Artificial intelligence (AI) has immense potential to transform operations across all industries, including banking and lending. Employing AI in their day-to-day functioning helps banks reduce costs, increase productivity, improve decision-making, spot fraud, and be more customer-centric.
A Business Insider report suggests that nearly 80% of banks are aware of AI’s conceivable benefits in banking.
Another report by McKinsey suggests that the potential of AI in banking and finance could reach as high as $1 trillion.
These estimations emphasise the growing utility and acceptance of AI in the banking and finance domain. Using AI in banking offers immense benefits to lenders. In this blog post, let us explore these in detail.
Benefits of Using AI in Banking
Artificial Intelligence allows machines to mimic human intelligence; it includes various technologies, such as machine learning and natural language processing (NLP), that work together to automate repetitive tasks, analyse data, and make decisions.
Now, let us explore six ways AI in banking is aiding lenders:
Fraud Detection And Prevention
Maintaining operational and data security is one of the topmost priorities for all financial institutions. Lenders make all possible efforts to prevent fraud or detect it promptly. As digital banking and lending proliferate, effective fraud detection and prevention become even more critical for lenders.
The introduction of AI in banking has been instrumental in identifying fraud and securing all financial activities in real time.
- AI-based tools analyse vast caches of data to assess customer behaviour patterns. These tools also adapt to changing tactics fraudsters use and help prevent them proactively
- AI-based biometric authentication systems, like fingerprint scanning and facial recognition, provide additional security to lending operations
- They also streamline secure identity verification, prevent unauthorised access and minimise fraudulent activities
This way, AI helps lenders stay ahead of fraudsters, prevent financial losses and improve customer satisfaction and trust.
Superior Customer Experience
As customer expectations and competition grow, lenders must focus more on improving the client experience to attract new customers and retain existing ones.
Lenders can use AI-powered virtual assistants and chatbots to provide prompt, 24/7 customer support. These intelligent tools effectively manage routine inquiries and provide personalised solutions, empowering customers so they do not have to wait for their queries to be resolved or struggle with a lack of information.
Chatbots help customers check their loan application status, answer queries about interest rates or charges and track their loan repayments.
AI applications analyse customer behaviour and preferences to offer financial advice and targeted recommendations, resulting in superior and engaging customer interaction.
Streamlined Operations
Smooth back-office operations are essential for efficient lending lifecycle management and satisfied customers. Lenders should be able to carry out these operations accurately and seamlessly, from verifying documents to risk assessment to EMI calculations. For example:
- AI in banking is helping automate back-office operations, resulting in improved efficiency and reduced costs
- This technology can improve accuracy and reduce the time taken for jobs like data entry and report generation; thus, lenders can use the same resources to process more applications in a shorter span
- AI also assists lenders in better data management and security
- Lenders can streamline their workflows by analysing historical data and distributing tasks better and more equitably, thereby improving overall productivity
Risk Assessment and Management
Sound risk assessment and management are critical for a lender to stay profitable and maintain financial stability. AI has drastically changed how lenders assess and manage risk and has made the process more robust.
- AI-powered risk assessment systems evaluate vast quantities of data and use it to identify potential risks
- Machine Learning algorithms analyse patterns and predict future risks with great accuracy
- AI can identify risks that are difficult to spot through traditional measures as it relies on analysing data from multiple sources
- AI-driven tools for risk management continuously adapt to evolving market conditions, helping lenders stay ahead with valuable insights and make well-informed decisions
Data Collection and Analysis
Every day, banks and other financial institutions record massive volumes of transactions. Due to the large volume and sometimes the complexity of transactions, recording and analysing them manually is extremely cumbersome, if not impossible.
Each transaction is a valuable source of information which can help lenders improve and grow their operations. In banking, AI helps structure this large data pool and analyse it without errors.
Innovative AI solutions help analyse this data into meaningful insights, which can help detect fraud, improve customer experience, aid product development, and design marketing strategies, helping lenders stay ahead.
Aids Regulatory Compliance
Banking is a highly regulated sector; lenders must adhere to guidelines laid down by various regulatory authorities and the Government of India. These regulations help protect customer banks and have acceptable risk profiles to avoid large-scale defaults.
All lenders have internal compliance teams to help them comply with the guidelines and generate the required reports. Manually performing compliance and reporting activities is time-consuming and requires huge investments.
The compliance regulations often change, and updating the systems and processes requires effort and disrupts operations. AI in banking, AI utilises NLP to understand new requirements and improve the compliance process by making it faster and more efficient.
To Sum It Up
Artificial intelligence has become an integral part of our daily lives without us realising it, and it is helping businesses improve their operations and serve customers better.
AI in banking is helping lenders manage their loan lifecycle better by aiding in fraud prevention, streamlining operations, better risk assessment, regulatory compliance and data analysis.
Precisa offers innovative AI-driven solutions like the bank statement analyser that helps lenders assess the customer’s financial health by analysing indicators such as income stability, cash flow, debt-to-income ratio and savings patterns.
The tool is simple to integrate with existing loan origination software and enables fraud detection by identifying suspicious transactions, including money laundering, fraudulent activities and potential risks.
Sign up today for a free demo.
Mumbai