The rise of artificial intelligence has heavily influenced the financial sector. The adoption of this technology has proposed new solutions by solving data extraction problems, integrating information, or analyzing data and new knowledge to improve decision-making.
In turn, artificial intelligence improves customer service by changing how users interact, answering their questions, and improving the customer experience.
To achieve this goal, they have started to bet on innovations such as natural language processing, emotion analysis, machine learning, or the ability to learn from their interactions.
Banks and fintechs focus on artificial intelligence to increase their competitiveness and generate new revenues. Automating processes through AI offers greater efficiency at a lower cost.
Therefore, although this digital innovation is still premature, more and more companies are jumping on the bandwagon of digitization through learning machines and natural language processing in decision-making processes.
Why must banks embrace AI?
Over the decades, banks have been adapting to emerging technologies, from card payments to online banking to mobile banking.
Today, banks are in the era of AI. This technology allows them to achieve maximum efficiency, increase differentiation, and deal with risk and customer needs by improving the user experience.
As a result, companies in the financial sector have begun to incorporate cloud, big data platforms, and data applications into their processes, eliminating unnecessary costs and face-to-face processing.
Thanks to the automation offered by artificial intelligence, banks can improve the decision-making process by accelerating time and using machines that can simulate human behavior.
In addition, AI technology can help banks achieve higher profits, increase personalization, and create omnichannel experiences and fast innovation cycles.
The main reasons for banks to adopt AI comes from the risk of being overtaken by competitors who implement this technology and the current threats.
Increased customer expectations
Due to the COVID-19 crisis, banks had to adapt to the new situation, using online methods to communicate with customers and execute their actions. Not having face-to-face contact forced them to develop applications to replace in-person visits.
As a result, customers have become accustomed to online services, and the more they grow, the more they demand innovations to improve their user experience.
Thus, banks must embrace AI to take the user experience to a new level through personalization and adapting to customers’ needs before knowing they have them.
Financial institutions are already using AI
According to McKinsey’s Global AI Survey report, 60% of the financial institutions surveyed have incorporated at least one AI technology.
The most popular technology is Robotic Process Automation (RPA_ (36%), followed by virtual agents or conversational interfaces (32%), and natural language text understanding (28%).
However, other adopted technologies have also achieved great importance, such as computer vision, learning machines, natural language speech understanding, or natural language generation.
Although some companies have occasionally incorporated some AI technology for specific uses, many financial institutions are already incorporating artificial intelligence into their business model.
The digitization of ecosystems
Digitization has reached all sectors within the market, making products or services available to the user through digital platforms.
Fintechs have taken the same initiative to offer services or products through mobile applications or websitess, particularly financial one.
As a result, traditional financial services are becoming obsolete and far from being able to meet the needs of consumers.
That is why banks need to redesign their participation in the digital environment using artificial intelligence as a driver of change.
The entry of technology giants into the financial sector
Tech giants have brought many advantages to all the markets they have entered. They are currently increasing their interest in financial services, already gaining a foothold in specific areas such as payment platforms, lending services, insurance, or real estate sales and purchases.
Technology giants tend to enter businesses to gain new sources of revenue and offer new and more innovative services to their customers.
The growing interest of these companies poses a danger for financial institutions unless they use AI to avoid customer churn and compete in the market alongside these giants.
What are the benefits of using AI in banking?
AI offers improvements in financial services at different levels:
Improvements in customer service
AI aims to enhance customer service departments through improved chat or voice services by advancing natural language processing or machine learning. These improvements offer greater agility in the communication process between banks and customers.
Thanks to consumer behavior analysis, artificial intelligence can also bring advances in marketing departments and product development.This technology enables the company to understand users in-depth to improve their customer experience by offering those products that best suit their needs. One example of this in action is robo-advisors, automatic financial advisors that provide financial products and services based on the user’s personal information.
One of the greatest strengths of AI at the financial level is the possibility of assessing the risk of users’ actions. Thanks to all the information perceived through big data, banks can evaluate the customer in a personalized way when offering a loan or preventing defaults.
Improvements in security and internal processes
Financial institutions and fintech companies have also turned to AI to improve operational efficiency, increase security, and reduce related costs.
Thanks to technologies such as digitization, biometric authentication, or document auditing, companies can automate processes.
In addition, another of the big bets in AI has been fraud control. For this reason, companies develop applications to learn about customer behavior patterns, i.e., how customers interact with their banks, in order to identify possible fraudulent patterns.
AI has also been used in the valuation of real estate since advanced technology makes it possible to calculate real estate prices through its characteristics, location, etc.
Finally, AI systems will be incorporated into financial supervision to monitor compliance with all regulations and develop real-time predictions to improve monetary policies.
Improvements in claim processes
One of the most valuable applications of AI is claims processing.Claims are one of the major weaknesses of any entity. Customers look for agility in these procedures so that organizations can favorably resolve claims in the shortest period.
That is why offering a good claims service has to be one of the main objectives of the banking sector.
One of the potential applications of artificial intelligence is to predict possible transactions that are susceptible to rejection or reversal.
Predicting the probability of a claim provides information on the factors that trigger it, which is essential for improving user service and advising customers on the safest transactions.
Another benefit of AI is the optimization of resources,achieved by investigating the most critical claims and those requiring less effort to resolve. When filing a claim, the customer is looking for speed and agility, which can be achieved through chatbots allowing shorter waiting times on the phone and collecting all the data needed to process the claim. In turn, the use of AI-enhanced search can optimize customer information collection without contacting the customer repeatedly.
In the end, AI can be the solution to complaints and a starting point for improving customer service and building customer loyalty.
What might the AI bank of the future look like?
Across all industries, artificial intelligence is a significant driver in accessing real-time data, improving efficiencies and connectivity across enterprises.
AI is expanding its horizons in financial services by tackling the challenges brought about by the digitalization of the banking sector and offering numerous benefits.
The future of artificial intelligence in banking focuses on becoming more intelligent, anticipating customer demands, automating tasks, and participating in decision making; more personalized, offering unique attention to each customer, and adapting to their needs through their previous behavior.
How AI will transform the financial sector for individual users.
The use of artificial intelligence in the bank of the future impacts customers daily. Banks will be able to recognize customer behavior patterns even in non-financial applications. They will also be able to assist in payment processes through facial recognition and offer them customized products or services based on the analytics obtained.
The bank will be able to develop personalized applications for its portfolios, such as payment or savings management.The customer will receive a summary of his financial activity through augmented reality and will receive reminders about the payment of his bills.
Ultimately, the customer will be able to access applications that recommend the investments most suitable for the customer’s profile.
How AI will transform the financial sector in small and medium-sized enterprises
In small to medium-sized companies, the bank of the future will be able to receive personalized loans based on their cash flows and the company’s statistics and needs.
Through questionnaires, AI applications will be able to recognize facial expressions or rely on biometric sensors to approve the loan.
Banks will also be able to develop applications that advise companies about business management, such as orders, stocks, or inventories, and reminders about outstanding payments.
Another task for banks will be to select the best suppliers thanks to the vast amounts of data they will be able to access and thus locate the best suppliers and buyers.
Through banking platforms, the company will be able to upload all financial information by sharing invoices and documents for review and approval.
Lastly, the company will have access to a virtual assistant to resolve all doubts and help in the process.
As we have seen, banks’ increasing integration of AI looks set to have a lasting effect on the industry. Today, artificial intelligence is not just a reality but is becoming one of the leading development paths for companies.
Although there is still a lot of development needed to overcome existing challenges, financial institutions are effectively embracing them. Banks are discovering the advances that technology can bring, so they must stay the course to reap the benefits that AI can offer.