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5 ways in which artificial intelligence is redefining banking

Artificial Intelligence (AI) has become an oft heard buzzword in the financial services industry. Be it improving customer interactions, analyzing millions of data points in seconds or detecting fraud. As I attended Infosys Confluence 2017 in San Francisco last week, and interacted with several banking and financial services leaders, one thing became stark clear- AI in the banking industry is no longer about pilot projects or enthusiastic experiments. It has established its value as a technology that can significantly improve the banking experience in the near future.

As AI adoption gathers pace, several aspects of banking are set for a makeover. Here are the 5 key areas that I think will be most significantly impacted with the rise of AI:

The banker bots: The bots are everywhere. And they are redefining the way banks are delivering customer experience. Be it Swedebank's Nina or Mizuho Bank's Pepper, virtual assistants have made their way right up to the customers in the banking ecosystem. As more and more banks adopt chat-bots, the technology behind them- Artificial Intelligence- is set to learn, evolve and become more agile and efficient. As a result, we are likely to see even more bots becoming bankers.

Catching the fraudsters: PayPal, which processed $235 billion in payments last year from over 4 billion transactions by more than 170 million customers, uses a deep-learning system based on AI to detect fraud. Not only does the system flag unusual transactions, it also profiles these frauds as a "feature," or a rule that can be applied in real-time to stop purchases that fit this profile. This has helped keep PayPal's fraud rate remarkably low, at 0.32 percent of revenue--a figure far better than the average of 1.32 percent that merchants see, according to a study by LexisNexis. As AI adoption gains traction, more and more banks are likely to utilize AI technologies for detecting and combating fraud.

Smartening the back-office: While the customer facing side of AI technologies is well elucidated, we often miss out on the impact that AI is having in the back-office operations of banks. AI is removing thousands of man-hours from banks' sheets by reviewing loan agreements, identifying repayment patterns and bringing in Robotic Process Automation (RPA) to populate data entry and increase processing speed, especially for structured data. This part, according to us, can be real game changer for banks in saving costs and increasing efficiencies in the near future.

Making data-based, real-time recommendations: Banks have often struggled to make relevant recommendations to their customers about their products and services. The model that traditional banks have been following is creating standard recommendations for a set of customers and flashing them at various point-of-contacts, without any real targeting metrics. AI engines are set to change all that. These self-learning systems are cultivating user data based on their behavioral patterns, banking history and in some cases even their public profiles to make suitable recommendations to users. In recent times, banks have been utilizing these recommendation engines as a key tool to upsell and drive incremental revenue.

Bringing Fintech innovations to customers: A lot of AI innovation is happening in the Fintech space. Companies like Anki and X.ai are reducing human intervention in customer interactions. These innovations are propelling banks to integrate specialist third party services from niche start-ups in a very flexible way and bring these services to their customers. New tools are facilitating integration and cognitive agents are making it faster to train and activate a customer facing agent to sell these services to all clients. Thus, collaboration, rather than competition, is booming between banks and Fintechs, thanks to technologies like AI. While banks have the edge of an already established customer base, and their ability to scale offerings quickly, Fintechs are bringing in the innovation factor to the banking party!

As AI adoption accelerates, we see more advanced use cases emerging for banks, such as identifying opportunities from data and actively suggesting intelligent, dynamic policy changes. The speed and scalability of cognitive technologies will result in a slew of growth opportunities for banks which incorporate these approaches into their strategy.

Comments

Very insightful article!

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