Potential implications of AI in banking services
“Innovation is the central issue in economic prosperity.”
Prof. Michael Eugene Porter
The fast-growing and substantially used term ‘AI ‘ as in artificial intelligence is the expertise related to machines and software referring to their capability to operate dimensions of onerous tasks, i.e., a proficiency provided by humans that may outperform them. In today’s scenario, artificial intelligence is being used in broad sectors; one such sector is Finance. In the financial world AI is used for customer service and to navigate like Apple’s Siri and Amazon’s Alexa.
In today’s world machines and technology are embodied in our day-to-day life. With more than 4.2 billion AI power devices, it wouldn’t be wrong to say that AI has been a game changer for our modern economy. Similarly, generative artificial intelligence or GenAI has enabled real-time interactions with potential benefits like problem-solving, and generating a multitude of images or audio and data. Such one GenAI is Chatgpt (Chat Generative Pre-trained Transformer). Financial sectors especially banks can utilise technologies like Chatgpt as a tool to minimise delays in customer service in general, alike other GenAI to maximize customer satisfaction in particular.
Commercial Banks, “the nerve centre of economic activity” can harness generative artificial intelligence as a pivotal tool to enhance not only their customer service but also work efficiency. A newcomer with little financial knowledge may find themselves enveloped amid the numerous banking policies and loan facilities provided by the banks. In such a case GenAI can play the crucial role of personal financial adviser as well as credit risk assistant in the form of chatbots.
These cost-efficient chatbots can assist customers all the time in resolving queries effectively and quickly. Further, they enable smooth transactions and advancement of loans according to the requirements of the borrowers. Similar facilities like credit score management can be opted with the help of artificial intelligence helping the customers reach their optimum score. GenAl can be vital in providing maximum utility by coming up with elaborate saving and investment plans. For instance, Ally Financial in Michigan, USA has launched text and voice-enabled artificial assistants. Sathish Muthukrishnan, the digital officer at Ally, regards generative artificial intelligence to have “the potential to unleash productivity for us”.
But is GenAI only limited to serving as a robotic or digital assistant? The answer would be no. AI has soared its wings into deeper sections of finance by acting as a fraud detector and automated document processor. Unlike the human mind, AI can go through numerous documents in a fraction of the time. Being time-saving it can assist in efficient operations, discounting bills of exchange, checking documents, cheques, drafts, email and so on.
Similarly, it can be utilised to track real-time activities of the banking account and provide the details to the owner. Accordingly, detecting signs of fraud and risk. Exemplar being “Capital One”, one of the largest banks in America. The organization has incorporated AI to ensure the privacy and security of the customer via a virtual assistant that alerts fraud activities along with performing varied functions like credit card management, doubt solving, etc.
With the growing market for AI commercial banks can utilize innovation to maximize their productivity and reach wider sections of society. With inclusive digitalization, banks can gain a competitive advantage ideally serving not only the majority but also the ‘special minority’ who might need extra help.
A financially inclusive GenAI can reduce the need for transportation and increase real-time interactions at any time and anywhere with no hesitancy. Thereby, increasing their revenue alike credit creation. According to McKinsey Global Institute (MGI), GenAI has the capacity to raise $200 to $340 billion of revenue for the banking sector annually.
Previous banking facilities like ATMs and digital banking have so far proved to be favourable tools as a component of the Internet and artificial intelligence. Many leading bankers and entrepreneurs have addressed the positivity of AI in the financial world. Moreover, the Financial Stability Board (FSB), has highlighted the potential benefits of the introduction of AI. With tech-savvy customers, the commercial bank’s incorporation of generative artificial intelligence is set to be crucial.
Likewise, Anti-Money Laundering (AML) and fraud detection services are an integral part of these advancing AI tools. According to ‘The OECD – FSB Roundtable on Artificial Intelligence (AI) in Finance’ (2024) GenAI is capable of acting as a fraud detector, risk assessment model, and claim manager reducing the likelihood of financial crimes in the banking sector.
In essence, this dynamic approach of commercial banks can stimulate positive involvement of the customers, overcoming language extremities and facilitating several banking facilities with minimum cost. With satisfied customers, banks can increase their outreach along with their capacity for credit creation.
By: Darshna Kaur
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