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5 Top Benefits of Artificial Intelligence for Banking
1. Risk Management
Risk management is an inherent part of banking. Financial institutions generate the profits they need to survive by taking informed financial risks and the aim of risk management is to control this process.
Traditionally, this task was carried out by banking employees where long and arduous research was undertaken to locate areas where losses were more predictable and the fallout limited.
Fortunately, there’s a better way – AI.
AI algorithms have long-since surpassed human performance for analysing complex data sets and making predictions based on this data.
Machine learning, in particular, has shown real promise in this area, as with each successful and unsuccessful prediction, the algorithm learns to adapt and improve the answers it gives without being explicitly programmed to do so – best of all, it frees up employee time, so they’re able to focus on more strategic tasks.
For financial institutions, employing an AI to help forecast where risks can be taken and where they can’t to a higher degree of accuracy is hugely important. Not only will it provide a competitive edge over the competition, but it also ensures that customers, shareholders, and partners remain satisfied with performance.
2. Fraud Prevention
Fraud and the financial sector have a rich and intertwined history.
From the days of Hegestratos in 300 B.C., who attempted to sink his ship to claim on insurance, to the modern era where brute force attacks, social engineering, and sophisticated malware have become the unfortunate norm – the trend has always been: where there’s money, there’s fraud.
It’s a wide-reaching problem – particularly in the financial sector. And over the last few years the nature of fraud has become more and more sophisticated and systemised.
UK Finance is the self-confessed collective voice for the banking and finance industry and, according to its 2019 Fraud the Facts report, despite the best efforts of advanced security systems and innovations in the financial sector criminals still managed to successfully steal £1.2 billion, up from £450 million in 2013.
It’s a lucrative market. But with the emergence of AI, the scales are tipping.
Using artificial intelligence and machine learning-based systems, banks can more easily identify elements of a transaction that typically indicate fraudulent activity.
What’s more, these systems can evolve over time to build new guides and rules for flagging suspicious transactions – mapping out recurring or shared transaction elements to better safeguard against future fraudulent attempts.
The prospect of AI-driven fraud prevention is so positive that recent projections estimate that AI will save the banking industry more than $1 trillion by 2030.
Billionaire philanthropist Warren Buffet once said of the stock market that “risk comes from not knowing what you’re doing.”
The same is true with asset-management.
FSI companies that are more well-informed, and make decisions based on the information they have to hand, are invariably more successful than those who fail to use every resource at their disposal to trade.
Today, AI is enabling companies to make smarter, real-time investment decisions on behalf of their investors and clients.
By leveraging AI algorithms, and tapping into data effectively, FSI companies can experiment with new strategies and broaden their focus to consider a more diverse range of assets with confidence – an avenue that was previously closed off to them.
Through this approach, risk is minimised and profit maximised. A win-win for banking institutions.
4. Personalised Banking
When the customer is king, meeting expectations is a priority – especially in consumer-facing verticals. Customers expect personalised services, and the financial services market is not exempt.
Personalisation is the vehicle through which the customer experience is enhanced – offering consumers the products they want when they want them.
AI can play a significant role in simplifying this journey.
The value of AI is that it allows FSI companies to collect data on customer spending habits, analyse it quickly, and then gain actionable info to recommend specific products, services, or loans that best match customer needs.
AI delivers a way not only to delight customers but also boost sales through targeted campaigns. For the financial institution of the future, personalisation is a must, and to implement it effectively, AI is key.
5. Employee Innovation
While AI is a technology very much in its infancy, the fears that accompanied the innovation just a year ago are starting to soften.
The main threat that AI posed to employees within the financial industry is that through a creative combination of AI and automation, their jobs would be replaced.
It wasn’t a misplaced fear. It’s now estimated that 90,000 of the 300,000 current jobs in asset management will disappear by 2025.
But rather than replacing the workforce with robots, it will revolutionise the working landscape, enabling financial services employees to do more human-required and high-level tasks.
It’s likely that, through a combination of AI, automation, and continued human interactivity, the entire FSI landscape will change. But while original fears were about how employees could be replaced, in fact it’s about how AI can be leveraged to make employees’ lives easier.
AI or Die
Artificial intelligence is a technology disrupting diverse industries across the globe – none more so than banking. Today, AI has the power to change just about every aspect of traditional banking, for both the banks and its customers alike.
While yet to develop to its full maturity, the fact remains that AI is already having a very pronounced and very real impact on the financial services market. And with constant innovations to the technology expected, the time to embrace AI is now.
Artificial intelligence is just one of the key topics being discussed at the world’s premier financial services event – Sibos 2019. HPE will be exhibiting at the event in London at stand Z141. To learn more about how we are helping leading institutions within the financial services industry accelerate business outcomes, improve customer experiences, and drive operational efficiency – visit us at Sibos 2019.