Banks that take steps to adopt an enterprise-wide AI strategy will get a lead way, gaining an edge over their competitors.
With many organizations embracing cloud and related technologies to digitally transform, Artificial intelligence (AI) has gained traction across all industries. The Banking Financial Services and Insurance (BFSI) is no exception. Even though AI adoption is at a nascent stage in banking and financial services, there are use cases to show that its potential to positively impact the industry is tremendous.
Today consumers wish to avail services at the click of a button – be it ordering groceries or investing in bitcoins. The digital-loving customers also need services to be faster, personal, and relevant. They have little tolerance for any lags or generic information. The increasing demand for digitized operations is forcing banks to be more innovative and is encouraging them to adopt deep technologies. The new-age banks must be able to balance the need for personalization and engagement with privacy and security. And this is where AI comes in.
AI does an excellent job of data analysis. Data is, in fact, the rocket fuel for AI applications. That said, banks deal with extremely sensitive and confidential data. Hence data management with added layers of security becomes critical. With the intelligent use of AI, financial firms can potentially redefine banking services. Though banks in India have adopted AI, its use is usually limited to chatbot services and other customer engagement features. There is scope to do a lot more with AI than just customer care services if leveraged well.
Following are five areas in banking that can be redefined with the use of AI:
With AI and related deep technologies, analyzing a huge amount of data to generate meaningful insights becomes a lot easier. It enables banks to better understand customers’ requirements, behaviors, and preferences. AI empowers banks to serve them better with the most relevant banking services as it helps in making informed decisions based on historical data to detect customers’ buying patterns. Historical data plays an integral role in unearthing customer’s buying patterns which are necessary for providing expected banking products and services. Thus, AI plays a vital role in meeting customer expectations in terms of products and services.
Automated processes and personalized insights
Today we choose a bank based on the ease of operations and services offered. With the proliferation of mobile devices and the internet, banks can now not only offer automated services but also provide analytics-based functionalities that give consumers an insight into their spending patterns and recommend services accordingly. Additionally, the conventional method of information and document gathering can be replaced with digitized KYC (Know Your Customer) processes to eliminate the need for physical document submission. Existing customer verification methods can be simplified by utilizing AI-based technologies to verify documents and related user information. AI can use intelligent automation to automate repetitive processes that otherwise time-consuming.
As per the recent McAfee report, frauds in the financial sector have resulted in an overall economic loss of about $600 billion globally. Banks and financial firms deal with vast amounts of sensitive data making it is more important for them to protect their user data from threats and breaches. With the advent of technology, banks are rapidly transforming and adapting newer ways to counter threats and frauds. AI plays a critical role in the mitigation of financial risks. New and AI-enabled solutions and advanced financial models will help banks identify fund flow analytics in real-time and stop fraudulent transactions the moment they are discovered. The new-age banks are already using blockchain and AI-powered algorithms to offer multiple layers of modern and robust security.
Intelligent business decisions
AI is a great tool that enables efficient management of both structured and unstructured data to make better decisions. For instance, AI can help predict potential loan defaulters and offer loss mitigation strategies that will work for them. With data analytics and user behaviour study, AI can even help determine the best time to approach a customer to sell a new product. AI-based smart environments can collate data from multiple sources and help banks derive meaningful value from it.
Like any other business, banks also are competing to provide better and enhanced customer experiences. They all aim to acquire new customers and retain them by providing them with the best-in-class services they need along with excellent customer support. Gone are the days when people visited the banks physically to obtain basic information like interest rates, loans, or services.
Today, banks have websites and even apps that take care of information sharing and even critical services like online transactions and crisis management. If your credit card gets stolen, you can block it in just a few clicks. AI is at play in many cases like these as it requires private and personal information to be accessed in real-time. Chatbots are hot too!
They have been proved effective to attain higher customer satisfaction levels. All of it can be attributed to the earlier mentioned ‘ease of operations’. While people find it a hassle to call or email a bank in case of a query, they find it easier to just chat with a bot that is available round the clock on the website.
Banking and financial services is a sector where AI has potentially a lot to offer. In the pandemic-normal world we are in currently, every business-critical operation is virtual which in turn is generating a huge amount of data. A cloud-first approach and AI-powered data management and analytics can completely redefine the banking game for Indian players. More and more banks are realizing the value AI can bring to the business. Moreover, the availability of technologies, the democratization of data, and easy access to cost-effective AI and Machine Learning (ML) platforms are driving further AI adoption. It is safe to say that we have all the right ingredients to transform banking with AI.
It is also important to state that adopting AI is not merely upgrading a particular technology. There are multiple facets to it and require a complete realignment at a transformation strategy level. To unlock the maximum potential of AI, banks must consider a fair human-machine interplay. Given the magnitude of the challenge, it might make sense for banks to come together to the power play with AI. This will ensure that the growth dynamics are balanced, and India’s regional and cooperative banks do not lag.
There is no doubt that AI is all set to disrupt banking. Early adopters are already gaining a competitive advantage and have widened the gap with laggards. Firms that take steps to adopt an enterprise-wide AI strategy will get a lead way, gaining an edge over their competitors.
( The author Puneet Gupta is VP and MD, NetApp India, and SAARC – Marketing & Services and the views expressed in this article are his own)