AI in Banking: the Changing Landscape of the Industry
Artificial intelligence has penetrated deep into several industries in recent years. The banking sector in particular has been greatly benefited from intelligent technologies. From quicker approval of loans to the detection of fraudulent activities, AI has revolutionized the banking sector significantly.
However, if the intensity of the process is to be considered, the adoption of AI technologies has been rather gradual. You would acknowledge that the banking sector is still led by manpower to a substantial extent.
The reason is, banking operations call for human involvement. Still and all, recent trends reveal artificial intelligence seeping into the banking sector steadily. According to analysts,by 2030, the banking industry will be able to save more than $1 trillion, thanks to AI.
It brings with it a blessing called automation, which reduces human effort in operations. The way artificial intelligence is leveraging the banking sector cannot be overlooked. The leading financial institutions, too, are collaborating with the AI startups to develop robust applications for them.
AI has the ability to optimize efforts and cut down redundancy, making the operations more impactful and hassle-free. Let’s explore how artificial intelligence is changing the banking industry.
Personalized Banking Through Chatbots
One of the most important benefits of integrating AI into the banking operational mechanism is the personalized experience the customers can enjoy. Today, you will come across chatbots on the websites of most of the leading financial institutions. These are AI-driven tools, ready to support the customers even during the public holidays.
By implementing virtual assistants, banks can keep themselves engaged with the customers round the clock. Customers can also privately converse with the chatbots regarding banking transactions. Certain activities can be accomplished without the involvement of human interaction.
Erica, the virtual assistant that the Bank of America has introduced, supports the customers in making transactions. In recent months, the ROI of the bank has increased, and following this, other banks have followed the suit.
Voice Assistance through AI
Over the years, natural language processing and speech processing have improved manifold. Integrating AI, computers are now able to handle most of the queries made by the customers. Banks can benefit from this mechanism, eliminating issues related to the dearth of manual labor in assisting the customers.
Most importantly, it is much more economical to deploy a robot to accomplish these tasks, than hiring an employee. Customers, too, can benefit from this increased efficiency, as they need not wait at the line to converse with the support desk.
Voice assistance is gradually replacing the physical presence of customer support personnel. Voice commands and touch screens are already a part of the industry.
Through IVRS (Interactive Voice Response System), requests can be processed quickly in order to connect the users of various banking services. The customers can get the desired information much faster, and the probable human errors involved in the process get eliminated.
Intelligent Lending Decisions
Banks have integrated AI systems to make safer, more informed, and profitable decisions while lending money to customers. Presently many banks are using this technology to analyze credit history and credit scores.
This process helps them to determine whether or not a company or individual is worthy of a loan. You might come across these personal robots in the websites of the banks and other lenders. They are capable of evaluating large volumes of data, providing forecasts, advice and calculations.
AI applications have also been developed to come up with financial plans through research. This helps customers with customized opportunities for investments, rates, loans, and fees. Replacing the manual system for the approval of loans at the initial stages adds to the efficiency.
Besides, smart systems can assess credit history seamlessly and generate intelligent insights into customer behavior. This mechanism helps banks detect applicants who are likely to falter with their payments.
Improving Overall Efficiency
The involvement of humans in banking operations makes the process prone to errors. Integrating artificial intelligence can help the sector improve its overall efficiency and minimize errors. Besides, the banks have been able to reduce the operational cost to a large extent.
An AI-enabled technology called COiN (Contract Intelligence) can evaluate legal documents to extract crucial clauses and data points. Considering that the process of evaluating 12,000 commercial credit agreements is carried out manually, it is likely to take around 3,60,000 hours. This process can be accomplished by COiN in a few seconds.
The banks are proactive in developing new AI-enabled technologies for further customization of services. Reputed AI developers are working closely with the financial institutions to cater to their needs. This helps them to assess risks and leverage the overall efficiency in business.
Automation has replaced the involvement of humans in the banking sector. Statistics reveal that banks implementing the process have been saving around 20% to 25% of their operational costs.
Achieving Regulatory Compliance
The banking sector is among the most stringently regulated segments in the world. The governments and regulatory authorities need to ensure that these financial institutions adhere to the regulations. AI-enabled technology has the potential to prevent money-laundering and protect the privacy of the customers.
Presently, several banks are using AI tools to collect KYC data from their customers. Besides, the banks are on the hunt for intelligent technologies to keep a track on the transactions and customer behavior. AI-enabled tools can also record information for the regulatory and compliance systems that are presently in place.
Banks are now able to prevent fraud through data analysis. This is having a considerable impact on the underwriting processes of credit cards. It is necessary to use tools that monitor the customer habits and behavior intelligently. Evidently, AI has helped banks stick to the regulatory guidelines, while ensuring transparency.
AI Changing Banking Habits of Consumers
With the inception of AI, it is evident that the banking habits of people around the world are changing. Particularly, the use of mobile wallets has increased among the millennials in recent years. Secure and robust payment gateways have eased up technologies like mobile banking and digital wallets.
Areas where AI has influenced
- Digital wallets
Payment technologies have been evolving fast, and digital wallets have become the future of personal banking. You must be familiar with apps like Google Pay, PayPal, Paytm, and other wallets. Secure AI-technologies that are used in these apps mitigate the dependency on the physical transaction of cash.
This can make the payment process paperless in the future, where the transactions take place only through digital wallets. The process boosts transactions of money and influences the buying habits of customers.
- Personalization of banking
Personalization of banking can benefit the financial institutions as well as customers. While the banks need to deliver the much-needed support to their customers, the latter often seeks tailored services from banks.
Today, you can use dedicated apps, loan calculators, mortgage analytical tools, and other mechanisms on online platforms. These are available in addition to the virtual assistants and catboats.
Eventually, customers can enjoy a more personalized banking experience, get suggestions of attractive schemes, and learn about the new investment policies. The bank can also understand the financial condition of the users can deliver the necessary services.
- Faster payments through blockchain
Sluggish processes of payments have given way to real-time payments, thanks to blockchain-integrated AI tools. The combination of these two technologies has changed the banking experience of the digitized landscape forever.
Presently, customers have greater control over the payment processes. Technologies like the two-step verification process and OTP have made digitized payment processes more secure. AI-enabled apps have enabled customers to complete the payment process in real-time.
From the perspective of the banks, they can benefit the customers in terms of support and satisfaction. Besides, people are not more inclined towards exploring investment schemes on mobiles and apps. Social media, too, serves as a powerful platform to connect the banks to their customers.
AI in the Banking Sector: Challenges and Opportunities
Although AI has strengthened the banking sector significantly, it is necessary to be watchful about the challenges ahead. Experts believe that a number of challenges can riddle the banking system if the institutions fail to detect them at the outset.
Particularly, the availability of accurate data in countries like India still remains a challenge. If the wrong data is processed by AI-enabled tools, the overall quality of data deteriorates. Since data continues to be the staple for AI, unverified information can make the entire process vulnerable.
Therefore, the banks need to verify that the sources of data are authentic. Without data accuracy, the fraud detection system backed by AI is likely to falter. Eventually, the banks need to work on collecting, standardizing, validating, archiving and correlating data, before serving them to the AI tools.
Lately, the reputed software developers are collaborating with banks and financial institutions to come up with powerful AI apps. The banking infrastructure is likely to evolve further, with the inception of smarter and more powerful AI solutions.
Artificial intelligence has already proven its potential in making the banking system free from manual errors. Implemented properly, it can enhance the overall productivity and efficiency of the banking system by manifold.
We’re rooting for the future. Are you?