AI in Banking Industry

Artificial Intelligence has played a disruptive role in traditional banking channels with exponential growth of technology. It has influenced the perception of people about banking and comfort of accomplishing banking activities. AI has emerged as an unavoidable and pioneering technology of the business world and AI applications are rigorously utilized in banking and financial services. This article discusses the transformation of banking system from traditional banking to modern digitized banking. It describes how financially excluded people are included into banking through AI-enabled operations. Lastly, the benefits of using AI in banking industry are outlined.

Banking System Transformation

Banking has evolved from traditional brick and mortar system to a completely transformed way of banking. The industry uses AI-enabled techniques like mobile banking, chatbots for customer service, robots for self-service in banking operations and customized services for customers. Banks use chatbots to interact with customers in order to resolve their issues and doubts. All these features enhance the overall operational efficiency of the banking industry. The traditional banking system has suffered due to constraints and inherent limitations like location, dormant accounts, operational expenses and inappropriate products. The disruptive technology of AI has leveraged digitization of banking processes to the potential market by reducing the cost of operations and performing analytics in evaluating the suitability of financial products and services. Banks further use AI for business alignment and for data workflow, skills and competency mapping.  Digital tools like mobile phones including AI are being widely adopted for financial transactions and services.

Inclusion

AI along with big data analytics is a substantial way of promoting financial inclusion of financially excluded people. The unique features of AI like security, speed, customization and cost-effectiveness make it attractive for financially excluded people to understand and come into financial sector. Financially excluded people are those with low income, financial illiteracy and who lack awareness about the benefits of banking. Such financially excluded people have migrated for their regular transactions to formal financial services where they avail services like payments, credit, insurance, savings, securities, etc.

Benefits of AI in Banking 

AI and Machine Learning have significantly promoted financial inclusion by expanding access to finance through digital financial services. Machine learning algorithms can further help in fighting the risks involved in giving access to finance. The technologies are used with data analytics to predict risks like credit card defaults and loan slippages. They are used to prevent frauds in dealing with payments through the use of customer authentication and multiple layers of control. AI is applied to the process of determining credit score which has increased the customer base by including cash-intensive users. AI techniques are used for determining alternative credit scores by analyzing the sources of data such as social media, location    address stability, driving history, loans, etc. Logistic regression models of AI are used for selling third party products. ML models are used to identify cash demand and optimize idle cash level in ATM network thus performing cash optimization. Cognitive systems built on AI provide solutions using real time data. They use knowledge database to store the information and enable bankers to reach effective strategic decisions.

Banking industry has adopted AI on a wide scale to offer better services to customers instantly, simplify banking operations and prevent financial fraud. The technology has the potential to facilitate banking industry in offering cost effective way to serve customers.