Subhashree Assignment
Subhashree Assignment
ABSTRACT
All that AI has achieved is to strengthen the relation with customers and
precision as well as effectiveness of managing the banks and the finance. Consequently, this
paper looks at how AI is embraced by the banking and finance industry; credit scoring, fraud
detection, investment management, and customer service. It aims at identifying the potential
benefits and difficulties that are likely to accompany the integration of AI into the financial
sector based on a critical review of the existing body of literature.
INTRODUCTION
Everyone thinks that Artificial Intelligence in banking will have a drastic impact
on the industry in the next five years, especially after ChatGPT’s success, which is an AI chat
bot that uses natural language processing to generate human like responses to questions and
prompts. This is because of a huge gap caused by limited human abilities. If we look further, we
can see the distruptive perspective of AI that will go well beyond banking, completely
transforming digital customer experience even providing superpowers to mankind.
Yes, it hasn’t happened yet, but we should start thinking already today about how
it could affect our businesses tomorrow.
The banking sector has seen a significant transformation as a result of the use of
AI. Artificial Intelligence has revolutionized traditional banking practices by utilizing its
capacity to handle large amount of data, identify trends, and make wise choice. It has broad
applicatiton in banking that can yield benefits including improving decision making,
productivity, lower costs and improved client satisfaction.1
Chatbots, which are always available and can manage several customer
contacts at once, have made a big difference in the customer experience by guaranteeing timely
1
M. Doumpos, C. Zopounidis, D. Gounopoulos, E. Platanakis, and W. Zhang, “Operational research and
artificial intelligence methods in banking,” Eur. J. Oper. Res., vol. 306, pp. 1-16, 2022.
and personalized support. Higher customer satisfaction and greater customer loyalty are the
outcomes of this change2.
USE OF AI IN BANKING
Globally, banks are already starting to adopt AI at a massive scale. According to UBS
evidence lab report4, 75% of respondents at banks with over USD 100 Billion in assets say they
are currently implementing AI strategies compared to 46% at banks with less than USD 100
Billion in assets. A Microsoft Asia and IDC Asia /Pacific study specific to the Financial Services
Industry (FSI) found that organizations in the Asia-Pacific that deploy AI expect to see 41%
improvement in competitiveness in 3 years5
2
G. Luger, “Artificial Intelligence: Structures and Strategies for Complex Problems Solving,” Fourth Edition,
Addision Wesley, 2002.
3
S. Russell and P. Norvig, “Artificial Intelligence: A Modern Approach,”Second Edition, Prentice-Hall, 2003.
4
https://www.businessinsider.in/finance/news/the-impact-of-artificial-intelligence-in-the-banking-sector-how-ai-
is-being-used-in-2020/articleshow/72860899.cmshttps:/www.businessinsider.in/finance/news/the-impact-of-
artificial-intelligence-in-the-banking-sector-how-ai-is-being-used-in-
2020/articleshow/72860899.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
5
Asia-Pacific’s FSI Organizations with AI Expect 41% Improvement in Competitiveness by 2021,
https://news.microsoft.com/apac/2019/09/24/asia-pacifics-fsi-organisations-with-ai-expect-41-improvement-in-
competitiveness-by-2021/
AI APPLICATIONS IN INDIAN BANKS
India is home to SBI, India’s largest public sector banking institutions which boasts
420 Million combined customers and it initiated it’s AI journey from the perspective of both
employees and customer ID. Chapdex, another successful participant of the first Hackathon, has
created an AI based solution that is being leveraged by SBI. SBI head of innovation Sudan
Baraokar told Emerj.
HDFC BANK
ICICI BANK
ICICI Bank, the country’s second largest private sector bank by assets has automated a
staggering 200+ business process spanning operations across various functions of the
organization using software robots. ICICI appears to be pointing towards what many referred to
as “robotics software”, which is essentially a specific type of software that typically deals with
the automation of office works.
AXIS BANK
Axis bank had as recently the launch of access pay, an app based money transfer and
payment application outside of court transactions features along with announcement around first
AI & NLP (Natural Language Processing) enabled app in India called conversational banking to
avail various transactions both financial and non-financial.6
6
https://emerj.com/ai-sector-overviews/ai-applications-in-the-top-4-indian-banks/
REQUIMENTS OF AI ADOPTION IN BANKING
The adoption of AI is an essential point for all companies and banks have not
been different from this topic, at Mckinsey global survey. The study went on to add that 68% of
the respondents with AI deployed in a given function indicated moderate or high value derived
from that use case; just one-fifth (21%) reported having embedded AI across multiple business
units/ functions. Even as a Indian bankers are interested in turning to AI, almost 77% agree that
most businesses have low or more arrangements for handling large scale use of AI.
Personalized Offer
With AI adoption, we get a highly accurate customer credit score based on not
only the profile of our bank and its previous history regarding this particular person but also
social profiles with offline activity to offer individually prepared proposals for each client.
Investment
AI will analyze multiple business and market factors to forecast business success to
take human irrationality out of investment decisions.
Security
AI will move most of the verifications to the background. This will move it closer to
people without the need for confirming identification at every step and brings trust to digital
banking.
Advisory
Using AI to calculate forecasts based on individual profiling and big data processing
will provide insights into the struggles and the needs of every single customer. Such forecast will
enable them to regain control over their finances by making the right decisions and executing
healthier financial behavior7.
7
https://www.theuxda.com/blog/future-of-ai-in-banking-ux-upgrade
PRACTICAL REAL TIME EXAMPLES OF AI IN BANKING
Armed with this AI driven contract intelligence technology called COIN, JPMorgan
Chase, one of the world’s largest multinational banks, set out to scale. This uses a machine
learning and natural language processing techniques to analyze legal documents, such as loan
agreements. It saves a lot of manual labor and processing time as this technology goes through
complicated contracts and extracts important information, enhancing efficiency many times
over8.
It’s named Erika a chat bot utilizing the line of Artificial Intelligence that better
improves customer service in wells Fargo. The AI response to questions posted by Erika. She
provides account information and helps client with simple transactions while interacting with the
bank through the website and mobile app. Because the AI features of the chat bot, customers
could get fast, personalized service accessible to them at any time of day or night and it would
mean the experience will be much better10.
8
V. D. Soni, “ROLE OF ARTIFICIAL INTELLIGENCE IN COMBATING CYBER THREATS IN BANKING,” International
Engineering Journal for Research & Development, 2021.
9
A. Marouani, “The Impact of Artificial Intelligence on Customer Behavior in Banking Systems,” 2019.
10
R. d. Silva, “Calls for behavioral biometrics as bank fraud soars,” Biom. Technol., bol. 2021, pp. 7-9, 2021.
WHAT DO BANKS NEED FOR AI ADOPTION
AI Strategy
Data Collection
An organization must invest in the creation and storage of large amounts of data
used to train AI algorithms to exploit AI’s huge potential. The quality and the quantity of the
data recorded are stored by these companies determine the dividends yielded by AI.
Talent Creation
Internal digitization
The banking eco system works on trust. It is therefore a crucial aspect that bank
should invest heavily in cyber security and built their AI systems. Considering the sensitivity
nature of data processed by banks, they are at the risk of suffering data branches from onlin
hackers. Banks have to learn to start investing significantly in cyber security collaborations with
technology firms regarding the detection and plugging of potential threads.11
Trained Manpower
Multiple Languages
FUTURE SCOPE
The promise and hope of transformation from the future of AI in banking service
make up an important part of the industry’s face that is set to change. As the AI technology
continues to grow and gain more familiarities, banks firms position themselves in a very
11
McKinsey; AI Adoption advances but foundational barriers remain; https;//www.mckinsey.com/featured-
insights/artificial-intelligence/ai-adoption-advance-but-foundational-barrier-remain.
exclusive place to lead growth opportunities, leverage customer experience, and reduce risk
through AI.12
CONCLUSION
REFERENCE
12
https://www.resrarchgate.net/publication/380119377_Artificial_Intelligence_in_Banking_and_Finance.