The future of the banking sector depends on AI?

Have you ever imagined – living a life without electricity? Ability to generate and use electricity changed the world completely. Today most devices around us run on electricity or electronic circuits. Does AI hold the similar potential of bringing human-like intuitive capabilities into services busines specially financial services? If data is considered new oil, then AI must equal electricity. Over the past two decades, banks have invested billions of dollars in creating a tech infrastructure to capture and collect quality data. These data-driven enterprises are now transforming themselves into AI-powered enterprise by integrating advanced analytics in the value chain. Realising this potential, Banks and financial services companies are rapidly adopting  Artificial Intelligence to redefine how they operate and conduct their business.

Need of AI in the banking sector

Many banks have struggled to handle an enormous amount of data and generate valuable insights to serve customers better, improve internal processes’ functioning, or optimise risk-return metrics. Artificial Intelligence provides that much-needed ability to analyse data at scale and derive conclusions comparable to a human mind, intelligent and contextual.

Firstly, this gives companies phenomenal power; with the help of AI, they understand a customer better, delivering a more personalised and faster banking experience. To make this happen, banks need to think creatively while embedding  AI to balance customer convenience, privacy and security. The use of chatbots and mobile applications integrated with AI that provide a robust infrastructure for customer convenience is becoming a minimum feature in the banking experience. Bank’s have done remarkable innovation in adopting AI in front office client-facing functions and automating internal processes.

Most banks lack to adopt and leverage AI effectively in risk and regulatory compliance. Banks operate in a dynamic regulatory landscape. According to industry estimates, banks have seen over a 500 per cent increase in regulatory compliance post the global financial crisis of 2008. Additionally, global banks spend around a whopping $ 270 billion on risk and regulatory compliance activities annually, out of which a massive $128 billion is spent on technology. Considering the challenges banks face due to the new regulatory environment, banks can leverage AI to achieve better transparency, improve accountability, higher responsiveness and audibility of various regulatory submissions and risk disclosures. 

Using AI in risk management can significantly help banks in better credit risk management by comparing their existing champion credit risk models with challenger ML models, using advanced sentiment analysis to capture credit sentiments, and using natural language generation to write credit memos to produce intelligent alerts for credit managers. The other big area is fraud management. As per the RBI’s 2019 report, banking frauds have risen by over 73.8%, despite the government’s continuous effort to curb them. In such a scenario, AI plays a crucial role in early fraud detection and helps the banks adopt the right set of practices to mitigate the risks. Additionally, banks leverage AI technology to monitor payment networks in real-time, analyse data and assess transaction risks. Apart from this, banks are tapping into this intelligent technology’s power to detect money laundering and monitor cyber threats.
 
Future of banks powered by AIs

Banks have already reached a long way in using AI-integrated technologies. The number of banks adopting AI is continuing to rise considering AI’s capabilities to handle traditional and time-consuming tasks, prone to mistakes. According to HIS Markit’s report, global spending on Artificial Intelligence is predicted to touch $ 41.1 billion in 2018 and reach $ 300 billion by 2030. 

Challenges to be worked upon

With the widespread adoption of AI, it has become evident…