If an 84-page report by Autonomous is to be believed, by 2030, global financial institutions and banks will start saving as much as 22% in costs owing to the reduction in operating expenses, thanks to Artificial Intelligence. That translates to roughly more than $1 trillion dollars worth of projected cost savings, and that’s enough to spin quite large an economical circle. With all three sections of such institutions – front office, middle office, and back office – witnessing a significant share of these savings, the application of AI in banking processes has already started taking shape.
And while it would be hard to imagine a future of the banking industry without referring to AI, there are still some prevailing doubts about the exact ways in which AI will support the industry. Through this post, let’s try to shed some light on the use cases in which the application of AI will become omnipresent in banking.
Key Benefits that AI brings to the Finance Sector
Though it doesn’t seem distant, today’s AI isn’t ready yet to completely replace humans. Rather, it is seen more as a means of augmenting their capabilities by allowing them to become free of role actions and perform more value-added operations.
Bob Legters (CPO of Banking and Payment for FIS) believes that AI and machine learning have begun to lay down a strong foundation for banking products.
On similar lines, according to McKinsey & Company, AI is one of the top trends shaping fintech and the sector will see significant winnings by combining advanced analytics and distinctive data sources with their existing business fundamentals.
When there’s so much emphasis being laid on AI and its progressive role in banking, there must be some real benefits to its application in the industry. And as per a Celent report, AI adoption in banking brings these key advantages to the table:
Reduced Costs – This is achieved by handing over manual tasks to AI for speeding up response times and seamlessly keeping up to date with regulatory changes.
Risk Mitigation – This is achieved by cutting down financial challenges through ML powered improved loan underwriting, advanced fraud detection, improved controls and compliance, and reduced operational risks.
Improved Employee Effectiveness – This is achieved by increasing the productivity of employees by allowing them to focus on the key business goals and highest value tests.
Enhanced Customer Experience – This is achieved by taking the assistance of customer-centric strategies like targeted emails and offers, and using speech analytics to quickly identify cases needing human attention.
And now a look at some banks who’re leading by example
A number of high-profile players in the banking industry have already started applying AI concepts in their regular processes and needless to say, they’re reaping quite a few benefits from the move.
The Bank of New York Mellon Corp has deployed multiple automated programs (bots) to carry out a range of repetitive tasks like responding to data requests, correcting formatting mistakes in requests, etc. to significantly reduce their costs.
Citibank is currently using ML and Big Data to monitor potential customer threats and prevents criminal activities.
JP Morgan Chase has developed a proprietary ML algorithm called Contract Intelligence (COiN) to analyze documentation and extract critical information for automating daily tasks and cutting down the time needed for operations.
Bank of America has deployed its automated virtual assistant, Erica, to act as an on-point financial advisor to over 45 million customers. The program works on the concepts of cognitive messaging and predictive analytics.
Wells Fargo launched an AI-powered chatbot this year for the bank’s Facebook messenger. They even established a new AI enterprise solutions team in February 2019 to provide increased connectivity to their payment solutions using AI to enhance growth opportunities.
Now, before jumping the wagon, take a closer look at the best ways in which you can ride the AI tide and extract maximum benefits.
Top AI Use Cases in Banking Industry
- Chatbots – Using digital personal assistants or Chatbots, banks are revolutionizing business communication and customer service. Chatbots have many applications right from assisting customers in performing daily tasks to delivering them a personalized experience.
- Intelligent Process Automation (IPA) – Through IPA’s core components of computer vision, cognitive automation, and machine learning, financial organizations can adopt automation capabilities to dramatically elevate business value and competitive advantage. Through IPA, banking systems can apply the concept of unattended robotics and self-learning to identify and self-correct issues without human intervention, thus saving time and fostering efficiency.
- Enhanced Data Analysis – AI-driven algorithms are capable of analyzing vast volumes of data to identify patterns and correlations, thus allowing the banking sector to inch towards near real-time analysis.
- Better Customer Service – Automated AI-powered CSRs can gather data from a customer’s device, process it through ML and either provide relevant information or redirect the customer to a worthy source. Further, the CSR can extend the bank’s other services by showcasing offers and insights in line with the customer’s behavior.
- Risk Management – While extending loans to new customers, assessing the associated risk is a sensitive zone requiring confidentiality and accuracy. AI can handle the matter in a simple manner by analyzing the data pertaining to the prospect’s latest transactions, market trends, and most recent financial activities to identify the level of risk.
- Customer Segmentation – In order to improve customer targeting, personalization, and engagement, the application AI in customer segmentation can prove to be key. By segregating specific customer types into different groups using AI-drive business strategies, banks can make appropriate content and product recommendations, thereby taking progressive steps to succeed in a hyper-competitive marketplace.
A few final anecdotes
Banking is one sector that can expect huge benefits from the full-blown adoption of AI, and the above use cases prove this fact. Leading American banks have already started walking the AI road and are taking it pretty seriously. Only time will chart the exact extent of AI adoption in this industry but what’s definitive is that it will have far-reaching impacts.