The banking sector is under pressure as consumers shift their spending to tap into new technological frontiers. This is particularly apparent in the payments sector, where retail and institutional investors benefit from the race to adopt new technologies, such as mobile payment systems and cryptocurrency.
At the heart of this transformation is artificial intelligence (AI). Banks are turning to AI to power chatbots and digital assistants, drive fraud detection and underwriting and even improve customer service. In doing so, they are redefining themselves as technology companies rather than traditional financial institutions.
This shift has major implications for the banking sector. It has been found that by 2030, AI will enable banks to achieve up to US$1 trillion in annual efficiency gains.1 In addition, AI-enabled chatbots and digital assistants are expected to generate up to US$11 billion in annual cost savings by 2023.
However, the adoption of AI in banking is not without its challenges. Banks must ensure that their systems are secure, compliant, and ethical. They also must ensure that their employees are adequately trained to work with AI.
Despite these challenges, the benefits of AI are too great for banks to ignore. Here we explore how AI is changing the way we bank.
Digital Assistants and Chatbots
One of the most visible changes that AI is bringing to banking is the proliferation of digital assistants and chatbots. Digital assistants are software programs that understand natural language and provide recommendations or take actions on behalf of the user.
Chatbots are similar to digital assistants but communicate with users via text or voice messages instead of providing recommendations or taking action on the user’s behalf.
Banks are turning to digital assistants and chatbots to improve customer service and reduce costs. For example, banks use chatbots to answer customer queries about products and services, open new accounts, and provide support during outages.
In addition, banks are using digital assistants and chatbots to cross-sell and upsell products and services to customers. For example, a chatbot may recommend a credit card to a customer who frequently travels for work.
Fraud Detection and Underwriting
Another area where AI has a major impact is fraud detection and underwriting. Banks are using AI to identify potential fraudsters and prevent crime.
For example, banks are using AI to analyse behavior patterns to identify potential money laundering. AI is also being used to find out fraudulent credit card and loan applications.
In addition, banks are using AI to streamline the underwriting process. Using AI, banks can assess a customer’s creditworthiness in real-time without requiring manual intervention.
This is essential in the current economic climate, where banks are under pressure to approve loans quickly. AI-enabled underwriting is also helping banks to identify previously undetectable risks, such as customer churn.
AI is also changing the methods banks interact with customers. Banks are using AI-powered chatbots and digital assistants to provide customer support and resolve queries.
For example, banks use chatbots to provide information about products and services, open new accounts, and make transactions. In addition, banks are using AI to identify customer service issues before they become a problem.
In doing so, AI is helping banks to improve customer satisfaction and retention rates. In addition, AI is helping banks to reduce the number of customer service calls, freeing up time for staff to specifically focus on more complex issues.
AI is changing the way we bank. Banks use AI to power chatbots and digital assistants, drive fraud detection and underwriting and even improve customer service. Doing so can improve efficiency, save costs, and better serve their customers. However, the adoption of AI is not without its challenges. Banks must ensure that their systems are secure, compliant, and ethical. They also must ensure that their employees are adequately trained to work with AI. Despite these challenges, the benefits of AI are too great for banks to ignore.