The banking sector is slowly opening up to the idea of digital transformation to improve the security, availability, and flexibility of banking services. In fact, as a sector, fintech is forecasted to achieve a CAGR of 25%, reaching a market value of $309 billion by 2022. One of the key contributors to the growth of Fintech is the rate of AI adoption. The global AI fintech market is predicted to reach $22.6 billion in 2025.
As banks look to strengthen customer relationships, AI opens doors to a world of exciting new opportunities. AI is fast-tracking new digital features that are laying the foundation of a new era of banking in the post-pandemic era.
Here are 5 areas of banking where AI will deliver value to today’s banks:
1. Process automation: Many banking operations are notorious for being time-consuming and complex, which tends to impact customer satisfaction as well as brand reputation. For example, for customers looking to open a new account with a bank, the process involves lots of paperwork, back-and-forth emails for document submissions and verification, and error-prone manual entries. In the pre-COVID era, customers had to personally visit the bank with all the required documents and then have to wait for weeks for the process to be complete. Today, as more and more customers opt for digital banking services, banks can make use of AI to smoothen out many common processes including customer ID verification and KYC, loan processing, audit and compliance, card management, and more. In the realm of customer verification, banks can rely on AI to gather the information they need from customers, verify it, and accelerate the entire process – while cementing customer relationships.
2. Fraud detection: In today’s digital age, as contactless banking and other digital banking processes take root, the threat landscape has also increased manifold. Reports expect worldwide losses due to such fraud to reach $44 billion by 2025. With hackers using a variety of novel and sophisticated techniques to launch an attack, AI promises great value in fraud detection. Supervised (or unsupervised) machine learning algorithms can monitor data 24x7, helping discover previously unknown patterns in financial services data: right from money laundering attempts to deceitful KYC regulatory checks. AI algorithms can generate an alert when an anomaly or illegitimate behavior is spotted, causing the security team to immediately spring into action to contain the impact of the risk at hand. AI helps improve the efficiency of fraud detection, prediction, as well as prevention.
3. Omnichannel banking: The rise of digital banking has made the expectations of modern customers rise. As they make use of different online and mobile banking channels to fit banking into their busy lifestyles, they expect the same kind of security and efficiency standards they’re accustomed to from digital banking as well. Banks can leverage AI to enable enriched omnichannel customer experiences. Using AI algorithms that constantly track and monitor customer interactions, buying behavior, and other critical parameters, banks can get a holistic view of each and every customer and orchestrate seamless centralization of customer interactions across multiple touchpoints. Such an approach can allow them to perfectly align with the channel-agnostic banking customer while empowering data-driven and customer-oriented innovation that delivers value to the customer.
4. Personalization: In an era of high competition, AI is also emerging as a powerful engine for personalization driven by a clear understanding of the fluctuating needs of modern customers and provide services that best meet those needs. AI can help in analyzing large customer data sets and extract valuable insights from them. These insights, when fed into an AI engine, can help in pinning down the unique needs of customers and delivering personalized services, campaigns, discounts, and offers. When done right, AI can help banks anticipate customer needs – even before they are aware of them – and offering highly-tailored services at the right time, through the right channel.
5. Customer service: For the context-aware, tech-savvy, and tremendously demanding modern customer, AI paves the way for frictionless and always available customer service interactions. With an increasing number of customers now accessing banking services via digital channels, AI can help ensure their queries and concerns are heard and responded to. Leveraging deep learning, NLP, and other forms of analytics, AI chatbots can interact with customers in real-time and answer basic questions – without relying on expert resources. Such interaction can not only help in improving response time – which improves customer satisfaction; but it also helps in taking the burden of customer service off from experts, who can then focus on more strategic tasks.
The discussions around AI technology in the banking sector are at an all-time high and for good reason: the potential for value creation in banking is among the largest across industrial sectors. By some estimates, AI can potentially unlock $1 trillion of incremental value for banks. Add to that kitty the aggregate potential cost savings for banks from AI applications, which is estimated to reach $447 billion by 2023 and it becomes clear just why everyone is so focused on AI in banking.
As AI proliferates across the banking sector, the hype around the technology is proven to be justified by several benefits: from process automation to enhanced fraud detection, omnichannel banking, personalization, and improved customer service. Given how quickly the banking sector is moving towards digital transformation, embracing AI seems to be a great way to enhance efficiency, improve customer satisfaction, and deliver value. Does your bank’s digital strategy include room for AI?
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