Banks have accelerated the adoption of Artificial Intelligence (AI) to gain competitive advantage, improve operations, enhance customer experience (CX), and drive profitability in a rapidly evolving digital landscape. AI is serving as the enabler for banks to reimagine the way they operate. Banking leaders are waking up to the reality that they can drive strong differentiators by delivering customer experience that is contextual, personalized, and tailored - this is where the deployment of AI can come in exceedingly handy.
According to a survey by The Economist Intelligence Unit, 77% of bankers believe that the ability to unlock the value of Artificial Intelligence will be the difference between the success or failure of banks. Further, a McKinsey survey revealed that 56% of respondents report AI usage in at least one function of their organizations. According to a study by Accenture, banks can leverage Artificial Intelligence banking tools to increase their transactions by two and half times while deploying the same headcount.
Customers of today (even their most loyal ones) are less tolerant toward any negative customer experience and would quickly switch to their competitors. According to a research study conducted by Emplify, 86% of consumers stated that they would leave a brand they were previously loyal to if they had just two or three bad customer service experiences.
Let us take a deep dive into how harnessing the power of Artificial Intelligence can benefit banks.
Taking Customer Service to the Next Level
Meeting customer expectations is a never-ending challenge and by harnessing the power of AI banks can go a long way in delivering customer delight. Banks can make the most of AI-powered chatbots & virtual assistants that analyze customer data to understand their preferences & needs and use this information to deliver more personalized and convenient CX. These chatbots & virtual assistants pave the way for banks to deliver frictionless 24/7 customer support, addressing queries & concerns in real-time, thus leading to reduced customer wait times, improved customer satisfaction as well as reducing the workload of human customer service representatives.
Effectively Detect Fraud & Enable Risk Management
Banks can deploy Artificial Intelligence to effectively detect fraud and enable risk management. AI algorithms can be trained to analyze vast volumes of data in real time as well as identify unusual patterns & transactions, which can help banks detect and prevent fraudulent activity more quickly and accurately than humans, thus saving millions of dollars. Such AI-powered systems are constantly looking for any fraudulent transactions based on previous data and when they detect anything wrong, they sound an alert to banks for any potential security breaches. Banks can also tap into AI to improve the anti-money-laundering process and conduct KYC regulatory checks based on customer feedback and history.
AI also assists banks in effective risk management - AI algorithms can be trained to analyze large amounts of data including market data, financial statements, and news articles to identify patterns & predict future market movements, which can help banks take more informed investment decisions and manage their risk more effectively. AI algorithms can also assess credit risk, identify potential defaults, and optimize loan decisions - it makes far fewer mistakes (or none) than people do. Using AI enable banks to mitigate all risk factors before taking any vital decision to get most out of their investment.
Driving Conversational Banking Experience
Banks can deploy the might of Artificial Intelligence at the front end to deliver a seamless customer identification and authentication process, thus speeding up the process and saving time of customers & the bank. AI can provide a conversational banking experience by integrating models with banking applications to provide a single point of contact for users to make transactions, view account information, and receive alerts through the chat or voice interface in multiple languages. AI can simplify the user experience and reduce the complexity of banking operations, making it easier for even non-native speakers to use banking services worldwide.
Improved Compliance & Mitigate Compliance Costs
The heavily regulated nature of the banking industry has created a need for banks to be on their toes, in terms of meeting compliance expectations. Regulations are created to protect customers and markets and banks can find them complex, costly, and challenging. Artificial Intelligence is the enabler for banks to enhance compliance and reduce costs in meeting regulatory compliance According to a study by Deloitte, compliance costs for banks have increased by 60% since the 2008 financial crisis. Another study showed banks end up spending 6-10% of their revenue on compliance. By leveraging AI banks can comply with regulatory requirements such as anti-money laundering (AML) and Know Your Customer (KYC) regulations.
AI can eliminate the need for the time-consuming process of collecting, sorting, and understanding these regulatory changes and mapping them to the appropriate business area - AI models help in understanding the regulations and how it can be applied to business processes. AI also helps banks in meeting regulatory reporting - it can quickly parse unstructured regulatory data to define reporting requirements, interpret it based on past rules & situations and produce code to trigger an automated process to access multiple company resources to build the reports. Further, AI can help identify potential compliance issues before they become major problems, allowing banks to take corrective action quickly.
Improved Loan & Credit Decisioning
Loan and credit decisioning can be a time-consuming process, which can leave customers frustrated. Leveraging AI-based loan & credit decision systems can help banks drive more informed, safer, and profitable loan and credit decisions. Empowered with AI-based systems, banks can eliminate the need for their dependence on credit scores, credit history, customer references and banking transactions to determine an individual or company is creditworthy.
Such AI-based loan & credit decision systems can look at customer behaviors and patterns to determine if a customer with limited credit history might in fact make a good credit customer or find customers whose patterns might increase the possibility of default. Further, they send warnings to banks about specific customer behaviors that may increase default chances. Clearly, AI is changing the future of consumer lending.
Automating Routine Banking Tasks
Artificial Intelligence can drive enhanced efficiency for banks by automating routine tasks and processes ranging from data entry, account balance inquiries, password resetting, compliance monitoring to processing insurance claims & mortgage applications, which can save time and money for banks & customers. As AI takes care of the mundane workload, banks benefit because it frees up their representatives to focus on complex issues. It also helps reduce costs by providing faster and more accurate customer support 24/7, which effectively means that customers can get help by answering questions, resolving issues outside of regular business hours.
Identifying Market Trends
The power of Artificial Intelligence can be leveraged by banks to process large volumes to predict the latest market trends, currencies, and stocks. AI help banks evaluate market sentiments and suggest investment options. AI also suggests what is the best time to invest in stocks and sends warning in the event of any potential risk. AI’s high data processing capacity also helps speed up the decision-making process and makes trading a seamless decision-making process for both the clients and the customer.
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Improved Investment Evaluation
Banks can capitalize on AI to drive improved investment evaluation. The investment valuation process comprises complex calculations taking place behind closed doors and involves collaboration across multiple teams responsible for different aspects of investment asset management, credit analysts, portfolio managers, and product specialists. These teams must weigh different approaches to investing, such as allocation of funds across various asset classes, diversification among industry sectors and currencies, market timing in terms of when to enter a transaction or liquidate an investment position. AI can process large amounts of data from multiple sources in real-time while learning each analyst’s preferences and biases regarding investments, risk tolerance, and time horizon. Essentially, AI algorithms will determine which options are best based on fundamental and technical evidence instead of relying on human discretion alone.
Conclusion
Artificial Intelligence is the go-to-technology for banks to optimize their business processes, further personalize the customer experience, and make more informed decisions. The future of AI in banking appears bright, with the scope for further integration with other new technologies. Embracing AI would provide banks with a competitive advantage while providing customers with better services, improving efficiency, and increasing profitability.
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