Artificial Intelligence (AI) is enabling transformation across the financial services industry, from finch and investment, to firms to commercial and retail banks. With AI, banks can better protect their customers’ accounts, secure payments, improve return of investment, and personalize content, investments, and next-action recommendations for their customers.
These AI-services are also set up to stop most of the problems traditional banking have, such as: fraud detection, portfolio optimization, sales, and marketing. The growing capabilities of AI and increase in available data mean that bank need to execute an AI strategy, or risk being left behind their competitors.
The Artificial Intelligence Revolution in Modern Banking
For years banks have been trying to implement artificial intelligence programs to improve their client experience and fend off increasing competition from new entrants outside the traditional financial services industry. Sadly, most of these efforts have found only modest success so far, in large part because potential benefits or AI for banks are in revenue improvement. But in the other hand there are a small group of AI trailblazers making real progress, creating maps for others to follow.
There are 4 steps that this group of successful banks in artificial intelligence deployment are following:
1. Seeking to develop artificial intelligence everywhere, not just in client-facing applications but across their enterprises.
2. Copying; they are watching, learning, and applying the very tech companies they are trying to defeat. They are starting to stop thinking as a bank, and start thinking like tech companies.
3. Commitment; they are committed to improve and modernize their data practices.
4. Artificial Intelligence factories; they are creating internal centers of excellence brimming with talented workers so the can deploy them across the enterprise.
A Glimpse into AI-Powered Banking
AI is revolutionizing the banking industry, offering enhanced customer service, improved risk management, and personalized financial solutions. This will bring potential benefits, but banks, must also address the challenges of data privacy, algorithmic bias, regulatory compliance, and customer trust. Striking the right balance between the capabilities of AI and human oversight will be key to the successful integration AI powered banking.
We must be certain that as technology continues to advance, we can expect even more innovative applications of AI in the financial sector, ultimately sharing the future of banking as we know.
To better understand what the future of banks using AI holds for us, we can consider the following points:
1. Customer Service and Chatbots: Let’s begin with the most fundamental aspect in all services, excellent customer service. By utilizing AI, banks will have the ability to assist their customers 24/7, with “trained” chatbots capable of addressing various types of questions. This aims to enable all customers to resolve their queries instantly without enduring long “virtual queues” for assistance.
2. Personalized Financial Advice: With the capability to analyze customer banking histories more rapidly and in a highly automated manner, AI will provide highly personalized financial advice. This not only enhances the customer experience but also boosts customer loyalty.
3. Credit Scoring and Risk Management: AI can conduct analyses within seconds and swiftly delve into the history of any individual. Consequently, AI can assist banks in maintaining updated information regarding customers’ and prospects’ credit histories, incomes, and spending habits. This allows banks to identify risks and obtain more detailed information to enhance their services for both new and existing customers.
4. Portfolio Management: AI can analyze market trends, assess the risk associated with various investment options, and optimize portfolios to achieve the best possible returns for clients. By staying updated on the stock market and leveraging this tool effectively, banks can provide clearer and more successful long-term services to their clients.
5. Fraud Detection: Real-time fraud detection is a critical activity for banks. AI algorithms can analyze millions of transactions to identify suspicious patterns and alert banks to potential fraud. This helps safeguard the interests of both the banks and their clients by combating fraudulent activities.
6. Language Translation and Multilingual Support: In a globalized world, banks serve clients from various parts of the globe. With the rise of digital nomads, this has become a common aspect of customer service. AI can break down communication barriers by providing real-time multilingual support, enabling banks to assist clients worldwide in their preferred languages.
These are just some of the tools that AI can provide to banks in this new digital era. If institutions use them correctly and aim to offer better services to their clients, it will be much easier to have interactions between banks and customers in the future.
Trend Shaping the Future of Banking
Banks used to be institutions that felt irreplaceable, even as more and more options for customers emerged. Banks were considered secure businesses, and until recently, they maintained a structure that had worked for years. This changed with technological advancements in the last decade. The rise of new digital banks and the entry of new players forced all banks to change their customer attraction and investment strategies.
It’s common to say that technology has globalized and significantly advanced the world in recent years. However, with the advent of AI, this evolution will happen even faster. Now is the time for these institutions, from the oldest to the most modern, to embark on a new journey to improve their systems and customer-facing services in their best interests.
In the future, AI trends in financial services will directly shape customized experiences for each customer, from initial interactions to clients with significant investments and bank assets. Bots will become a fundamental part of customer service, and gradually, we will see service trends advancing toward a “zero-touch” model, where we interact with bots and machines when making transactions in our bank accounts.
We still have a long way to go before we have a completely “non-touch” financial system, but in the coming years, I am confident that trials will begin to transition us to this new way of interacting with our banks.
Enhancing Customer Experience with Artificial Intelligence
As I mentioned earlier, AI has been evolving and enhancing customer service in recent years. Many industries have chosen to have a bot on their website to try to address any questions or issues with their customers, taking the last resort to contact a company’s agent. Banks are no exception, and although there are still people who don’t trust talking to a bot about their personal banking matters, the commitment to achieving this change has marked a before and after in traditional banking.
With faster, direct, friendly, and, above all, 24/7 service, banks have changed the way people perceive the difficult and lengthy calls they used to make with agents, making them a thing of the past. Nowadays, they have a bank assistant in the palm of their hand that can resolve most of their problems and questions instantly. If the bot can’t handle it, it creates a ticket, and as soon as an agent is available, you’re connected to them in a call without having to wait on hold.
I’m sure that in the not-so-distant future, those long, hours-long calls and waits will be things of the past and topics for jokes in conversations among friends. Personally, I use the new tools that banks offer, and I can say that, for me, the experience has always been positive. I’ve tried different banks, different services, and yes, I can assure you that in 90% of the cases, I am more satisfied with AI assistance than with a bank agent.
Data Analytics and AI: Powerful DUO
Gentrification and financial inclusion remain a challenge for banks and financial institutions as a whole. AI will enable them to maintain a steady pace of higher growth and thus avoid losing customers and, secondly, investments. Globalization and remote work have led more people to seek a new place to live or a temporary place to live. In most cases, these individuals look to open a bank account in the place they arrive, thereby gaining greater accessibility to national banking.
This new challenge of growing the customer base and providing them with quality service with minimal risk has pushed banks to maintain an updated database, and this is where AI plays a significant supporting role in achieving this.
This is why data analysis and AI form the perfect DUO for the future of banks, allowing them to keep up with the pace of customer portfolio growth at the same speed as the world changes.
Security Challenges and Solutions
One of the most critical topics in the financial industry is security and finding solutions to make it safer to entrust our money to a bank every day. This depends on the trust between the bank, its clients, and its shareholders.
This means that making decisions about how to address these changes and incorporate AI and cybersecurity in the financial sector is quite complex. Studies show that 8 out of 12 people trust the integration of AI in their bank. This demonstrates that new technologies and new generations are strongly pushing for a paradigm shift.
Even when many shareholders resist having AI as the “face” of the bank to customers, the trends don’t lie, and we live in a time where trends define the growth of your customer portfolio. If any bank chooses to stick with its traditional services, it’s likely to lose the battle.
Whenever we face a paradigm shift like this, I recommend remembering what happened to Kodak with the arrival of digital cameras. They chose to maintain their business in the traditional way, and we all know how that turned out.
While the issue of security will always be very delicate when it comes to money and banks, there are now millions of options for more secure websites and applications. What we need to consider here is whether our bank is willing to make the necessary investment to retain us as customers and adapt to our preferences and demands.
Artificial Intelligence impact on Banking Efficiency
As I wrote earlier in this article, banks will experience significantly increased efficiency through the integration of artificial intelligence into their processes.
It has been shown that adapting artificial intelligence in various industries has brought a satisfying impact on their customers, provided it is applied correctly and responsibly. This industry will be under scrutiny from all users when they decide to take the big step towards change. Even though baby steps have already been taken, we haven’t yet seen the full extent of the improvement in bank efficiency using AI.
Today, the majority of banks have implemented artificial intelligence in risk management (56%) and revenue generation through new products management (52%). As artificial intelligence gains popularity in banks and financial institutions, they seek to create more extensive solutions for the future.
Most banks, despite some apprehension, are aware of the potential that artificial intelligence holds for the not-so-distant future. In fact, many banks are planning to enable more AI-based solutions by 2026 and make an investment of over 100 billion dollars to apply them and face these new challenges.
I don’t want to sound repetitive, but I’m confident that these benefits will bring many improvements to financial services, especially with the new generations. They seek, before building a substantial investment portfolio, security in knowing their money is well protected and that they can use it anywhere in the world. They also want to have the assistance they need right at their fingertips.
Regulatory Considerations in AI Banking
Artificial intelligence, while bringing significant benefits in the not-so-distant future, will also bring new laws. Although some are already in effect, many will evolve with the progress of this new technology in our lives.
In favor of artificial intelligence, we can find numerous arguments, such as the lack of transparency in AI models. Many of these models have limited visibility into the results of various analyses that have been conducted, particularly in the case of machine learning algorithms. Based on this, a regulatory framework based on transparency may contradict the nature of artificial intelligence.
On the other hand, artificial intelligence can pose risks to financial stability. If machine learning algorithms make decisions based on past data where there was a better economic foundation, this can amplify risks in the current market and lead to a concentration of risk in their outcomes.
This suggests that artificial intelligence should be regulated, but not in the traditional manner.
In conclusion, as I reflect on the promising future of artificial intelligence and the challenges it brings, I’m struck by the complexity of this evolving landscape. Artificial intelligence is a double-edged sword. On one hand, it offers immense potential to revolutionize the financial industry, enhance customer experience, and boost efficiency. Yet, it’s not without its issues, including the need for transparency and the potential for market destabilization.
As we move forward into this artificial intelligence driven era, it’s essential that we find a balanced approach to regulation, one that fosters innovation while safeguarding against potential risks. Moreover, the ongoing evolution of laws and regulations in this field must remain adaptive to keep pace with artificial intelligence’s ever-changing landscape.
While there’s no one-size-fits-all answer, what’s clear is that artificial intelligence is here to stay, and it’s up to us to harness its power for the greater good while navigating the challenges responsibly. This journey toward an AI-augmented future will undoubtedly require collaboration, continuous learning, and thoughtful consideration of the ethical and legal implications.