Role of artificial intelligence in banks

The three main channels where banks can use artificial intelligence to save on costs are front office (conversational banking), middle office (anti-fraud) and back office (underwriting).

AI powered systems can appraise customer credit histories more accurately to avoid this level of default. Mobile banking apps track financial transactions and analyze user data. This helps banks anticipate the risks associated with issuing loans, such as customer insolvency or the threat of fraud

 some of the key takeaways from the report:

• Banks are leveraging AI on the front end to smooth customer identification and authentication, mimic live employees through chatbots and voice assistants, deepen customer relationships, and provide personalized insights and recommendations.
• Front and middle-office AI applications offer the greatest cost savings opportunity across banks
• The winning strategies employed by banks that are undergoing an AI-enabled transformation reveal how to best capture the opportunity. These strategies highlight the need for a holistic AI strategy that extends across banks’ business lines, usable data, partnerships with external partners, and qualified employees.
• AI is also being implemented by banks within middle-office functions to detect and prevent payments fraud and to improve processes for anti-money laundering (AML) and know-your-customer (KYC) regulatory checks.

Data security

According to the Federal Trade Commission report for 2020, credit card fraud is the most common type of personal data theft.

AI based systems are effective against wrongdoers. The programs analyze customer behavior, location, and financial habits and triggers a security mechanism if they detect any unusual activity.

Risk management

Extension of credit is quite a challenging task for bankers. If a bank gives money to insolvent customers, it can get into difficulties. If a borrower loses a stable income, this leads to default.

Transaction Data Enrichment

It is an important part of financial management, both for financial institutions and consumers. It uses machine learning and artificial intelligence to decipher unintelligible strings of characters that represent transactions and merchants and converts them to readable text that shows each merchant’s name and lists their address and city. It shows the local merchant’s location, rather than the central corporate office. This method of turning hard-to-understand data into easy-to-read information, helps both banks and customers to understand where they spent their money and with whom. It reduces both customer service calls and fraud research costs, because the customers can tell what they bought and where they bought it. Fraud detection reduces the number of people calling about mystery charges on their credit card bill, because they understand what those charges mean. Fewer calls mean less fraud research, which reduces costs. Most importantly, these clear descriptions help developers put financial data into context so they can more easily categorize and analyze purchases. This helps with things like budgeting, analyzing spending habits, credit scoring and being able to predict future earning and spending issues.

AI-powered chatbots

Chatbots are AI-enabled conversational interfaces. This is one of the most popular cases of applying AI in banking. Bots communicate with thousands of customers on behalf of the bank without requiring large expenses. Researchers have estimated that financial institutions save four minutes for each communication that the chatbot handles.

Since customers use mobile apps to carry out monetary transactions, banks embed chatbot services in them. This makes it possible to attract users’ attention and create a brand that is recognizable in the market.

Mobile banking

AI functionality in mobile apps is becoming more proactive, personalized, and advanced. For example, Royal Bank of Canada has included Siri in its iOS app. Now, to send money to another card, it’s enough to say something like: “Hey, Siri, send Rs. 30 to Areti!” and confirm the transaction using Touch ID.