6 Ways AI Has Revolutionized Banking
The banking industry faces many challenges such as online fraud, changing financial laws, and growing customer demand for faster services. Since traditional methods are no longer enough, banks are increasingly relying on technologies like artificial intelligence (AI) and automation for optimal performance and results.
Analysts predict AI can save more than $1 trillion by 2030 by reducing front and back-office costs. These numbers show AI’s potential to transform the banking industry. Here we share six ways in which AI has revolutionized the banking sector.
- Fraud detection
With the increasing number of online transactions, the opportunities to commit fraud have also gone up. As per Javelin Strategy & Research, there were 1.7 million fraud cases in 2019 alone. But these numbers have decreased since the record high of 16.7 million cases in 2017. AI is responsible for this nosedive, as it can analyze and interpret an enormous number of transactions in real-time. It takes only seconds for AI to identify fraudulent wire transfers or verify credit cards.
- Customer service automation
Customers don’t like to wait. The banking industry has sped up onboarding and transacting by implementing AI in processes like KYC and customer support services. This helps in customer retention and increasing customer satisfaction.
According to a McKinsey report, “For every one-point increase in customer onboarding satisfaction on a ten-point Net Promoter Score (NPS) scale, there is a 3% increase in customer revenue.” It translates to an additional $15 million per year in profit for the banking industry.
Banks have a ton of financial data about customers. Earlier, they had no way of analyzing it, but now they can use machine learning to study patterns and create customized services. The day is not far when you would get personalized savings and credit services according to your habits. Moreover, big data analytics has now made precise targeting possible.
- Cost efficiency
AI reduces bank employees’ workload by streamlining tiresome tasks and helping them reduce or prevent mistakes. Robotic process automation (RPA) is an integral part of a larger AI concept that can automate repetitive, rule-based processes. According to McKinsey, AI will perform 10 to 25 percent of manual labor, freeing employees to do high-value tasks in the coming years. It will help save the money spent on hiring and maintaining an additional labor force.
The banking sector uses technological advancements like biometric identification and security codes to tackle safety issues. According to Goode Intelligence, about 1.9 billion bank customers will have to use biometric identification by 2021.
AI does not stop at preventing fraud and hacking; it can also find loopholes or vulnerabilities in the existing system and remove them to minimize such incidents in the future.
- Better decision-making
Banks no longer base their marketing decisions on guesswork. AI-powered analytics provide customer data in a readable and processor bill format that companies can use to forecast upcoming trends and create actionable marketing strategies.
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