The artificial intelligence revolution that started a few years ago has touched just about every major industry today - from e-commerce to health to travel - and the financial sector has been no exception.
According to a recent study by IDC, by 2022, $5.6 billion is expected to be spent on AI-enabled solutions in the banking industry. The actual business value of AI in banking, according to the IHS Markit’s Artificial Intelligence in Banking report, is expected to reach $300 billion by 2030.
Furthermore, a study by PWC shows that 52% of the financial services industry is making considerable investments in artificial intelligence, and 72% of business decision-makers assume that AI will be the business advantage of the future.
AI has impacted financial institutions from all aspects. Even if you have no idea as to how your bank is leveraging, say, cutting-edge deep learning to fight fraud, you have probably already interacted with its artificial intelligence in the form of a customer service chatbot.
Here are the top 4 ways AI is shaking up the often change-resistant financial sector:
Banks are always facing intense pressure from regulators to keep up to date with the latest regulations. These regulations are put in place to fight financial crimes such as money laundering, tax evasion, and terrorism financing while also protecting both banks and customers from the efforts of fraudsters.
AI systems can read new compliance requirements for financial institutions and detect any changes compared to legacy ones through deep learning and natural language processing. Although AI is not yet able to completely replace compliance analysts, it can definitely improve their decision-making abilities through big data analysis and by replacing the manual time-consuming tasks involved in their work.
2. Customer Service
Customer experience affects every business in the world, but more so the banking industry, due to the uniquely sensitive nature of its service. For customers to feel satisfied with their bank’s service, they need to feel assured of swift, easy access to their money 24/7, and have access to instant help when they need it.
Previously, customers had to navigate through several FAQ pages on the bank’s website or wait to talk to a customer care representative over the phone within a specifically designated time of day. Today, financial institutions employ AI chatbots and voice assistants to help their clients anytime, anywhere.
These chatbots can handle queries ranging anywhere from transaction details to purchase history to balance enquiries and more. Furthermore, and most importantly, they are constantly learning from previous customer interactions, so the quality of their customer service is evolving with time.
3. Fraud and Cyber Security
Fraud detection and prevention is incredibly important to financial institutions. With the last decade’s rapid digitization of banking, it is tied with cybersecurity now more than ever. Today, banks are transferring more and more sensitive information over virtual networks. This in turn raises their vulnerability to cyber-attacks and the risk to their brand credibility and reputation among customers.
Despite payment fraud attacks becoming more advanced and complex, AI can detect fraud in large data sets within 250 milliseconds on average by combining both supervised and unsupervised machine learning algorithms. It can also use historical data to predict the risk of fraud with a particular customer.
In fact, according to a recent survey, AI Innovation Playbook published by PYMNTS in collaboration with Brighterion, 80% of fraud specialists who employ AI-based platforms believe the AI technology helps reduce payment frauds and prevent fraud attempts. 63.6% of financial institutions that utilize AI believe that it is capable of preventing fraud before it happens.
4. Cost Reduction
It is estimated that by 2023, $447 billion will be saved in costs by financial institutions through the use of artificial intelligence. By utilizing AI, banks can cut costs by reducing the time spent on digitizing documents, and by reducing data breaches caused by human error, through automation of unstructured data.
Banking will never be the same again!
Beyond the above four, another significant application of AI in the financial sector is in trading and stock investments. For several years now, Wall Street banks have been using AI systems for ‘large algorithmic trading’ which combines large volumes of high-velocity data, high-frequency trading and ultra-fast trade execution to gain a remarkably powerful edge over human trading. AI-driven models are also being used by banks to make credit risk assessment, pricing and underwriting much faster and more efficient.
However, despite all the advantages it presents, AI-based banking requires heavy financial investment and brings greater potential for severe legal problems and reputational damage. Let the professionals at ASB Resources guide your financial institution in deploying the right AI solutions in the way that maximizes your returns while minimizing your risk. Schedule a call with one of our experts today!