How AI Changes The Banking Industry

AI will redefine traditional banking, making it more efficient, secure, and innovative. AI-driven chatbots and virtual assistants will streamline the front office, personalize customer service, and improve banks' top and bottom lines, experts said.

"AI is going to have a tremendous impact on retail banking – from developing new products for customers that will better fit their financial needs to driving more personalized and consistent engagement with new and existing customers," Chris McGee, managing director of the Financial Services Consulting Practice at AArete, a U.S.-headquartered global management and technology consulting firm, told International Business Times.

Arsalan Vossough, CTO and Co-Founder of BetterAI, explains how AI is transforming the banking and financial industry and its pivotal role in several key areas.

"Its most notable impact is in operational efficiency, where AI automates manual processes, enhances data analysis, and informs investment decisions. This makes financial operations more streamlined and significantly improves risk management by identifying suspicious activities and anomalous transaction patterns. AI's role in elevating customer service is equally transformative," Vossough said.

"AI will dramatically reduce the required staff and drive down the cost of banks' middle and back offices," added Suresh Ramamurthi, the Chairman of NetXD. "This will lead to a streamlined front office and delightful customer service handled by AI. Banks may shed as much as 80% of their middle and back-office staff while improving efficiency."

Billy Roberts, CEO of Wedge, mentions several examples of banks already using AI to enhance their operations and services, like JPMorgan, Bank of America, Citigroup, Wells Fargo, HSBC, Deutsche Bank, and Goldman Sachs.

"They are using AI for a range of applications such as cybersecurity, fraud detection, virtual assistants, decision-making processes for loans, credit decisions, automation of lending processes, and enhancing customer service through chatbots and next-best-action recommendations," Roberts stated. "Many smaller banks are also incorporating AI into their operations."

Still, McGee believes it will take several years for AI systems to be implemented and for bank customers to realize the difference.

"One of the core reasons is ensuring effective risk management across AI design and implementation activities," he elaborated. "This balance between embracing AI while delivering effective risk management is critical. Any bank looking to leverage AI that will impact its external customers and financial markets must take time to ensure all potential risks are effectively understood and addressed, especially for instances where AI would be taking the place of any human oversight or interaction."

Branavan Selvasingham, VP of AI and Automation at Zafin, sees AI personalizing banking experiences. "By analyzing vast amounts of data from client interactions and global information streams, algorithms can tailor financial products and advice to individual customer needs, helping them make smart financial decisions," he explained. "This level of personalization, combined with the speed and convenience of automated services, will significantly enhance customer satisfaction."

Meanwhile, Ramamurthi sees AI boosting banks' top and bottom lines. "The top line will grow much more rapidly after the complete transformation as the bank can take away market share from others and its ability to offer hyper personalized services to its customers," he added.

McGee believes the timing of AI adoption is critical. "Those banks that adopt AI early and drive meaningful interactions with customers will certainly see a boost in revenue and income, especially as their customer base grows," he explained. "Those banks that lag will experience disruption across their business as they work hard to defend against other banks looking to entice new customers to change their primary bank."

"Retail banks have been working hard to map and refine their customers' journeys for years continuously," added McGee. "AI enables them to establish far greater precision and detail in mapping these journeys, allowing them to make far better connections with their customer base moving forward."