Original article was published by on AI Magazine
Banking Industry embraces digital transformation using AI and ML
In the given unprecedented times, digital transformation is vital. One of the significant challenges is modernizing banks and legacy business systems without disrupting the existing system. However, artificial intelligence (AI) and machine learning (ML) have played a pivotal role in conducting hassle-and risk-free digital transformation. An artificial intelligence and machine learning-led approach to system modernization will enable businesses to associate with other fintech services into embracing modern demands and regulations while ensuring safety and enabling security.
In the banking industry, with the growing pressure in managing risk along with increasing governance and regulatory requirements, banks must improve their services towards more unique and better customer service. Fintech brands are increasingly applying AI and ML in a wide range of applications across several channels to leverage all the available client data to predict how customers’ requirements are evolving. And they are also speculating what services will prove beneficial for them, what type of fraudulent activity has the highest possibility to attack customers’ systems. Leveraging the power of AI and ML in banking is required along with data science acceleration to enhance customers’ portfolio offerings.
Here are some significant roles of Artificial intelligence and Machine Learning in banking and finance listed below:
Mitigate Risk Management
One of the practical examples to showcase the benefits of machine learning could be described in it. While sanctioning loans to customers, banks had to rely on the client’s history to comprehend that particular customer’s creditworthiness. However, the process was not always seamless and accurate, and banks had to face challenges in approving the loans at times. With the digital transformation, the machine learning algorithms analyzes the user better to process the loan further in a much convenient manner.
Preventing Fraudulent Activities
Banks are undoubtedly one of the most highly regulated institutions and observe strict government regulations in order to protect defaulting or prevent fishing financial crimes within their systems. This is one of the primary reasons for the banking processes to shift to all-digital in such a short span of time. It is essential to be aware of the risk before any suspicious activity has begun to mitigate fraudulent activity. During the traditional process, banks had to violate some pre-set protocols to prevent users from fraudulent activity. Advances in machine learning can sense suspicious activity even before the external threat violates the customer’s account. The underlying benefit from this is that machines are capable of performing high-level analysis in real-time, which is impossible for humans to perform manually.
The Functionality of Chatbots
Chatbots are one of AI-led software that clones human conversation. The technology imbibed in chatbots makes it convenient for banks to respond to customers’ questions faster. The chatbots are proven beneficial for financial institutions to serve users’ issues at a large scale in a matter of a few hours.
The ability to identify the user’s past behaviour and craft targeted campaigns is a boon for both customers and banks. Such customised campaign creates all the necessary information the client would require while making it and will save both time and energy. Today’s customers also enjoy services that are customised as per their preferences and enhance their banking experience.
With the increase of fintech companies and the rapid change in technology use, it was a matter of time that artificial intelligence and machine learning would enter modern banking, redefining the dynamics forever. The application of AI and ML will offer predictive data analysis as banks and financial institutions will try to offer better services with more actionable information like patterned data sets of customers’ behaviour and spending behaviour. Artificial intelligence adoption for financial institutions will be the key to obtaining a competitive edge as they will offer a fast, secure, and personalised banking experience to its customers.
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