AI is making waves in many industries. Banks and financial institutions are no exception. So what are the implications of AI in banking? What benefits and improvements can result from it?
The impact of AI in reducing fraud, decreasing costs, enhancing revenue and improving customer experience is being explored. Banks are using AI algorithms for several processes, both internal processes and those that involve customers. Machine learning, natural language processing and cognitive computing are some of the components of AI paving the way for these advances. Some of the applications of AI in banking are:
AI can detect fraudulent activity as it transpires and also predict patterns of suspicious behavior. Location data plays an important part in fraud detection. The advantage of AI systems is that they learn quickly so they can identify abnormal transactions. In the first half of this year, one of the biggest global banks was fined over £500 million for failings regarding anti-money laundering. The activities were suspicious and the bank failed to spot them. That’s a big price to pay. Real-time fraud detection could save banks millions. They help banks by avoiding heavy fines and business lost through damage to their reputation. AI is likely to become a common anti-fraud measure in banking.
At JPMorgan Chase, AI is being used to lower costs and improve efficiency of processing documents including commercial credit service agreements. The platform COiN (Contract Intelligence) is a powerful tool that drastically reduces the time for processing such documents and agreements. 12,000 agreements typically need 360,000 hours of manual effort to review and process them. COiN could perform this in seconds. These impressive results show the massive potential of AI applications for improving the efficiency of routine banking operations.
Improve Customer Experience
Earlier this year Wells Fargo launched an AI-based chatbot that operates through Facebook’s Messenger platform. This chatbot functioned as a virtual assistant that communicates with users to get their account information and help them reset their passwords. Without AI this would have required customers to navigate several web pages. The chatbot accomplished this through a simple conversation in the style of a chat environment. This is a lot more convenient for busy customers.
Banks are using chatbots to improve customer experience and also boost customer engagement. These chatbots operate without human intervention. Over time, they collect a great deal of information learning the behavior of users so they can adapt to the moods and requirements of the user. They provide intelligent and personalized services.
Recommendations for Customers
Bank of America plans to launch “Erica” an AI-based virtual assistant that will make suggestions to customers over their mobile phones to improve their financial matters. This could cover credit card plans, funds or investment strategies to name a few financial suggestions. Erica is not unique. Robo-advisors and virtual assistants powered by recommendation engines that function with AI algorithms are making an impact in the banking industry. Financial Investment Advisors (FIAs) are expensive and not everyone can afford them. AI-based assistants like “Erica” can help these individuals as well as high net worth individuals and more experienced investment pros.
AI is making its presence felt in the world of banking from global to local banks. Even small banks will benefit from improved customer interactions and better operational efficiency. Are you ready for the changes that are underway with AI in banking?