Artificial intelligence is the future of banking – are you prepared for it?
By Pritham ShettyConsulting Director, Propel
Our world is changing at a rapid pace. Although banks originally built their foundations to be run solely by humans, the time has come for artificial intelligence in banking. In 2020, the global banking AI market was valued at $3.88 billion, and it is expected to reach $64.03 billion by the end of the decade, with a compound annual growth rate of 32.6%. However, when it comes to implementing even the best strategies, the application of AI in banking is susceptible to weak core technology and poor data backbones.
By my calculations, 20,000 new banking regulatory requirements were created in 2015 alone. Chances are, your business won’t find a one-size-fits-all solution to this problem. The best option is to be nimble. You need to be able to break down the business process into small pieces. By doing so, you can build digital strategies that work with new and existing regulations.
AI can take you far in this process, but you need to know how to harness its power. Take for example the original home loans. This can be a significant, and sometimes tedious, process for both the loan applicant and the bank. With an AI solution, loan origination can be done faster and better for both parties.
As the world of banking moves towards AI, it is essential to note that the crucial work item for AI is data. The trick to using this data is understanding how to best leverage it for your business value. Data without direction will not lead to progress, nor to the proper deployment of your AI. This is one of the main reasons why it is so difficult to implement AI in banks — there has to be a plan.
Even if you come up with a bad strategy, these mistakes can be corrected over time. It takes time and effort, but it is doable. If you focus on how customer information can be used, you can use AI for banking in a scalable and actionable way. Once you understand how to use the data you collect, you can develop technical solutions that work with each other, identify specific needs, and create data pipelines that will lead you down the AI path.
How is artificial intelligence changing the banking industry?
Due to the increasingly digital world, customers have more access to their banking information than ever before. Of course, this can lead to other problems. Because there is so much access to data, there are also great opportunities for fraudulent activity, and this is an example of how AI is changing banking. With AI, you can train systems to learn, understand, and recognize when these activities are happening. In fact, there was a 5% decrease in record exposure from 2020 to 2021.
AI also protects against data theft or abuse. Not only can AI recognize breaches from outside sources, but it can also recognize insider threats. Once an AI system is trained, it can identify these problems and even suggest solutions to them. For example, a customer support call center might have AI-directed traffic to quell an influx of calls during large swings in volume.
Another good example of this is the development of conversational AI platforms. The ubiquity of social media and other online platforms can be used to personalize customer experiences directly driven by AI. By using data collected from all sources, AI can greatly improve the overall customer experience.
For example, a loan can take from seven to 45 days to be granted. But with AI, the process can be accelerated not only for the customer, but also for the bank. By using AI in a situation like this, your bank can assess the risk it is taking in managing the loans. It can also speed up the process by performing underwriting, document scanning, and other manual processes previously associated with data collection. On top of all that, AI can collect and analyze data about your customers’ behaviors throughout their banking life.
In the past, much of this work was done only by people. While automation has certainly helped to speed up and simplify tasks, it is used for boredom and lacks the complexity of AI. AI saves time and money by freeing up your employees to perform other processes and provides valuable insights to your customers. And customers can budget better and have a clearer idea of where their money is going.
Even the most traditional banks will want to adopt AI to save time and money and provide employees with more opportunities to have positive one-to-one relationships with customers. Look no further than the fintech companies – such as Credijusto, Nubank and Monzo – that have digitized traditional banking services through the power of cutting-edge technology.
Are you ready to put AI to work for your business?
Today, it’s not about how AI impacts financial services. Now it’s about how to implement it. It all starts with you. You need to ask yourself the right questions: What are your goals for implementing AI? Do you want to improve your internal processes? Simply provide a better customer service experience? If so, how should you implement AI for your banking services? Start with these strategies:
- Set yourself short-term goals. Instead of diving deep, focus on some features that you think would be interesting from the start so that you can create an infrastructure that you can fully realize later. For example, you can configure AI to identify the type of credit your customers are looking for. Eventually, you could use this same technology to predict whether this line of credit will be successful.
By setting realistic short-term goals, you set yourself up for future success. These are the solutions that will be the building blocks of the type of AI that everyone will aspire to use.
- Understand your readiness for implementation. Here you are going to need a bit of self-awareness. If you want to implement AI, you need to make sure you have the right data collection mechanisms in place. If not, you need to start from there.
You want to make sure you know how you are currently using the data and how you plan to use it in the future. Again, this sets your organization up for long-term success. If you don’t have the right practices now, you definitely won’t move forward.
- Equip yourself with the right tools. Once you’ve done some self-reflection, it’s time to equip yourself with the tools you need to implement AI functions. To do this, you need a team together and ready, so you can start racing.
When you implement AI into your banking practices, you need to know exactly how you generate data. Then you need to understand how you interpret it. What is the best use of it? After that, you can make decisions that will be scalable, helpful, and transparent.
Technology has not only made the world around us faster, but also improved in many ways. Traditional institutions such as banks might be slow to adopt, but we have already seen how artificial intelligence is changing the banking industry. By taking the right steps, you could be heading into the future.