Artificial Intelligence (AI) is becoming ubiquitous in recent years and its uses are seen in every industry from health, to travel, to banking, to hospitality and finance. According to the IHS Markit’s “Artificial Intelligence in Banking” report, the global AI market is expected to reach $300 billion by 2030.
AI is becoming important for all businesses that rely heavily on data. This is because this technology has the ability to teach itself and make it better through its practice. This is done through deep learning which includes the acquisition of new knowledge, the development of motor and cognitive skills through experience or practice, the assembling of knowledge into general, effective presentations and the discovery of new facts and theories through observation and experimentation.
The financial services industry has been getting transformed through the integration of AI. According to a study by PwC, 52% of the financial services industry is making huge investments towards AIence. Deep learning is a crucial fixture in the banking industry giving way to infinite possibilities and transforming traditional banking.
How is AI Transforming the Banking Industry
According to the MIT Sloan Review, 85% of business decision-makers predict that AI will provide an advantage to businesses in the future. Therefore, here are five ways that AI is transforming the banking industry.
Fraud Detection
The banking industry is extremely vulnerable to hacks and scams and fraud detection and mitigation is the topmost priority of the banks. AI plays its role in decreasing rates of false positives, preventing fraudulent attempts and reducing payment frauds.
According to a survey by PMNTS, 80% of fraud specialists who use AI-based platforms believe that AI technology plays part in reducing payment frauds and prevents fraud attempts.
AI is extremely efficient in detecting fraud with 63% of financial institutions saying that AI is capable of preventing fraud before it happens. Through supervised machine learning, AI is able to interpret trend-based insights which joined by completely new knowledge gained through unsupervised machine learning, makes it possible for AI to determine whether a transaction is fraudulent or not.
Enhanced Regulatory Compliance
As the cases of frauds and scams increase, banks come under increased pressure from regulatory bodies to have strict regulations. In order to be properly compliant with these regulations, AI can be utilized. Relying on cognitive fraud analytics, AI observes customer behaviors, track transactions, recognize dubious activities and keep up with suspicious accounts.
AI can also help businesses remain up to date with compliance rules and regulations by going through the compliance requirements and detect any changes in the requirements through deep learning and natural language processing. This enables banks to remain updated on ever-evolving regulatory requirements and align their own regulations according to them.
Reduction in Costs
Cost reduction is a huge advantage of integrating AI in the banking industry. It is expected that by 2023, $447 billion will be saved in costs due to the use of AI in banks. Most of the time is spent on identifying, digitizing and onboarding document templates. Through the automation of this process using AI, banks can reduce the time and revenue spent on this process.
Human error is one of the leading causes of financial data breaches and unfortunately, errors are costly yet unavoidable. Since AI is a lot better at handling unstructured data, error rates are reduced and subsequently the cost to resolve that error is saved.
Based on data from IBM, banks spend hundreds of millions of dollars on the traditional onboarding process. According to the same report, by using AI tools that are 80% automated, 90% of accuracy is achieved which results in reductions of about 30 to 40 percent of the original cost spent on the onboarding process.
Enhanced Customer Experience
Customer experience directly affects the way a business is perceived and especially in the case of banks, people use such banks that provide swift and easy transactions with 24/7 access to their money. Banks are now introducing chatbots and voice assistants to provide a more personalized experience to their customers.
Since chatbots don’t follow any timezone, it becomes very easy for users to access them anytime, anywhere in the world.
Mobile Banking
In this digital age, people prefer to perform their financial transactions on their smartphones. Through mobile banking, the entire concept of traditional banking has been revolutionized. Mobile banking allows users to perform financial transactions anywhere in the world at any time from the comfort of their homes.
A survey by the National Business Research Institute reported that 32% of financial institutions are now using AI tools like predictive analytics, voice recognition, and recommendation engines to provide a more personalized touch to the customers.