The Role of Artificial Intelligence in the Banking Industry

The Role of Artificial Intelligence in the Banking Industry

Businesses are being reshaped by digital disruption. Technology-driven industries are assessing options and creating value in new ways. A major change is taking place in the banking sector: customer-centricity is becoming more prevalent.

The technology-savvy customer expects seamless experiences from banks because of their daily exposure to advanced technologies. Banks have been expanding their industry landscape to include retail, IT, and telecom as a means of meeting these expectations. Customers can now access many banking services anytime, anywhere thanks to these advancements, but they come at a price for the banking industry.

Combined banking and IT, telecom, and retail sectors have increased the risk of cyberattacks and fraud as critical information is transferred over virtual networks. Banks’ profitability is impacted, and customers’ trust and relationships are also compromised by these incidents.

Due to the growing threat of online security threats, government regulations have become more stringent. However, these regulations have hindered banks’ ability to keep up with the digital transformation, even though they are useful for monitoring online financial transactions. International regulatory framework guidelines for capital adequacy restrict banks from investing in technology. Consequently, banks are subject to fierce competition from FinTech players, which lack capital adequacy requirements. Globally, about half of the consumers have indicated they would switch banks with these companies, according to the World Retail Banking Report of 2016.

Artificial Intelligence in Banking

Financial institutions are already able to become more accessible, efficient, and secure thanks to artificial intelligence in financial services and banking.

Additionally, financial institutions must continuously innovate to accommodate the increasingly demanding needs of modern tech-savvy clients and regulators when it comes to AI and deep learning in investment banking. AI will most likely transform money management in the coming years, so it would not be incorrect to say that adoption will change the banking industry.

1. Improved customer service

With the help of AI, businesses can better understand their customers and their behaviour based on past interactions. Through this, banks can customize their financial products and services based on their customers’ needs and enable them to build strong relationships with them by adding personalized features and intuitive interactions.

2. Fraud detection and regulatory compliance

Early fraud detection and comprehensive audit documentation are possible with a Decision Management System. When employees are notified that missing details are needed, or entries are unclear, third-party auditing can disrupt regular operations. It is possible for the system to be accurate, with the right software and machine learning, and to identify and disallow errors in the system as soon as they occur.

A rise in financial institution vigilance alters the behaviour of fraudsters. Rather than dealing with large sums, fraudsters have learned to work with amounts just below the detection limit. Even if criminal activity meets the prescribed requirements, it may remain undetected without proper analysis. A true advantage of artificial intelligence lies in this area. Analysing data and identifying suspicious transactions is possible with artificial intelligence. Attempting to analyse these transactions manually results in errors. Criminals are able to launder money and finance illegal activities unhindered without AI fraud detection systems.

3. A better way to evaluate investments

Banks and financial institutions generate revenue in many ways, not only from interest earnings. To earn profitable returns, they continually seek out lucrative investment opportunities. Artificial intelligence can help in this situation. Investment recommendations tailored to banks’ risk tolerance can be obtained with AI-based investment software.

Furthermore, since industry-relevant data is often difficult to interpret, it can help assess customer funding proposals accurately. It is important to remember, however, that investment funds must be decided by humans. As a result of this software, the investment analysis process is more seamless, and the decision-maker can factor in a greater number of factors.

4. Cost Reduction

A significant portion of the operating costs of the banking industry can be attributed to the paperwork its employees deal with. According to estimates, banks could save $447 billion by 2023 as a result of artificial intelligence. Automating mundane tasks and reducing the amount of time spent digitizing documents are two of how AI can save banks money.

By optimizing the efficiency of human resources, AI can reduce human errors and improve customer support in banking institutions, thereby reducing operating costs.

The banking industry is set to become increasingly reliant on artificial intelligence, according to industry experts worldwide. Machine learning will enable banks to drive operational efficiency through the combination of human and machine abilities. These enormous banking institutions will benefit from AI in the future, from fraud detection to enhancing customer service.

5. Making effective decisions

Intelligent systems that respond to data in real-time like human expertise provide optimal solutions. Their databases contain expert information stored in knowledge databases. The cognitive systems of bankers play a significant role in strategic decision-making.

6. Evaluating loans and facilities more effectively

Scores are often outdated, misclassified, and inaccurate when used to evaluate qualifying for financing. Despite this, modern technology has provided a lot more information online, allowing us to gain a more realistic understanding of someone or a company.

Even when the party, whether personal or business, does not have adequate documentation, an AI-based system can provide approval or rejection recommendations based on more variables.

One of the tricky things about the software is that it is not always clear why it makes certain recommendations. In the case of an approved application, no questions are asked. It is the institution’s responsibility to explain its rejection, however, when an application is rejected.

Despite their objective nature, systems may display bias. A configuration is only as good as the developers who built it. Fortunately, most funding requests that institutions receive are similar, and institutional bias is well known. Thus, developers are in a better position to design and update applications based on better variables.

7. Resolve issues quickly

Using AI-powered chatbots can help significantly reduce the operational costs of banks and improve customer service through quicker resolution times. With AI chatbots now, humans can reduce errors by a huge percentage by learning from experience.

8. A process for automating investment decisions

The use of artificial intelligence is also being used to support research carried out by some banks to make investment decisions. To manage their algorithmic trading systems, UBS and ING use AI systems to seek out untapped investment opportunities. Through better modelling and discovery, AI systems uncover additional investment opportunities, even as humans remain in the loop.

The financial services industry also offers many companies with robo-advisers to help their customers manage their portfolios. They provide investment advice and are always available for their clients through personalization, chatbots, and customer-specific models.


AI is expected to become a major driving force in banking shortly. As businesses operate internally and offer their customers services across devices, the Internet of Things will change everything. There is no future for banking in AI. Currently, it is present. The market will continue to be transformed by new technologies such as quantum, edge, and cloud computing as data becomes more accessible.

People, processes, and data must work collaboratively to achieve success in a holistic transformation stretching across multiple layers of the organization. It is no longer a choice but a strategic imperative for these firms to adopt AI technologies across the enterprise. To offer outstanding client services and make operations more seamless, financial institutions might not be wrong in investing in AI technologies.