Traditionally, banks have proactively embraced new technologies to improve their services and gain customers. Banks have consistently rolled out tech-driven solutions, from digital ledgers and ATMs to online banking and debit cards. Today, there is unmissable hype around artificial intelligence (AI) in banking and how it can revolutionise the various aspects of the banking industry. These include fraud detection, credit assessment, customer service, and more.
A majority of banks around the world have acknowledged the benefits of AI and that it will help them attain their short and long-term objectives.
Nearly 85% of IT execs working in banks have a clear strategy to leverage AI in banking to develop new products and services.
This blog digs deep to understand how AI in banking is transforming traditional processes, improving customer experiences, and is likely to shape the future of financial services.
AI in Banking: A Financial Evolution
AI is no longer a mere spectator in the banking world. As more and more banks explore the AI-first path, the technology is poised to take over and revolutionise conventional banking services.
Here are a few ways AI in banking is making waves in recent times.
Fraud Detection
The significant rise in UPI adoption has increased the number of non-cash digital transactions in India. The country’s non-cash transactions share is expected to grow to 65% of all transactions by the end of 2026.
Digital payment infrastructure is continuously expanding. Hence, it opens up new opportunities for fraudsters looking to exploit vulnerabilities in the rapidly evolving financial ecosystem.
AI has emerged as a powerful solution to combat fraud as it can analyse large volumes of data in real time. This equips banks to detect fraudulent and suspicious activities and prevent losses. Banks are increasingly using AI to prevent sketchy financial activities, including credit card fraud, identity theft, money laundering, etc.
Improved Customer Support
While most banks are jumping on the digitalisation bandwagon to stay competitive, they shouldn’t overlook the importance of customer support. As customer preferences evolve, banks need to go above and beyond to ensure they serve their customers seamlessly across digital and traditional channels.
Many state-owned banks across India have earned a reputation for having sub-par or unsatisfactory customer support. While private and public sector banks do a better job, there is ample room for improvement.
AI-powered chatbots and virtual assistants have shown promising signs of filling the gap and providing tailored responses for each customer.
Hyper-personalised Banking Experiences
Have you noticed how Netflix, YouTube, and other platforms offer personalised recommendations based on your past activity? Similarly, AI in banking is tipped to create hyper-personalised experiences for customers by recommending relevant and meaningful products and services.
AI’s ability to study behavioural and transactional data to offer personalised recommendations and fulfil unique customer requirements will pave the way for hyper-personalised banking experiences. Many retail banks can differentiate themselves and increase their revenue by tapping into hyper-personalisation in conjunction with the arrival of APIs and unique digital IDs.
AI in Banking to Streamline Credit Scoring
One of the most important applications of AI in banking is credit scoring. A credit score is a customer’s ability to repay loans or clear off debts without any hassles. Despite widespread internet penetration,
Around 190 million Indians are still unbanked, making it difficult for them to secure loans due to a lack of conventional data and traditional credit history.
AI-powered credit scoring systems are tipped to fill in the gap by considering alternative data sources to determine the borrower’s creditworthiness.
Rental payments, e-commerce and social media activity, telecom payments, employment background, and biometric data are some alternative data sources that provide valuable insights into a borrower’s creditworthiness.
Swift and Accurate Document Verification
AI is set to replace manual document and ID verification with swift and accurate online verification processes. As the volume of digital transactions continues to rise, the need for accurate customer authentication has also moved in an upward trajectory.
In the same vein, AI is increasingly being used for document verification processes. It can process large volumes of identities in a matter of seconds.
It is set to play a pivotal role in streamlining loan approvals, improving customer onboarding experience, preventing fraud, and ensuring compliance.
Parting Notes
AI in banking is here to stay. Its adoption is expected to grow at an impressive rate in the upcoming years. Today, AI in banking is not only a strategic requirement but also an indispensable solution. It helps in improving operational processes, preventing fraud, and offering tailored solutions to customers.
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