By Pritham Shetty, Consulting Director, Propel Technology Group Inc
Our world is moving at a fast pace. Though banks originally built their foundations to be run solely by humans, the time has come for artificial intelligence in the banking industry. In 2020, the global AI banking market was valued at $3.88 billion, and it is projected 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 artificial intelligence in the banking industry is susceptible to weak core tech and poor data backbones.
By my count, there were 20,000 new banking regulatory requirements created in 2015 alone. Chances are your business won’t find a one-size-fits-all solution to dealing with this. The next-best option is to be nimble. You need to be able to break down the business process into small chunks. By doing so, you can come up with digital strategies that work with new and existing regulations.
AI can take you a long way in this process, but you must know how to harness its power. Take originating home loans, for instance. This can be an important, sometimes tedious, process for the loan seeker and bank. With an AI solution, loan origination can happen quicker and be more beneficial to both parties.
As the world of banking moves toward AI, it is integral to note that the crucial working element for AI is data. The trick to using that data is to understand how to leverage it best for your business’ value. Data with no direction won’t lead to progress, nor will it lead to the proper deployment of your AI. That is one of the top reasons it is so challenging to implement AI in banks — there has to be a plan.
Even if you come up with a poor strategy, those mistakes can be course-corrected over time. It takes some time and effort, but it is doable. If you home in on how customer information can be used, you can utilize AI for banking services in a way that is scalable and actionable. Once you understand how to use the data you collect, you can develop technical solutions that work with each other, identify specific needs, and build data pipelines that will lead you down the road to AI.
How is artificial intelligence changing the banking sector?
Due to the increasingly digital world, customers have more access to their banking information than ever. Of course, this can lead to other problems. Because there is so much access to data, there are also prime opportunities for fraudulent activities, and this is one example of how AI is changing the banking sector. With AI, you can train systems to learn, understand, and recognize when these activities happen. In fact, there was a 5% decrease in record exposure from 2020 to 2021.
AI also safeguards against data theft or abuse. Not only can AI recognize breaches from outside sources, but it can also recognize internal threats. Once an AI system is trained, it can identify these problems and even offer solutions to them. For instance, a customer support call center can have traffic directed by AI to assuage an influx of calls during high-volume fluctuations.
Another great example of this is the development of conversational AI platforms. The ubiquity of social media and other online platforms can be used to tailor customer experiences directly led by AI. By using the data gathered from all sources, AI can greatly improve the customer experience overall.
For example, a loan might take anywhere from seven to 45 days to be granted. But with AI, the process can be expedited not only for the customer, but also the bank. By using AI in a situation such as this, your bank can assess the risk it is taking on by servicing loans. It can also make the process faster by performing underwriting, document scanning, and other manual processes previously associated with data collection. On top of all that, AI can gather and analyze data about your customers’ behaviors throughout their banking lives.
In the past, so much of this work was done solely by people. Although automation has certainly helped speed up and simplify tasks, it is used for tedium and doesn’t have the complexity of AI. AI saves time and money by freeing up your employees to do 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 allow employees more opportunities to have positive one-on-one relationships with customers. Look no further than fintech companies — such as Credijusto, Nubank, and Monzo — that have digitized traditional banking services through the power of cutting-edge tech.
Are you ready to put AI to work for your business?
Today, it’s not a question of how AI is impacting financial services. Now, it’s about how to implement it. That all starts with you. You must ask 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 short-term goals. Instead of diving in deep, zero in on some features you think would be nice up front so you can build an infrastructure that you can fully realize later. For example, you could set up AI to identify the type of credit your customers seek. Eventually, you could use that same technology to predict if that line of credit will be successful.
By making realistic short-term goals, you set yourself up for future success. These are the solutions that will be the building blocks for the type of AI everyone will aspire to use.
- Understand your readiness for implementation. Here, you are going to need a little self-awareness. If you want to implement AI, you need to make sure that you have the proper data collection mechanisms in place. If not, then you need to start from there.
You want to ensure that you know how you currently use data and how you plan on using it in the future. Again, this sets your organization up for success in the long run. If you don’t have the right practices now, you certainly won’t going forward.
- Equip yourself with the right tools. Once you have done some self-reflection, it is time to set yourself up with the tools required to implement AI functions. To do so, you need a team gathered and ready, so you can hit the ground running.
As you implement AI into your banking practices, you should know how exactly you generate data. Then, you must understand how you interpret it. What is the best use for it? After that, you can make decisions that will be scalable, useful, and seamless.
Technology has not only made the world around us move faster, but also better in so many ways. Traditional institutions such as banks might be slow to adopt, but we’ve already seen how artificial intelligence is changing the banking sector. By taking the proper steps, you could be moving right along with it into the future.