Artificial Intelligence is, “A core, transformative way by which we’re rethinking how we’re doing everything.”
– Sundar Pichai ( CEO of Google)
In this incessantly evolving world, the economy progress of any nation depends on efficient utilization of modern technology. For the past few years, financial industries such as banks, brokerage firms, insurance companies etc have proved to be an enthusiastic adopter of Artificial Intelligence driven by the urge to provide secure and quality services to the customers. Nowadays customers expect faster and personalized services with zero tolerance for unsolicited messages and fraudulent calls. In such circumstances, AI plays a crucial role in predicting the future and strengthening the competitiveness of banks with the help of advance data analytics.
Understanding AI and it’s challenges in financial sectors.
The term ‘Artificial Intelligence’ primarily refers to the replication of human intelligence demonstrated by machines that are programmed in such a way that it can think and act like human beings. In simpler term it exhibits various traits associated with a human mind such as learning, decision making and problem-solving. However the biggest challenge is some banks are still unwilling to improve or adopt methods due to lack of supporting data. Also with the upscaling use of AI, financial sectors need to follow the regulatory standards of government. In addition there is an obvious demand for skilled workforce which includes proficient software engineers and computer scientists in streams like data science, coding and machine learning to improve customer relations.
Pros and Cons of Artificial Intelligence in Banking.
Artificial Intelligence (AI) is a rapidly evolving technology, that has gained popularity worldwide. Following are some benefits of AI in banking sectors :-
1.) Customer Satisfaction
Usually banks remain closed due to public holidays and weekends. Sometimes working hours are compromised due to network problems. So one of the biggest advantage of AI in banking is the use of ‘chat bots’ or conversational assistants which can handle various bank transactions, private conversation and other tasks that previously required person-to-person interaction. For instance, a virtual assistant called Erica was introduced by Bank of America on its mobile app in 2018 to help with various transactions. Moreover banks are using chatbots to highlight additional services and offerings to their customers who are unaware of loan offerings and merchant services that can assist in resolving payment or credit issues.
2.) Reduces Cost and Risks.
Nowadays banks are replacing human tasks with AI based automation to eliminate much of the strenuous, time-intensive and error-prone work involved in entering customer data from contracts, forms and other sources. Robotic process automation (RPA) are coupled with natural language processing, improved handwriting recognition, and other advance AI technologies, having the potential to handle a wide range of banking workflows. According to reports by Accenture banks have witnessed 20% to 25% savings in their operations due to adoption of AI in banks.
3.) Prediction of future outcomes and trends
By simply analyzing past behaviours, banking sectors can predict future outcomes and trends. With the help of powerful AI applications like Machine Learning and Cognition, one can identify fraud, detect corruption and anti-money laundering pattern. A.I pinpoints these hidden actions and helps save millions for banks. Since we are witnessing a rapid rise in cybercrimes, it is possible to detect suspicious data patterns among ginormous volumes of data to carry out scam and fraud management.
Inspite of above benefits AI is expected to massively disrupt employment, banks and other financial services. Some of its cons are listed below:-
1.) Highly Expensive
The production and maintenance of AI are quite expensive since they are very complex machines. Moreover it consists of advanced software programs which require trained professionals and regular updates to meet the needs of the transforming environment. In the case of critical failures of systems the procedure to restore and recover lost data may be time consuming and costly.
2.) Bad Calls
Although AI is capable of learning and imitating human actions but it still can’t make judgement calls. Thus by replacing adaptive human behavior with AI, it causes irrational behavior within ecosystems of humans and things thereby causing unpredictable outcomes.
By replacing workforce with machines it can cause mass unemployment. Also by becoming more dependent on machines we tend to lose our creativity. Unemployment is an inevitable and undesirable issue. Since machines can perform tasks more faster and precisely than humans, it is expected that in near future there will be chances of huge losses and layoffs.
Artificial Intelligence will not only empower banks by automating its knowledge workforce, but will also make the whole process of automation intelligent enough to uproot numerous cyber crimes and other security issues. However reliance on legacy systems, lack of data science talent and cost constraints have hindered seamless adoption of AI. Nevertheless it has the potential to completely transform the financial sector, making it innovative and reliable, but it is only possible if the financial sectors can manage the security risks of systems based on AI efficiently.