How Artificial Intelligence Is Transforming The Finance Sector
Artificial intelligence is a disruptive technology that has positively affected all aspects of businesses across sectors. Read how it is transforming the finance sector.
Millions of customers. Billions of transactions. The trillions worth of assets. The finance sector, as we know it, is the propelling force of the global economy and the world we live in. In the 21st century, with the advent of digital transformation, the sector has also undergone a sea change. What used to work in the previous century is no longer feasible for the digital generation.
Take, for instance, the change in customer behavior. Accountholders rarely visit banks for day-to-day transactions. Banks have restructured their operations and services to cater to the modern needs of customers as well. It is at this juncture that a new form of transformation is taking shape. It is Artificial Intelligence. Chatbots, Robotic Process Automation, are some of the AI forms that are gaining traction in the finance sector.
In fact, AI is poised to give the banking industry an aggregate potential savings of $447 Billion by 2023.
Now here is the million-dollar question? How exactly are these technologies reforming the sector? That forms the premise of this blog.
1. The convenience of instant personalized support
Compared to other industries, the banking and financial sector has always been considered to be lagging behind in customer service. In the current digital age, customers expect banks to provide customer support not through the conventional in-person mode but through digital mediums.
Chatbots and live chat software have become the first point of contact for customers who are looking for customer support. Chatbots are essentially Artificial Intelligence programs that work based on preset rules. Advanced chatbots can also be integrated with deep learning capabilities that enable them to learn continuously from customer conversations and improvise their customer service.
The primary advantage of using chatbots for customer service in the finance sector is this: they offer convenience and also instant personalized support. In fact, they have also proven to be capable of increasing sales conversations by 35%. All said, they are an ideal fit for the finance sector, be it for customer service or for sales.
2. Reliable risk assessment
Players in the finance sector, typically banks and financial institutions are governed by statutory regulations applicable within their own physical frontiers. Compliance with these regulations becomes tedious when the services are rendered across a huge market sprawling across multiple geographies.
Even with the best minds for, accounting and risk assessment in the team, ensuring total compliance while dealing with securities, insurance products, debt, and similar financial products can be difficult.
It is here Artificial Intelligence can help. It helps improve reliability in risk assessment by introducing systemized frameworks that keep manual error out of the way. According to McKinsey, this could generate a value of more than $250 billion in the banking industry.
3. Cost-savings in Front- and middle-office operations
Most of a bank’s critical operations happen in the front office and middle-office. It is here that customers are serviced, their queries are addressed, and the ideal customer experience delivered. In the past, banks resorted to manual operations to cater to their customer needs.
But, given the scale at which operations happen today, it is no longer feasible to manually operate a bank’s front and middle-office operations. It is here that Artificial Intelligence makes its entry as a problem-solver.
With its pre-defined logic and ability to continuously learn from interactions with live transactions, an AI system can easily automate the operations at scale. This will result in enhanced productivity, reduction of errors, and also maximized cost-savings.
4. Intelligent personal finance management
Not every average user can handle spreadsheets, especially for personal financial management. It is one of the reasons why mobile apps and web-based applications have become popular for personal financial management.
Artificial Intelligence and Machine Learning are adding a layer of convenience to these mobile apps. The purpose of AI in personal financial management is simple. On a daily basis, we scatter tidbits of financial information, which if compiled together and analyzed, can throw light into better ways of organizing our finances.
In fact, there are wealth management tools that are powered by AI that help users to quantify their probable savings and passive income earnings based on their current spending patterns. With every single day, we are getting closer to autonomous finance becoming a reality.
According to Forrester, autonomous finance is “Algorithm-driven financial services that make decisions or take action on a customer’s behalf.”
Within autonomous finance, an AI-based chatbot assists a customer in signing up for a financial service, understand how it works, and even get more details relating to security and so on.
5. Fast-tracked credit decisions
One of the biggest challenges for financial service providers is that — providing credit to the right extent, to the right borrower, and for the right tenure. A slight misjudgment can cause the loan arrangement to go sour, resulting in heavy losses.
Until recently, the credit-worthiness of an individual was determined by banks by checking their historical and current earnings, generally accepted lifestyle expenses, previous repayment history, and so on. Needless to say, it is a serious process consisting of several logical steps and strenuous data compilation.
Can Artificial Intelligence lend a helping hand here? Turns out, yes. AI can help bankers and financial institutions to create predictive models of individual income earning capacity and repayment capacity by connecting several data points. They can fast-track the pace with which credit decisions are taken. This would enable in identifying the accounts that can yield good returns and those which have a high probability of turning into bad and non-performing loans.
Conclusion
Artificial Intelligence is introducing sweeping reforms across the finance sector. The reforms are so drastic that in a few years from now the finance sector as we know it today might become completely unrecognizable.
The common misconception about AI is that it will kill jobs across all industries. On the contrary, the fact is, AI is going to make tasks easier for finance professionals. Of course, it will eliminate some jobs in the process. However, it will also create new opportunities.
For example, customer service reps may not be much in demand once chatbots become the norm for customer service. However, customer service professionals would still be required to train and make chatbots presentable for customer service.
In a similar fashion, there are several ways how AI will reform the finance sector. It will fast-track existing processes and give them a renewed rigor that was missing in manual processes. In the process, it will also reduce the volume of errors and also maximize productivity and operational efficiency for banking and financial institutions. All said, AI is a harbinger of good times for the finance sector.
Do you know of any other ways AI will make a difference to the finance sector? Let us know.
