Both banks and fintech startups have one common goal which is to provide a more seamless customer experience for their users. The fintechs, however, are the trailblazers in this regard. Traditional banks are now harnessing cognitive technology within artificial intelligence to deepen the utility and advantage of digitization as well as to help them meet the competition posed by Fintech players.
With conventional banking targeting end-users, AI is estimated to boost revenue and bank productivity by up to 50%.
Artificial Intelligence (AI) is disrupting industries across every sector and has become an integral part of the world we live in. AI refers to the ability of a computer or machine to mimic the competencies of the human mind, which often learns from previous experiences to understand and respond to language, decisions, and problems. These AI capabilities such as computer vision and conversational interfaces, have become adopted in various sectors of industry. Research projects that the global AI market will reach a size of over half a trillion U.S. dollars by 2024.
There are certain challenges facing the adoption of AI, like limited knowledge. Within the banking system, there are many places where artificial intelligence can be used to perform better than the traditional systems, however, there is a huge challenge of knowledge concerning artificial intelligence as not all banks are aware of most Al products and their service providers like Amazon and Google cloud.
Al systems functionality relies heavily on data that are fed as input to get output. Hence, the systems require heavy training and data sets and sometimes, these data can be false resulting in some level of bias.
Also, Machine learning demands a high and ever-increasing power to perform efficiently and most of them require supercomputing power which is very expensive to achieve and maintain. Banks, being profit-oriented institutions, may not see these applications as being cost-effective.
Benefits of the use of AI in banking
These challenges might seem daunting but there are many opportunities that AI offers in the banking sector including:
• Anti-money laundering feature that helps in detecting fraudulent activities, irregular payment as well as improving the standard process for combating money laundering and helping customers know their regulatory checks.
• Customer support at the front office through technological bots that have assistance capability.
• Helps banks make better customer credit and loan credit decisions.
• Provides better regulatory compliance tool that mediates the huge risk of financial transactions, the flow of income, tracking of transactions, identifying of suspicious activities as well as assessing data for various compliance issues.
• Fosters effective decision making.
• Strengthens competitive advantage by offering a well-enhanced customer experience and a better understanding of customer patterns and their behaviours.
Risks associated with the use of AI in banking
Despite the benefits of adopting artificial intelligence, there are still certain risks associated with the use of AI in the banking sector.
The major concern is the impact AI will have on the labour market as people fear that bots will replace certain jobs and thousands of educated professionals will lose their jobs to machines.
Other risks associated with AI include:
• Biased algorithm.
• Misalignment between banks goals and machines.
• Privacy, less personal security, and the rise of deep fakes.
• Social inequality.
Why this matters
The quality of AI technology in banking has improved considerably in a few areas over the past few years. Banks have undergone a wave of digitization to keep up with changing technology by introducing internet banking. As most services are now available through the mobile app, customers do not have to walk into the banks all the time for every transaction and this has provided a more seamless customer experience which would undoubtedly be deepened by an even greater deployment of AI technology to the sector.