What comes to one’s mind first when thinking of Artificial Intelligence? Robots or Robotics engineering can help one perform day-to-day activities. Well, AI is an imitation of human intelligence methods by machines, particularly computer systems. The strategic deployment of AI in banking and finance can bring substantial benefits.
Artificial Intelligence (AI) is also known as machine intelligence. In simple terms, AI facilitates those machines which are competent in performing tasks that typically require human intelligence. The process of Artificial Intelligence involves three quadrants: learning, reasoning, and self-correction.
AI has several peculiarities, but expert systems, speech recognition, are particular applications.
AI in Banking and Finance
The influence of digital technology is in almost all industries. It is not only redefining industries but also transforming the way businesses operate. Nowadays, every sector is evaluating options and adopting ways to compete in this tech-driven world.
Thus, the question arises. How can the banking sector support more customers without increasing workforce expenses?
Hence, it is challenging for the industries to match the individual demands of the customers. The level of expectations of today’s customers is exceptionally high. Nowadays, customers are technologically savvy and assume the industries provide a pleasant and comfortable customer experience. Also, same thing customers expect from the banking sector.
Therefore, to meet customers’ expectations banking sector has spread its wings in retail, IT, and telecom fields. To help with services such as mobile banking, e-banking, and real-time money transfers.
So, the main aim of AI in the banking industry is to assist the customers by keeping their preferences a priority. Additionally, AI plays an essential role in assuring that customers are happy with the services offered by the bank. Furthermore, AI or machine intelligence helps the bank to understand the expectations of the customers.
It offers a range of AI applications in the banking industry and the areas in which AI can rule in the forthcoming years:
Personalized Finance Guidance
AI in finance helps customers obtain fast and accurate financial decisions. As it provides them with the most precise information concerning the market’s current situation. Therefore, we can say that AI can assist customers with personalized guidance for finance.
Undoubtedly, the discovery of digital wallets has taken the trend of digital money to the next level. Thus, when one talks about the specialty of these wallets, customers can purchase any item online by just entering their mobile number or OTP.
Interactive Voice Response System (IVRS)
IVRS supports banks in interacting with their customers. Therefore, the main aim of this application is to provide a pleasant banking experience to the customers by solving their queries.
Artificial Intelligence and Credit Decisions
AI learns based on past experiences and defines that one can also use AI in the financial domain. Let’s consider the example of credit cards. Thus, when a person demands a credit card from the bank, that customer is checked for eligibility.
So, to keep these things simple, banks provide their customers with their credit scores. Hence, in the finance industry, the credit score operates like a tool. This helps the banking professionals to identify the number of existing loans, the number of existing credit cards, etc.
Financial Industries have to deal with several customers daily. Thus, it is difficult for the financial industries to manage a record of all the customers. Hence, AI not only reduces the probability of mistakes while examining vast volumes of data. It helps the banks to differentiate among high default risk applicants and worthy customers.
Fraud Detection and Management
If one is running a business, what will be the priority? One would like to reduce the risk conditions for the company. Let us suppose one has a cash amount of money but doesn’t want to buy something with that, nor wants to invest that amount. Of course, one will deposit that money in the bank.
On the contrary, let us suppose that one wants to expand the business and has an urgent need for cash but doesn’t have sufficient funds. Thus, in this case, one will ask the bank or any other financial institution for the loan.
Nonetheless, the bank doesn’t have its own money if one takes a loan; it instead gives one someone else’s capital and pays interest for that money.
Thus, this is where fraud is probably because if the person does not return the money to the bank, how will the bank give it back to its owner? So, to reduce that risk, AI leverages monitoring features that minimize the danger of fraud. Besides, it also helps in fraud detection and the effective management of funds.
Financial Advisory Services
AI also plays an important role when it comes to financial advisory services. There are various situations when the pressure of funds increases in the financial industries. Thus, in this situation, AI can be more fruitful as compared to humans. Further, AI also can do financial decision-making by analyzing the various business components.
AI can be proven fruitful when assessing new ways to give extra benefits and comfort to individual users. Thus, in the finance industry, AI gives customers smart chatbots that help them with self-help solutions. So, it reduces the workload of the banks and finance industry and presents the customers with more accurate information.
Impact of artificial intelligence in banking sector:
Reduction in operational costs and risk
The banking industry is mainly digital in operation. But it still has some human-based processes that sometimes are paperwork-heavy. In these processes, banks face high operational costs and risk issues due to the potential for human error.
Robotic process automation is software that mimics rules-based digital tasks performed by humans. Thus, it is being applied in banking to eliminate the time-intensive and error-prone work.
Therefore, RPA bots are intelligent process automation tools. They manage an increasingly wide range of banking workflows. They were previously handled by humans with enhanced handwriting recognition, NLP and AI.
Improved customer experience
There’s a reason people ridiculed banking hours. Banks never seemed to be open when one needed them the most, such as later in the day or on holidays and weekends. Call centers were notorious for long wait times. And when eventually engaged, operators often couldn’t resolve the customer’s issue.
Hence, AI technologies are changing that. Chatbots on call. One of the notable benefits of AI in banking is the use of conversational assistants or chatbots.
A chatbot, unlike an employee, is available 24/7. Customers have become more comfortable using this software program. This helps to clarify questions and handle many tasks that involved person-to-person interaction.
Improved loan and credit decisioning
Banks use AI-based systems to help make more informed, safer, and profitable loan and credit decisions. Currently, various banks are still too restricted to using credit scores, credit history, and banking transactions. To decide whether or not an individual or company is creditworthy.
These credit-reporting systems are far from accurate and frequent errors. They miss real-world transaction history, and misclassify creditors. In addition to using available data, AI-based loan decision systems can look at behaviors and patterns.
Thus, it will help determine if a customer with limited credit history might make a good credit customer. Also, it helps to find customers whose designs might increase the likelihood of default.
Automation of the investment process
Lastly, some banks are probing deeper into the world of AI. By using their innovative systems they support investment decisions. Also, hold their investment banking research. Firms like Switzerland-based UBS and Netherlands-based ING have AI systems. They seek the markets for untapped investment opportunities. They also inform their algorithmic trading systems.
Thus, humans are still in the loop with all these investment decisions. AI systems uncover additional opportunities through better modeling and discovery.
The use of Artificial Intelligence is going to expand in the future. Furthermore, the future of AI in banking and finance industry is bright and also in various other sectors.
Exercising AI-supported solutions is now more than a trend. Therefore, it has become a necessity for bankers. However, one must consider that more important than using AI technologies is to implement these technologies most accurately and appropriately.