The banking industry’s potential cost saving from artificial intelligence is forecasted to be $477 billion by 2023. The front and middle office account for a whopping $416 billion of that predicted amount. Even though around 80 percent of the banks are aware of AI’s vast opportunities, most banks have struggled to utilize the technology for their needs appropriately.
Utilizing the power of artificial intelligence can help banks and other financial institutions digitize their processes and meet their customers’ demands efficiently. In this article, we will discuss the benefits of artificial intelligence to the banking sector.
Customer experience and satisfaction play a vital role in the growth of an organization. Consumer behavior and expectations have drastically changed, and now customers prefer quick responses and personalized content. With machine learning algorithms, banks can now analyze user behavior and credit scores to develop customized plans for each user separately.
Moreover, by embedding chatbots and virtual assistants, banks can now provide 24/7 customer support service. Virtual assistants can assist customers with basic functions such as simple transactions, paying bills, and checking their current bank balance.
Financial institutions have been charged with $10.6 billion in global fines and penalties related to anti-money laundering, data privacy, knowing your customer, and other regulations in 2020. AI can be a game-changer in risk management since it can analyze a large set of data, quickly identifying patterns from several channels.
Artificial intelligence can help banks in identifying malicious activities such as money laundering and identity theft. Moreover, AI can help predict and prevent credit risks and identify individuals and businesses who might default on their loans.
These regulations are necessary to overcome hurdles like tax evasion, money laundering, and other issues. In most cases, banks maintain an internal compliance team to deal with these problems, but these processes take a lot more time and more capital to do it manually. The compliance regulations are also subject to frequent change, and banks need to update their processes and workflows following these regulations constantly.
AI uses deep learning and NLP to read new compliance requirements for financial institutions and improve their decision-making process. Even though AI can’t replace a compliance analyst, it can make their operations faster and efficient.
Banks and other financial institutions are vulnerable to fraud and other cybercriminals, which costs around $600 billion in the US alone. In comparison, online transaction fraud takes the most significant slice with more than $200 billion. Over 50 percent of the banks’ investment in AI was specialized in fraud detection, cybersecurity, compliance, and risk management.
AI and machine learning prove to be very efficient solutions to battling fraud and other cybercrimes in the banking industry. By combining both technologies, AI can accurately identify where a given transaction or series of activities are fraudulent or not. It is predicted that implementing AI and ML into fraud detection and prevention software will drive spending forward, reaching up to $10 billion in 2024.
The banking industry deals with a ton of paperwork, and their employees dealing with this paperwork can cause a significant increase in their operating costs. As we mentioned earlier, the potential cost savings for banks from artificial intelligence are estimated to be $447 billion by 2023. By utilizing AI’s power, banks can cut costs by automating mundane tasks and reducing time spent digitizing documents.
From reducing human errors to improving customer support, AI enables banking institutions to focus their human resources on more valuable tasks, which reduces operating costs by maximizing the efficiency of the available human resources.
Industry experts worldwide have predicted that AI will play a more significant role in the banking industry. AI will empower banks to leverage machine and human abilities to drive operational and cost efficiencies. From fraud detection to enhancing customer experience, AI will present opportunities to these enormous banking institutions and will continue to grow in the future.