Artificial intelligence (AI) refers to technology with the capacity to carry out that traditionally require human intelligence. These tasks include understanding language, identifying images, decision-making, and drawing insights from data. AI has numerous industries, spanning health, education, entertainment, and beyond. One of the sectors that stands to benefit significantly from AI is financial banking services.
Today, we will explore the potential of artificial intelligence in banking to improve customer experience, efficiency, and profitability within the banking sector, which is our focus in this article. However, we won’t overlook the hurdles and deliberations linked with integrating AI into banking offerings.
AI Helps Banks Support Sustainability Transformation
AI models can work with a lot of data very fast. This makes them useful for other areas, like sustainability. Starting from 2023, banks in the European Union will have to tell which of their transactions are good for the environment.
They will follow the EU’s rules, which say which loans are green. For example, loans for making electricity from the sun or the wind are green. Loans for a medium-sized business to buy things or systems that will help it use less energy or produce less pollution are also green. Banks need new information from their business customers to sort out the transactions.
Apps of AI in Banking Examples
Customer Service and Customer Engagement
AI can make chatbots that can talk to customers anytime, help them with their questions, suggest things they might like, and make them happy. For instance, Personetics stands as a testament to this potential as it leverages artificial intelligence in banking to support both customers and businesses in financial affairs.
Personetics is a company that uses AI to deliver personalized guidance and valuable insights throughout the financial customer journey. By analyzing data from multiple sources like transactions, social media, and web browsing, Personetics enables banks to comprehend their customers’ behavior, preferences, and needs. This empowers banks to provide personalized products and services, optimize pricing and marketing strategies, and enhance customer loyalty. Capital One employs Personetics to offer personalized financial advice, and exclusive offers to its customers.
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Personetics also helps banks create and manage unique content and compelling insights through a user-friendly tool called Engagement Builder. With Engagement Builder, banks can define logic, customize UX, and set up specific prompts for different customer segments and campaigns. It also helps banks distribute the insights across all banking channels, such as mobile, web, email, and voice.
Personetics claims its AI-powered technology can increase customer engagement by 35%, account and balance growth by 20%, and customer satisfaction by 90%. Additionally, it states that it can reduce customer churn by 25% and lower call center costs by 15%. Personetics has raised millions in growth funding in January 2022 and plans to use the funds to expand its global presence and product offerings.
Fraud Detection and Risk Management
AI can help banks find and stop bad things like fake payments, dirty money, and hackers by looking at a lot of data, finding things that are not normal, and warning the banks. For instance, Quantexa is a company that uses AI and connections between data to fight against crime with money.
Quantexa is a company that leverages AI and network analytics to fight financial crime and fraud. They assist banks in integrating diverse data sources to gain a comprehensive understanding of entities and their connections. Their solution enables banks to minimize false positives, concentrate on the most significant risks, and tackle intricate fraud patterns that cannot be addressed by basic rules alone.
Quantexa also helps banks with a new solution called Syneo. Syneo is an all-in-one platform that helps monitor and investigate financial crime and fraud. It uses contextual monitoring to detect and manage the various risks associated with international trade, including money laundering, sanctions evasion, and trade-based fraud. Syneo also automates the laborious task of manual data gathering and analysis and provides visualization tools to aid in the exploration and decision-making process during investigations.
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Quantexa claims its AI-powered technology can reduce case volumes by 60%, increase fraud savings by 20-30%, and reduce investigation time by 80%. They also claim it can enhance customer experience and compliance by providing a comprehensive risk view and decreasing false positives by 75%. Quantexa raised $240 million in Series D funding in July 2021 and plans to use the funds to expand its global presence and product offerings.
Underwriting and Credit Scoring
AI has the ability to assist banks in determining whether individuals are capable of repaying loans, streamlining the loan process, and reducing the risk of loan default. By employing models that analyze data, words, and images, AI can offer valuable insights. A notable example is Zest AI, a company that leverages AI technology to aid lenders in their loan operations.
Zest AI is a company that employs AI to enhance lending solutions for banks and credit unions. They assists banks in evaluating the creditworthiness of borrowers, automating loan approvals, and minimizing default risk by utilizing data-driven models, natural language processing, and computer vision technology.
Zest AI also helps banks build and manage their own AI models with a codeless management system called Zest Model Management System. This system enables banks to establish logic, customize UX, and configure calls to action for different customer segments and campaigns. Moreover, it helps banks ensure their models comply with regulations and perform optimally by providing validation, documentation, and monitoring capabilities.
Zest AI states that their AI technology can boost approval rates by 20-30%, lower charge-offs by 30-40%, and accelerate credit decisions by five times. They also assure improved customer experience and fairness by presenting a comprehensive risk overview and decreasing false positives by 75%. In January 2022, Zest AI secured millions in growth funding, aiming to expand globally and enhance its product range.
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Predictive Analytics and Personalization
Banks use AI to analyze data from different sources like payments, social media, and websites. This helps them know what clients are looking for and requiring. By doing this, banks can offer customized services, improve their pricing and advertising, and make sure customers are happy. For instance, Capital One uses AI to give customers helpful financial advice and special deals. With AI, banks can improve their services and relationships with customers.
Capital One, a bank that uses AI technology, provides personalized financial guidance and exclusive deals for its customers. By analyzing data from transactions, social media, and web browsing, it learns about customer behavior, preferences, and needs. Using natural language processing and machine learning, Capital One creates engaging content and detailed information tailored to different customer groups and marketing campaigns.
Capital One uses a chatbot called Eno, making it the first natural language SMS chatbot offered by a US bank. Eno is available 24/7 and can engage with customers, address their inquiries, offer personalized suggestions, and improve their overall banking experience. For instance, Eno can assist customers in making bill payments, checking their account balances, monitoring their experiences, and receiving fraud alerts.
Capital One claims that their AI-powered technology has the potential to enhance customer engagement, boost account and balance growth, and increase customer satisfaction. Additionally, they claim that it can decrease customer churn and reduce call center expenses. Capital One has a track record of AI advances is the first U.S. bank to utilize cloud-based infrastructure.
Robo-advice and Wealth Management
Artificial intelligence in banking can help banks provide customers with investment and financial management advice, especially for those with limited funds or no access to traditional banking services. It can also assist banks in making informed decisions regarding fund utilization and trading. For example, Wealthfront is one company that uses AI to support customers in managing their money.
Wealthfront is a company that uses AI to offer automated investment advice and portfolio management. They caters to customers who may be underserved or unbanked. Wealthfront has a minimum investment requirement of Wealthfront has a minimum investment requirement of Wealthfront has a minimum investment requirement of Wealthfront has a minimum investment requirement of $500 and charges an annual fee of 0.25% based on the assets under management.
Wealthfront employs data from multiple sources, including transactions, social media, and web browsing, to comprehend customer behavior, preferences, and needs. Additionally, it harnesses natural language processing and machine learning to produce personalized content and captivating insights for diverse customer segments and campaigns. One tool it utilizes is the Engagement Builder, which enables the creation and administration of custom content and insights through a codeless management system.
Wealthfront also helps customers optimize their asset allocation and trading strategies. They provide various services, including automated investing, retirement planning, tax-loss harvesting, and a portfolio line of credit. Additionally, they offer help with diversifying portfolios and implementing efficient tax optimization strategies.
Wealthfront claims its AI-powered technology can increase customer engagement, account and balance growth, and customer satisfaction. Additionally, this innovative platform effectively minimizes customer churn and reduces call center expenses. With a rich history of AI-driven innovation, Wealthfront proudly stands as the first U.S. bank in the cloud.
Challenges And Considerations For Banks
Artificial intelligence in banking can improve the customer experience but also have some problems. One of the main problems is keeping customer data safe and private. Banks should ensure that their chat system is safe and that no one can see or use customer data without permission.
Another problem is teaching an AI model to understand the words and terms used in banking. Banks should give good training data and connect the model with their other systems to ensure it can give correct and suitable answers to user questions.
One additional challenge is getting customers to use the chat system. Banks should ensure that customers are aware of the chat system’s benefits and are comfortable using it. This will include making improvements to the system’s design and offering detailed use instructions.
The power of AI to work with language and customer data has huge potential to make banking and financial services better for customers. With AI, users can enjoy a faster, more personalized, and easier journey.
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Artificial intelligence in banking can potentially enhance banks’ customer experience, efficiency, and profitability. It can assist with tasks like approving loans, detecting fraud, improving customer service, personalization, and wealth management. AI also helps banks navigate digital challenges such as increased competition, changing customer expectations, and stricter regulations. However, implementing AI poses challenges for banks, including data security, training AI models with banking language, and promoting customer adoption of AI-powered chat interfaces. Therefore, banks must carefully incorporate AI into their offerings to deliver a more personalized, convenient, and satisfying banking experience.
