The banking sector has started to fully embrace the potential of artificial intelligence (AI). There are already a variety of AI applications in banking, such as Siri and Alexa. Banks have taken this to the next level by creating actual machine learning algorithms that can learn and adapt on their own, therefore impacting the face of banking as we know it.
This process is known as machine learning, which uses algorithms to find patterns in data to make accurate predictions. Artificial intelligence has a lot of potential for success in the banking sector since it offers transparency, efficiency, convenience and support for personalization.
For example; AI is helping banks measure customer satisfaction through chatbots that answer customers’ questions on social media channels like Twitter and Facebook.
How AI Is Changing The Way We Bank
Banks may employ AI to improve the client experience by providing frictionless, 24/7 interactions – but AI in banking apps isn’t confined to retail banking services.
Banks that employ AI technology can enhance their product development. This means they can come up with new products and services that previously weren’t possible to create. For example; banks can use AI technology to predict what products a customer might need to be successful in their business or personal life. They could then use this information to sell these products and services directly to the customer by making a tailored offer.
Banks save money through reduced costs of operating as well as enhanced competitiveness against peers who aren’t using AI technology in their operations. For example; banks can use AI technology to optimize their resources and trim the fat.
Banks that employ AI technology can make better investments in areas like IT, so they can develop new products and services to improve their customer experience.
Banks that use AI technology in their operations are able to improve the profitability of the business by increasing productivity and efficiency. For example; banks can save money in areas like payrolls because they don’t need as many employees since AI software takes away the need for many human jobs. They can also cut costs by making better decisions based on data from multiple sources due to improved accuracy and speed.
How Can AI Be Used In Banking
Banking is an industry that is ripe for automation and machine learning. Financial institutions have long used machine learning for risk management and fraud detection. Now, with advances in natural language processing, machine learning is being used to automate customer service, loan origination, and other processes. This is good news for banks, as it can help them improve efficiency and cut costs.
According to an OpenText poll of financial services professionals, most banks (80%) are well aware of the potential benefits of AI.
AI can help banks to better understand the intentions of customers and work out ways to optimize financial services. It is possible for AI to have a huge impact on the banking sector. For example, AI can be used in the following areas:
1. Customer Experience
AI can be used for customer communication with banks’ chatbots. They can respond to customers’ questions and concerns, helping them solve their problems quickly. Phones are being used more than ever and therefore need to be more accessible for customers, which is where chatbots come into play. This allows banking customers to interact with an actual person without having to make calls and wait in line at the bank.
2. Fraud Detection
In the banking sector, a large amount of fraud is detected. Currently, banks must manually check every single transaction and manually find frauds and mistakes in their processes. Other companies like Equifax are offering to do this for banks to cut down on costs and increase efficiency. AI will eventually be able to detect frauds with more accuracy than humans – saving money for the banks and enabling faster processing of the applications.
3. Customer Intimacy Through Personalization
AI can be used to create personal experiences for customers. For example; AI can help customers find relevant products based on their needs and preferences through chatbots that answer specific questions they have when they are online or at home.
This personalization can be valuable for customers since it means banks can keep on track of customers’ preferences and needs, thus allowing banks to provide them with the best banking services.
Benefits Of AI In Banking
The banking and finance industry is no stranger to fraud, and mobile banking apps are a growing target. Credit scores are one way to detect fraud, but AI is being used more and more to detect fraudulent activity. Banks are using AI to detect fraudulent activity in real time, and it is becoming more and more effective.
According to a UBS Evidence Lab analysis seen by Business Insider Intelligence, 75% of respondents at banks with more than $100 billion in assets are currently implementing AI initiatives, compared to 46% at banks with less than $100 billion in assets.
The banking sector has been struggling to keep up with the ever-changing landscape of customer data and fraud detection systems. This has led to many banks and finance companies turning to artificial intelligence (AI) to help automate their fraud detection processes.
AI can help identify patterns in customer data that may be indicative of fraud, and can also help banks and finance companies to better understand their customers’ needs and preferences.
1. AI Is A Force For Efficiency
AI makes banking more efficient in various ways. For example, AI can be used to respond to customer concerns and requests quickly. This means that banks can answer these queries from their customers in real-time and never have to wait longer than necessary.
The chatbots that banks have created behave like humans when they talk; this allows them to communicate with people in the same way as someone does in person. Since a conversation with a human-like chatbot would last longer than thousands of years, it would be hard for humans to keep up with. Banks could save many hours of work if they used AI as assistants instead of dealing with humans that cannot handle the workload.
2. AI Stores Information
Storing banking information is a risky process. If the banking data is not kept safely, it can be corrupted or lost by hackers. AI can solve this problem by storing large amounts of data that banks may need to refer back to later on.
AI can keep track of their customers’ information, such as their preferred payments and types of accounts at different banks. This way, humans do not have to worry about keeping track of all this data and can focus on more important tasks that cannot be performed by machines.
3. AI Promotes Transparency
In banking, AI and machine learning can perform this duty with greater precision and privacy.
AI helps create a level of transparency in the banking sector that helps customers better understand how their money is being handled by banks. For example; AI helps human bankers to confirm the identity of their customers.
In most cases, banks have so many customers and it is impossible to check every single customer’s ID. However, AI can perform these tasks more efficiently as it can collect and analyze vast amounts of information quickly. This means that banks will be able to give a better service that is more personalized for their customers.
4. AI Enables Personalization
AI helps banks to provide a personal experience for banking customers. Banks often have millions of customers and cannot possibly provide the same services for each of them. An AI chatbot can be trained to recognize customers based on their needs and preferences.
For example, AI can automatically offer different products and services based on the banking customer’s age and income level. The products and services provided by the AI chatbot can also change based on the time of the day or day of the week.
This personalization is useful for customers since they can get tailored services that are appropriate for them, while banks save money by not having to provide banking services that are redundant.
5. AI Helps Banks Cut Expenses
AI helps banks cut down on costs in many ways. For example, it saves a lot of money by helping them increase efficiency – which is a key factor in banks’ success over time. It also cuts down on costs by providing customers with tailored services for various banking needs, making it more difficult for banks to lose money.
6. AI Cuts Down On Redundancies And Mistakes
AI helps banks reduce the amount of redundancies and mistakes in their products through a variety of ways. For example; AI can be used to create error-free forms for customers, thus helping them avoid mistakes that may cost them money. Additionally, AI can detect when a product or service is redundant so it can be eliminated thereby saving time and effort invested in this product or service since it will no longer be needed by the customer.
7. AI Is A Force For Growth
AI helps banks increase their sales by providing tailored banking services. This could mean that the bank can gain more customers or sell more products or services to the existing ones.
8. AI Improves Security
AI can help banks become more secure and reduce frauds occurring during transactions. Banks are a target for cyber-attacks, but AI can help them detect if they are being targeted and prevent these attacks from succeeding. A variety of methods like antivirus programs, firewall systems and others can be used to prevent cyber-attacks from succeeding through the use of AI technology.
Risks Of AI In Banking
The finance sector is under pressure to improve data security in the wake of high-profile credit card fraud cases. Banking apps are a key target for criminals, as they can provide access to sensitive financial information. Senior financial management must ensure that adequate security measures are in place to protect customer data.
According to Autonomous Next study seen by Business Insider Intelligence, the overall potential cost reductions for banks from AI applications are predicted to be $447 billion by 2023, with the front and middle office accounting for $416 billion of that total.
1. Job Losses
AI technology has the power to eliminate many jobs within the banking sector. This could be a risk since people may not have enough money to live on since they may not have a job.
2. Customer Experience Risks
A risk of AI technology is that banks might lose their human touch and become too impersonal for their customers. For example, AI can learn how to respond to customer concerns, but it is unlikely that it will ever be able to talk with customers in the same way as humans do. In such a case, the customer’s experience would be severely affected if they were being forced to communicate with an AI chatbot instead of speaking with a human being.
3. Security Risks
While AI can be helpful to banks by increasing efficiency and security, it also poses a risk in that it can be hacked. For example; if AI is used to perform high-risk tasks like confirming user identity and performing financial transactions, then it could potentially be hacked.
Hackers are always expanding their expertise and may soon figure out how to hack AI software. So, banks should employ the best professionals to make sure their data is safe from hackers.
4. High Costs Of Initial AI Adoption
Another risk of AI technology in banking is that businesses must incur high costs at first to get started with this technology. For example; training an AI chatbot can take a lot of time and effort. Even after the AI is trained and ready to be used, it would require maintenance and upgrades as time goes on. This could be a drain on business resources.
5. A Large Number Of AI Businesses
Another risk of using AI technology in banking is that there are a lot of other businesses using this technology. For example; there may be an AI chatbot for loans, another for mutual funds, another for financial information and so on and so forth.
This makes it challenging for banks to find an ideal chatbot that will meet their needs and even more challenging to train the chatbot based on their requirements. It also makes it harder to track these different AI bots in order to ensure they are working properly.
6. A Lack Of Banking-Specific AI
Another risk of using AI technology in banking is the lack of custom AI software for this industry. For example; many AI chatbots are based on computer software that was originally developed for other industries.
This makes it challenging to tailor banking-specific solutions like a chatbot that can talk to customers about loans in a way that makes them interested in getting a loan from the bank.
7. Inconsistent Customer Service
A risk of using AI technology in banking is inconsistent customer service. For example; some banks may use an AI chatbot for their customers while others may not, which can lead to confusion among customers and make them dissatisfied with their bank’s services.
8. A Risk Of AI VS Human Interaction
A risk of using AI technology in banking is the lack of human interaction between customers and staff members. For example; customers may feel uncomfortable interacting with an AI chatbot that can’t visibly express emotions like humans do, as a result they may not be able to trust this chatbot and may prefer talking to a person instead.
Final Note
70% of banks are planning to integrate AI into mobile banking apps and seize the golden prospects presented by AI in the banking industry.
Businesses can benefit from AI technology in numerous different ways. For example; AI can help businesses to keep track of their work force, so they can make sure that their employees are working effectively and efficiently.
In addition to that, AI helps businesses to automate many manual processes like form filling and payrolls. This removes the need for manual jobs and makes the business more efficient.
Last Updated on September 29, 2023 by Priyanshi Sharma
