around the world trading their goods for the grains from the farmers. When it comes to India, evidence of banking activities such as loaning was found in the Vedic Period. However, the modern banking in India took birth in the last decade of the 18th century with the establishment of the first few banks, namely Bank of Hindustan, General Bank of India, and Bank of Calcutta. While the others were liquidated, Bank of Calcutta transformed into the largest and the oldest bank that still exists and is named as the State Bank of India.
The Indian banking industry has evolved rapidly after liberalization when the economy opened itself to private and foreign banks. At this time in the history of banking in India, the adoption of technology started, and the results are quite evident. Long gone are the days when standing in a line for a simple query about your banking account was a norm. Now, you can transfer, withdraw, manage your account, apply for loans, make payments, and create a new account, in just a few clicks. This massive technological revolution has transformed conventional banking methods to convenience banking methods.
Among several future banking trends, artificial intelligence is creating the most impact in the Indian banking sector. To stay ahead in the competition, banks today are struggling to reduce operational costs, meet goals, and exceed customer expectations through customer experience. To achieve these goals, they are aggressively implementing AI tools.
According to a report by the National Business Research Institute, more than 32 percent of financial institutions are using artificial intelligence through voice recognition and predictive analysis. However, initially, many feared that AI could make human employment obsolete. Experts suggest that that is just a myth. It is expected to create new job opportunities in the millions. The banking industry is yet to realize the full potential of AI in banking, therefore, researchers are making dedicated efforts to explore new opportunities. Meanwhile, AI has contributed massively to the development of the banking industry.
The top global industries including banking and finance are moving towards AI for its numerous benefits.
- AI enables error-free computation and lower chances of error when compared to humans.
- It is extremely useful in reducing human efforts in laborious, repetitive, and tedious tasks.
- It provides impressive predictive analysis for various banking situations.
- It is easy to detect fraud and prevent any kind of disastrous activity.
- Organizing and managing records and customer information, a huge volume of transactional data recording, becomes easy.
- With applications like natural language processing and voice recognition, AI tools are interacting with humans and assisting them in solving problems efficiently and promptly.
- There is a better scope of achieving regulations compliance and standardization.
- Finally, there is no fear of exhaustion. AI can continue to use human intelligence capabilities without a break, rest, or sleep.
Impact of Artificial Intelligence in Banking Sector
AI has enabled the banking industry to expand their gamut of products and services and improve its efficiency in many ways. Here are some points to consider.
Artificial Intelligence in Banking Customer Experience
AI has most powerfully impacted customer service and the customer experience segment in the banking industry. Customer satisfaction is the highest priority for several banks and AI is helping them achieve the same with better services. Apart from promptly assisting the customers with queries, it provides personalized products to individual customers based on their banking history and transactions. Loan and online wealth management services provided by banks are able to use predictive analytics for their customers before they decide to take a loan or make an investment.
Artificial Intelligence in Banking to Prevent Fraud
Banks and financial institutions are most susceptible to cyber crimes and frauds. It is important for banks to create a secure financial environment. Therefore, technologically advanced AI tools are being implemented to prevent fraud by executing the predictive approach. Knowledge engineering and other integrated applications allow the AI to identify discrepancies in transaction patterns that can lead to fraudulent behavior or terrorist activity. These techniques are considered superior to any other IT platforms.
Artificial Intelligence in Banking and Risk Management
AI is a game changer for risk management in banking and finance. With the tools and assimilated knowledge, a greater level of risk analysis is possible, which can help banks create tailored products based on the customer’s history. Just like fraud, it can predict risk and help develop a suitable strategy.
Artificial Intelligence in Banking To Improve Operational Efficiency
At the back-end and front-end, AI has undoubtedly improved operational efficiency. AI can provide insights and analysis for faster decision making and enhancing profitability for the employees. Additionally, tackling documentation work in real time has greatly cut down the workload and back-office processing time. It is worth mentioning that the massive digital transformation revolution carried out by the banking industry was not possible without the tools of AI. Various software and virtual assistants fast-tracked the tediously lengthy task of digitization.
Today, AI is the primary channel through which banks interact with their clients. Now banks are available round the clock to their customers. Apart from this, AI is also playing a large role in sales and recommendation of banking products and services. Robo-advisors are employed to perform this task efficiently and provide the customers with relevant information. All in all, AI has created a massive shift in the banking space. Today, it is playing a prominent role in transforming the banking sector. However, nothing comes without challenges.
Just the implementation of sophisticated technology is not going to benefit until changes are made to create a cultural shift without disturbing the existing structures. It is important to bring a mindset change to create trust and maximize its potential. An understanding must be created that it is an aid to human intelligence.
Meanwhile, the workforce, with enriching knowledge of data science skills, must be created to fulfill work opportunities. This is the only way to create the right impact of the new technology.
Future of Banking With Artificial Intelligence
Adoption of artificial intelligence was undoubtedly a drastic move in the industry which was resisted by many. However, AI has contributed magnificently to the rapidly developing banking industry. It has changed the landscape impressively and made banking activities a lot easier to perform. So, it is certain that artificial intelligence will continue to play a prominent role in the future of banking and finance industry. With proactive efforts, we will soon be able to realize the full value of this technological innovation and how it can make digital banking effortlessly efficient.