The transformational impact of artificial intelligence in financial services has been felt in several areas. Small banks and lending institutions as well as large fintech firms now tap into the potential of smart automation in transactions and other AI applications. Contrary to the common belief, the penetration of AI in these sectors would support human workforce and not replace it. Also, this helps in reducing the stressful tasks in the daily workload of people working in financial services.
Conventional banking processes and the problems
There is nothing wrong with conventional banking except that some processes become tedious with the ever expanding consumer base. This leads to human errors in some cases and inconvenient delays in others.
- Keeping up with regulatory compliances feels like a terrifying thing for some businesses
- Others find it hard to keep up with the volatile market trends
- Competitive strategies adopted by some also make it difficult for banks with traditional processes to retain their customers. People now prefer digital banking and other advancements in financial services.
To overcome all these challenges and more, artificial intelligence comes as a boon
AI applications in financial services
Faster and more reliable credit checks
From approving a loan application to granting the suitable credit cards, there are several places where banks and lending institutions need to perform underwriting checks or credit checks. This cannot simply be understood for the credit score of the applicant. There are several strategies to help improve the score but these do not always make up for the fact that some applicants are bad bets to grant loans. From consistent delays in repayment to missed instalments there are several types of problems that will affect the performance of the financial institution. AI comes to the rescue. It helps in speeding up the process of background verification. When healthy patterns are fed into the system, it can then identify anomalies that indicate that the lender is possibly not a party who would repay the loan as intended. All this can happen without human errors. And with the intervention of machines it is possible to do this in minutes against days as in the case of traditional underwriting checks.
This is beneficial both to the financial institutions and the customers. For the customers, this can be a huge plus as the banks can process their loan or credit card applications faster. And for the banks it is a benefit because they are safeguarded from approving loans to high-risk lenders.
Better financial portfolio recommendations
As more and more customers understand the need for a good investment portfolio, they seek the help of financial institutions for recommendations. No two cases are similar when it comes to credit. Artificial intelligence helps in tapping into the digital data reserves that talk about the income, expenditure and current credit performance of the customer. With this the system can analyse the spending patterns and come up with suggestions on where to save money and where to invest them instead. Investment consulting services have now become so much more accurate in their processes thanks to the use of AI.
Personalization in all its forms
Personalization does not always have to be an aspect associated with mobile banking and web-based financial transactions. Some customers might like it if they have everything digital, from opening an account to making and tracking transactions. But there are others who like a hybrid approach. They might prefer visiting the physical bank branch for specific transactions. A mix of traditional and modern data can bring a bunch of hurdles. This is where the impacts of artificial intelligence in financial services become better visible.
Machine learning models that are less rigid when it comes to dataset types can make it easier to streamline all the data input streams. With this it is possible to make all relevant data of each customer accessible from the system, even at a physical bank branch. Customers can pick exactly from where they left and have an updated record of all transactions taking place online and at bank branches. Such seamless banking experience would be the practical manifestation of personalization in financial services.
For the proper utilisation of artificial intelligence in financial services, each organization has different strategies. Irrespective of the approach, the truth remains that this is a productive disruption in a system heavily reliant on traditional processes. Businesses that have accepted this change are the ones that are emerging as trendsetters in today’s competitive world.