How AI will transform banking and why it matters
DIGITAL transformation and adoption of cutting-edge digital technologies have allowed for the financial services sector to run so smoothly; it is inching closer to become virtually invisible to the customers.
In the last 20 years, the industry has evolved from chips-and-pin to contactless payments, giving way to seamless financial transactions across industries.
Further, the card reader terminals themselves are rapidly edging towards obsolescence, thanks to the integration of biometric authentication in mobile banking.
However, to realize the vision of providing consumers with a seamless experience, the sector has to remove the remaining friction that occurs within its operations, including sales, complaints, and other customer requests.
And to remove this friction, the financial industry has to tap into AI.
While it may not be as straightforward and seem risky for some of the enterprises within the ecosystem, adopting AI, and advanced data analytics would immensely benefit the sector in several orders of magnitude.
Here are the few ways how AI will help take banking to the next level:
# 1 | Mortgage application, servicing, and settlement
There has to be a paradigm shift in how lenders approach customer experience or CX.
For most people, the experience of purchasing a house can be daunting on its own, and they could do without the lengthy and cumbersome process of applying for banking facilities to finance the purchase.
To remedy the issue, banks could deploy AI to measure the borrowers’ credit scores and calculate risk without any input from the customer.
With the loan applications virtually completed and approved by AI, customers could pick the mortgage facilities they want without having to fill up long, redundant forms.
# 2 | Wealth management and spending optimization
Most consumers want to simplify their wealth management – starting from setting up the account, monitoring, and achieving their financial goal.
The use of AI would greatly aid on this front as the technology could be utilized to optimize income and saving based on data derived from users’ spending pattern.
Customers in the future can set an objective, and AI will be giving financial advice based on consumers’ data and market signals, seamlessly growing their wealth with minimal risk.
# 3 | Enhanced customer experience
AI-powered technology is already being put to practice in certain banks, but AI’s predictive capability could further be deployed to enhance customer experience.
In the future, banks will use AI to figure out customers’ intention and move to solve the issue ahead of time, even before a single complaint is lodged.
Advanced analytical tools will also allow for the monitoring of the emotional state of consumers calling into the customer service lines so that they can be grouped, for particular call handlers dealing with priority calls.
# 4 | Protect against risky mortgage
Regulators everywhere often piles pressure on banks to take on customers that are likely to default on their mortgages and to minimize the risk; preventative measures have to be put in place.
With the help of AI, banks could detect certain trends and behavioral patterns that have resulted in default historically, and stage an intervention at various points before it occurs.
The key here again is knowing something ahead of time, to mitigate the situation.
# 5 | Fraud protection
One of the most effective uses of AI revolves around pattern detection. And when it comes to banking fraud, there’s always a pattern.
Traditional methods of pattern detection, especially when it involves sophisticated frauds, may take anywhere from days to months, but with AI it could be much quicker, affording quicker response, minimizing losses.
While some institutions are already employing AI for this purpose, the futuristic applications of AI will be based on more robust analytics — ensuring better protection.
In conclusion, while there is a big hype around AI technology at the moment, financial institutions have to get on board the technology for the right reasons.
The focus should remain on consumers and how to provide them with a seamless banking experience that is almost invisible, while at the same time tapping into the business opportunity that AI helps unlock.