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How AI is Reshaping The Banking Industry

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In 2007, 30% of UK consumers used online banking. In 2016 that figure doubled to 60%. Fast forward to 2017, there’s a paradigm shift in the way consumers bank.

From checking balances to setting up direct debits, consumers rely on ease and reliability of having financial services available within a few clicks.  Mobile phones and tablets have outpaced desktops and branches and this momentum is quickly increasingly.

The shift to greater banking, however, involves one key element to continue transforming: artificial intelligence. AI is already being used frequently within banks to create a more seamless and personalised experience.

A recent statement by PwC states: “While the term artificial intelligence has been around for 60 years, it has finally become part of our daily lives—and how we bank, invest, and get insured. Some financial institutions have been investing in AI for years. Other firms are now beginning to catch up thanks to advances in big data, open-source software, cloud computing, and faster processing speeds.”

Digital banking is now the dominant platform for banking in the UK. Consumers have warmed up to the ease of use, with banking literally at their fingertips through mobile apps, and banks have embraced the cost-benefits of a smaller physical presence to achieve larger online presence.

Understanding AI in Banking

Self-made billionaire Mark Cuban once claimed that the “the world’s first trillionaire will be an AI entrepreneur.”

But how do banks use AI? Machine learning is a discipline with a wide variety of applications that concentrates on algorithms and picks up patterns that enable it to “learn”.

AI can take care of the mundane tasks that don’t necessarily require human effort, and in this process, banks can focus on high value activities and create better solutions around the customer experience.

The predictive capability of AI is especially powerful: using analytics helps banks understand customers’ opinions and experiences from across multiple channels. More advanced AI can create bespoke recommendations based on a consumer’s behavior and decisions.

Rise of Chatbots

Artificial intelligence chatbots have been created to provide better service, efficient management and personalisation when it comes to banking.

Take Cleo for example. Cleo is an AI money-managing assistant that links up with your bank account to help you save and see where your money is being spent. Cleo can help you budget, create spending targets and track exactly how much you spend on various purchases.

Another example is Luvo, RBS’ automated technology that assists the banks service agents in finding answers to popular customer queries. Luvo is a ‘human artificial intelligence’ designed to help staff with answering customers’ questions online and help direct them to the right places.

“AI is poised to transform business in ways we’ve not seen since the impact of computer technology in the late 20th century,” says Paul Daugherty, chief technology officer, Accenture.

“The combinatorial effect of AI, cloud, sophisticated analytics and other technologies is already starting to change how work is done by humans and computers, and how organizations interact with consumers in startling ways.”

Chatbots Becoming a Must Have Tool

The growing popularity of chatbots has been a success amongst digital-savvy consumers, especially the millennial population, as the personalised function allows users to approach their banking with better understanding of their finances. For years, the banking system has been broken. The use of AI in the finance system and specifically chatbots is gradually bringing the personalisation back into banking in order to circle back to the consumer and focus on the his needs.

Business Insider Intelligence recently reported that consumers are becoming increasingly dependent on chatbots and have accepted them as part of the online banking experience. The article reports that chatbots have created more trustworthy relationships with users, particularly for millennials, whom banks are trying to target.

And the push for greater artificial intelligence shows no signs of stopping. Chatbot technology will continue to advance in the next few years, with better integration of algorithms and behavioral biometrics. Chatbots are set to become standard for customer service.

“Our research demonstrates that as AI matures, it can propel economic growth and potentially serve as a powerful remedy for stagnant productivity and labour shortages of recent decades,” adds Paul.

Already being used extensively in the banking industry, chatbots are revolutionising customer relationship management at a very personal level.

Improving Operations

Banks are experts of descriptive analytics, which looks at historical data to figure out the who, what, when and how within their organisations and to keep abreast of consumer analytics. With the help of AI, banks can move towards focusing on high-value activities and creative solutions around the customer experience.

Incorporating analytics when managing large numbers of transactions can give banks the upper hand to take care of these processes at a lower cost. Consequently, clients can expect improved tailor made advice, products and services, and even the option to conduct their banking and investment activities with the help of automated services and recommendations.

AI within operations opens up a world of bespoke advice, and not just to the more affluent consumer. The use of technology within banking gives equal opportunities to a wider audience, and also means that each transaction can be personalized and recorded for future tailor-made recommendations.

Reducing Fraud and Increasing Protection

According to a report published by Accenture, in the UK, AI could reportedly add an additional $814 billion to the economy by 2035.

While the best purpose for AI is removing the need for human interaction, machine-learning technology is also key at reducing costs and eliminating fraud.

AI can replace human decision making with more compelling technology, analyzing a tremendous amount of back log data to back up recommendations. These algorithms can determine and predict decisions, and can also be integrated into business-models to recognize patterns to save time for repetition. AI can monitor the spending patters of a consumer, and send alerts if it spots whether a transaction may be fraudulent.  Using AI is an essential part of improving detection and eliminating fraud.

Banking is About The Unseen

Digital banking is becoming increasingly about invisibility and about transforming what can be seen, to unseen. Consumer requirements are quickly changing. AI enables seamless that it becomes invisible to the customer and assists in developing a better overall banking experience.

The use of AI in banking is only just getting started; pair it with the powerful combination of innovation and technology reveals that the banking world is yet to fulfill its capability.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.