“AI is probably the most important thing humanity has ever worked on”
– Sundar Pichai- CEO of Google and Alphabet
The above statement is quite apt for almost all industries across the world including the banking industry. The COVID-19 pandemic has made it even more relevant. As they say, necessity is the mother of invention.
Since the beginning of this decade, most conventional banks have started partnering with fintech companies to offer modernised banking solution in order to enhance customers’ experience. The financial services industry worldwide has proved to be an enthusiastic adopter of Artificial Intelligence. The Indian banking sector is also witnessing ground-breaking changes, foremost being the rise in customer-centricity driven by new-age technologies. They are actively adopting AI not only to combat the competition but also for better growth prospects.
Why are banks banking on AI?
There are several reasons, but here are the top 5:
- Demand for better customer experience
- Increasing threat of competitors
- To reduce losses due to human errors
- To improve employee productivity
- To derive valuable insights from data
How is AI disrupting the banking sector in India?
Here are some of the use cases of Indian banks leveraging AI to enhance customer experience and improve efficiency,
- State Bank of India (SBI): SBI Intelligent Assistant, or SIA, helps customers with everyday banking tasks just like a bank representative.
- HDFC Bank: EVA (Electronic Virtual Assistant) is one of the largest Artificial Intelligence powered banking chatbot in India.
- ICICI Bank: Its AI chatbot iPal empowers customers with information and financial services. Recently, it was integrated with two of the world’s most popular voice assistant apps– Amazon Alexa and Google Assistant.
- Axis Bank: It has partnered with Vernacular.Ai to deploy its multi-lingual BOT AXAA on its phone banking IVR which will result in increased automation in customer service. In addition, Axis Aha!- a virtual banking assistant, uses artificial intelligence and machine learning to help customers do transactions and answer their banking related queries.
- Andhra Bank: The AI chatbot named “ABHi” is integrated with Core Banking Servers (CBS) of Andhra Bank to digitally engage and automate its customer support.
How exactly is AI being leveraged by banks?
- Fraud Detection- AI tools can learn and monitor behavioural patterns of users to identify anomalies and warning signs of fraud attempts and occurrences. This is very vital for banks given the heightened threat of cyberattacks. They can proactively form a line of defence to mitigate any such threat.
- Risk Factoring- Predictive analysis, which is very crucial for banks, can run on AI. It allows banks to better manage cashflow, predict rise in NPAs, anticipate demand fluctuations, and mitigate risk. Simply put, it brings actionable insights, accelerates understanding, and helps the banks to do a better risk factoring.
- Regulatory Compliance- Across the globe, banking is one of the most highly regulated sectors. Regulatory bodies make sure that banks follow strict compliance to avoid large-scale defaults. This forms a significant cost as well as higher liability for banks if not followed properly. AI-based systems help banks to stay on top of their regulatory compliance, while minimizing overall risk. Banks are using AI virtual assistants to audit and log information to various compliance and regulatory systems which helps to save time as well as cost and improve accuracy.
- Customer Service- The new-age customers have high expectations. According to them, if the money doesn’t sleep, so why should the banks? Moreover, they are spoilt for choices and do not mind switching over a bad experience. The use of conversational assistants or AI-based chatbots help banks in providing the desired standard of service to its customers 24/7.
- Personalized Banking Experience – AI chatbots that can learn about customer’s habits/behaviour. It can refer to the data from the past about transactions, offerings, credit card usage etc., and make the recommendation to the user based on the same. Such personalised consumer experiences drive up spending and creates stickiness to the product.
What’s the future of AI in Banking?
The AI technology is constantly evolving. Nobody really knows what kind of new features AI will surprise us in time. However, one thing is certain that the banks need to take advantage of the power that AI offers in order to sustain the competition. At present, Chatbot seems to be the primary AI use-case at Indian banks. But it won’t be surprising to see the banks launch advanced AI solutions in order to stay ahead in the technology adoption curve. With the increased focus on digital transformation (courtesy: COVID-19), more budgets may start flowing in the direction of AI and related technologies.
However, several experts worldwide opine that the risk of cyberattacks can arise with the wider use and reach of AI if there are no adequate measures taken to ensure cybersecurity. Thus, the banks should also focus and invest in building a comprehensive cyber defence mechanism alongside their AI initiatives to safeguard themselves from such malicious attacks.