How Artificial Intelligence is Transforming the Banking Industry

How Artificial Intelligence is Transforming the Banking Industry | Insights Success

The banking industry is undergoing a profound change with the advancement of technologies like Artificial Intelligence. There are some banks who have already tried AI and then those who are now trying to implement it in their systems to figure out what AI can do. Currently, the focus of the financial institutions is on the user experience rather than the bottom line.

Artificial Intelligence has enabled computer systems to perform tasks that require human intervention. Machine Learning is a key building block of Artificial Intelligence and it helps in making choices that machines cannot without the help of a human being. The banking industry is very sensitive in such cases which results in more severe and long-term loss of credibility of the company providing the financial services.

Investments

According to independent reports, the banking industry is emerging as the second-biggest spender on artificial intelligence after retail. The banking sector will witness an investment of 3.3 billion USD in AI and related technologies in the coming years. Overall spending on the technologies estimated to be more than fifty billion USD by 2021. On the other hand, there were concerns over governments amending the laws against the extent to which the AI can be used. For example, the European Union rules are stressing on human oversight and consumer protection which may hamper the plans by banking and finance companies in building future tools.

Compliance

Artificial Intelligence (AI) systems learn from present experience as well as past data fed to it by the operators. In banking, the difficult task is to learn the difference between the compliant and the non-compliant behavior of the individuals and institutional customers. It needs vast instances of non-compliant behavior which are not available with any bank for AI to make reliable decisions. But still, AI could help by replacing the manual time-consuming tasks and big data analysis. As of now, AI may not be able to act as a substitute for the decision-making abilities of the compliance analyst.

Customer Service

AI technology has transformed the customer experience to a large extent by providing interactive solutions. Earlier the customers had to navigate through several pages on the bank’s website while AI can do it with a simple conversation in a chat environment. The convenience and time-saving features of these systems have made the customers stick to the services by banks.

The most important part is that AI can be available at any time at any place when the customers might need it the most. Artificial intelligence in mobile banking is serving the customers efficiently and effectively which then allows the staff to spend more time with the customer to understand their need for financial services better.

Cyber Security

The utmost attention has been given to e-commerce and cyber-security issues while developing AI for banking. There are systems which can detect an anomaly in real-time to identify and eradicate fraudulent cases in commerce including online and in-person banking. The customer is rapidly alerted about such activity. The service also assists financial institutions and payment providers in monitoring and protecting financial activity.

Trading and Stock Investments

AI of banking in most probable circumstances will be used for ‘large algorithmic trading’ which uses the large volumes of high-velocity data to overcome the competition and provide value to customers. AI is especially useful in high-frequency trading and ultra-fast trade execution where a robot has an advantage over the human trading.

Implications

The development of AI-based banking with heavy investment involves substantial operational and financial risk. There is a potential for severe legal consequences and added reputational damage. There is a positive side to this that it enhances the connectivity for payments efforts and advanced applications interfaces to corporate banking customers.

With the rise of Artificial Intelligence (AI) in banking Industry, customers will interact with a robot from their mobile instead of a real person sitting behind the glass window for help with a tax return or managing their investments. There is a digital tsunami coming up and it is certainly disrupting traditional business process across all segments of banking.

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