How Artificial Intelligence is Helping Banking Industry

Why it Matters: Fraud prevention is one of the main areas that banks are investing in. Machine Learning (ML) and Deep Learning (DL), both offsprings of Artificial Intelligence, are being used to improve security by using algorithms to compare vast amounts of data from many different sources and assess the likelihood of a transaction being fraudulent.

When we talk about the banking industry, there are loads of new technologies that are making waves. These technologies are disrupting the banking industry as we know it. Data science, cloud computing, biometrics, and blockchain are a few of the technologies that are taking this industry by storm.

Artificial Intelligence (AI) isno new term in the banking sector; in fact, many financial institutions have already found success with the help of AI. But how can this technology be leveraged for banking functions, you wonder? Artificial intelligence helps improve customer personalization, identify connections, and patterns that cannot be quickly figured out by humans and provides answers to several banking issues in real-time.

However, these technologies are beginning to catch fire only now. Artificial Intelligence, on the other hand, has had a profound impact on the world of banking and how it functions. The ability of a machine to replicate human efforts and evolve without requiring any human intervention whatsoever is an advancement that the banking industry desperately needed. AI is definitely the future and with respect to the banking industry, it is safe to say that the "Future is Now!"

Let’s see how AI is shaping the world of banking today:

Improves personalization

Today, customers get more attracted to companies that provide them with personalized services. Banking sector companies can use artificial intelligence to give the customers several tailor-made services and offers to suit their needs. 

Banks are also making use of AI technology to make use of robots as financial advisors, which gives automated and algorithm-based accurate financial that would best suit the client

Algorithmic Trading

Plenty of hedge funds today make use of sophisticated systems to deploy artificial intelligence models. These models learn by obtaining inputs from various sources of fluctuation in financial markets and sentiments about the entity to make decisions regarding investment on the fly. Automated AI systems are responsible for nearly 70% of the trading today. 

High-Frequency Trades are made as soon as a trading opportunity is identified based on the inputs obtained by the AI models. Different strategies are followed by different hedge funds to make trades like these. The AI model deployed must be extremely accurate in order to base your trades on the inputs from thee models.

Detecting AML patterns

AML stands for Anti Money Laundering. AML is a set of laws, regulations, and procedures designed with the intent of stopping money laundering. Money laundering is the generation of income via illegal means. 

The act of money laundering is where a money launderer covers their tracks to make it seem like the illegal earnings have come in legally. Watching ‘The Wolf of Wallstreet’ will give you a better idea about money laundering. The major banks are moving from rule-based software systems to AI-based systems. AI-based systems are a lot more robust and are the most intelligent at detecting money laundering patterns.

Fraud Detection

The area in banking where AI made its debut and had a phenomenal impact is in fraud detection. AI systems have excelled the most in the field of fraud detection. The FICO Falcon Fraud Management Solution is the earliest and best example where a software made use of artificial intelligence to combat the problem of transactional fraud and security threats. The AI models learn through tons of transactional data and discover unorthodox or fraudulent trends and activities.

Chatbots

Chatbots are automated chat systems that are AI based. Chatbots simulate human interaction and work with zero human intervention.  How a chatbot works is it identifies the emotions and context in the text and sends out what would be the most appropriate reply. 

Chatbots learn and evolve all the time. Chatbots are extensively used by banks with the aim of improving customer relationships at a personal level. Bank of America has their own financial digital assistant known as "Erica" which is AI-powered.

These are a few of the ways in which Artificial Intelligence is shaping the world of banking today. There are various live examples of Artificial Intelligence that you see today. Faster decision making, increase in revenues, better customer relationships, faster and efficient processes are all possible only with the advent of AI in the banking industry.