How AI is becoming indispensable tool for banks’ survival

What will the future of banking look like? This is the question uppermost in the minds of almost every player in the industry.

Already, technology has brought about massive disruptions in the sector with fintechs giving just a glimpse into how banks will operate in the future. Yet the trajectory of transformation looks to continue intensely and persistently.

Thanks to these massive changes, legacy lenders have been compelled to recalibrate their operations and tap various forms of innovations to keep pace with the new trends in conveniences, efficiencies and effectiveness associated with fintechs. Over the recent past, expansion in the sector has ridden more on technology rather than brick and mortar, a trend set to gather more steam.  

Experts say banks that are quick enough to ride the wave of innovations and tap new cutting-edge technologies are bound to not only remain in business but to continue reaping health margins.

During the inaugural Leap 2022 global tech summit in Riyadh, Saudi Arabia, that concluded last week, it emerged that the application of Artificial Intelligence (AI) is increasingly becoming a crucial component of financial services, and provides a lifeline for lenders as competition from fintechs grow stiffer.  

The forum heard that incorporating AI and other technologies will help banks put their fingers on the pulse of consumer needs, and hence make the difference in terms of profitability.  

 “The combination of intelligent propositions and personalised experiences will set an AI bank apart from traditional incumbents,” said Rana Gujral, chief executive officer of Behavioral Signals, an enterprise software company that unravels behavioural signals from speech data.

 On its website, Behavioral Signals says it is bridging the communication gap between humans and machines by introducing emotional intelligence, from speech, into conversations with AI.

Mr Gujral said personalised banking will become more urgent going forward and called on banks to take advantage of the tools provided by the Fourth Industrial Revolution to have a deeper understanding of their customers deeper in order to provide unmatched experiences.

Technology is also a reliable instrument for banks to minimise risks. An AI-based loan and credit system, for instance, can look into the behaviour and patterns of customers with limited credit history to determine their creditworthiness. Moreover, the system sends warnings to banks about specific behaviours that may increase the chances of default.

Experts say technologies such as AI has made it possible for banks to dissect and understand even the subtle messages in customers’ communication.

“Banks need to use AI to understand human emotions, deduce speaking styles, assess human behaviours and predict interval signals generated from the tone of voices,” Mr Gujrat said

By deploying Natural Language Processing (NLP), a subset of AI, banks could reach every customer in the language they best understand, even if it is vernacular, further boosting financial inclusion in countries with huge unbanked or underbanked populations.

Petr Stransky, founder and chief executive of British dispute recovery platform iCEIBA advised financial institutions to do more in leading the way in implementing innovations towards the future of digital finance.

“We are entering an era where everything can be priced and traded in real-time. This will change how we think and act about finance,” he told Afcacia, adding that banks will need to use frontier technologies to segregate most functions and gatekeepers for different types of assets and transactions, as customers now jump into Decentralised Finance (DeFi) products such as Non-Fungible Tokens (NFTs).

The tech forum said banks ought to adopt modern software in analysing real-time data on every single detail in their banking operations while observing market trends and the changing customer preferences occasioned by the Covid-19 pandemic.

AI-driven analytics can give a reasonably clear picture of  future expectations and help banks stay prepared, especially by analysing data from external global factors such as currency fluctuations, natural disasters or political unrest which have serious impacts on banking and financial industries.

Chief executive of fintech research company Burnmark, Devie Mohan underscored the need for insurance companies to make data-driven predictions to remain in profitable business and rethink their business models.

“Insurers will need to deliver a better digital experience for both panic buyers and long-term customers,” she said.

If banks fail to adapt fast to AI and mobile banking, Ms Mohan warned, bigtech companies could soon take control of the global banking sector, with Google Pay, Apple Pay, Facebook Pay, WhatsApp Pay, Amazon Pay and Alipay all unleashing the power of Big Data analytics to create successful payment across their social networks.

“Big technology companies may become quasi banks,” she said.

IBM’s global head of strategy in banking and finance Anthony Lipp says financial services are now so digital that it’s easy to embed them in other offers, and it’s easy to enhance those offers in markets outside of banking.

“So the model that banks need to build to be competitive is one of hyper efficiency — very low cost, extreme scale. That means financial institutions have to come up with alternatives to expensive existing processes.”

AI-based systems can help banks reduce costs by increasing productivity and making decisions based on information unfathomable to a human agent.

Also, intelligent algorithms are able to spot anomalies and fraudulent information in a matter of seconds. 

Banks were also urged to deploy robotic process automation algorithms to increase operational efficiency and accuracy whilst boosting transaction speed.

A report by Business Insider suggests that nearly 80 percent of banks are aware of the potential benefits that AI presents to their sector. 

Another report suggests that by 2023, banks are projected to save Sh45 trillion by using AI apps, an indicator that the banking and finance sector is majorly relying on AI to improve efficiency, service, productivity and digital Return on Investment.

The Leap 2022 event has brought together tech leaders from across the world, making it a tech information sharing ecosystem by global players in 5G, fintech, AI, blockchain, Virtual Reality, robotics, green energy, cloud management, edtech, medtech, autonomous mobility and 4D printing.

Afcacia seeks to be a powerful tech mouthpiece, giving a voice to your products and services in a way that has never seen before.

AFCACIA MEDIA LTD