Technology is playing a bigger and bigger role in everyday life. One of the most significant developments is artificial intelligence (AI), which enables computers and machines to help humans make decisions and solve problems.
AI is transforming businesses across industries, including banking. But what is artificial intelligence, and how do banks use it to improve processes for customers and employees alike?
Read on to learn more about the application of artificial intelligence in banking.
Key Points
• AI can analyze real-time transaction data to help detect and prevent fraud.
• AI may help combat cyber threats, including spam, phishing, and malware, by predicting and blocking breaches.
• Chatbots offer 24/7 customer support, handling common queries and improving convenience.
• AI automates proactive alerts and reminders for account management, helping users avoid fees.
• AI may help improve loan and credit decisions, enabling faster and more accurate assessments.
What Is Artificial Intelligence?
Artificial intelligence (AI) refers to systems and machines modeled after human intelligence. Using complex algorithms, AI can solve problems, make decisions, and analyze data on a much larger scale than individual humans.
AI represents a large body of technologies and computer science. For example, machine learning is a branch of AI that refers to a machine’s ability to learn and improve its processes over time. Another common branch of AI is natural language processing (NLP), which enables computers to process and understand language — both text and voice — in very much the way humans do.
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AI in Banking Statistics
Artificial intelligence has touched virtually all industries. Financial services, which represents nearly a quarter of the world’s economy, is no exception.
There are plenty of examples of AI in banking. According to 2024 research by PYMNTS, most banks and financial institutions are using AI or plan to do so. More specifically, 72% of finance leaders say that their departments are using AI for common use cases, such as risk management (64%), fraud detection (64%), investment management (57%), and automation (52%). In addition, 42% of chief experience officers feel confident that AI can improve customer onboarding, while 25% mainly plan to use AI to improve customer experiences.
The rise of online banks — featuring mobile apps, chatbots, and innovative product offerings — is a sign that AI will continue to reshape the banking experience.
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12 Examples of Artificial Intelligence in Banking
It’s clear that AI represents enormous opportunities for banks willing to invest in it. But what can it specifically do for the customer and for employees? Here, you’ll learn 12 ways that AI applications in banking are evolving and benefiting users just like you.
1. Fraud Detection
One of the biggest examples of AI in banking is fraud detection. By analyzing vast amounts of transaction data in real time, AI can learn from historical data to detect subtle signs of bank account fraud, such as unusual spending behavior, login attempts from unfamiliar locations, or rapid, repeated transactions. These systems have the potential to flag suspicious activity instantly, enabling banks to take immediate action, such as sending alerts to customers or freezing accounts.
By automating detection and response, AI can reduce human error and help banks safeguard consumer data and financial assets more efficiently.
2. Cyber Attack Prevention
Another application of artificial intelligence in banking: how it’s used to prevent major cyber attacks. Banks may use artificial intelligence to combat spam and phishing attempts, protect data, identify malware, establish multi-factor authentication, and even predict breaches before cyber criminals launch their attack.
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3. Chatbots
When you think of artificial intelligence for banking, you may first envision chatbots — and that makes sense because they’re pretty standard at banks today. Chatbots allow customers to get help 24/7, even when banks are closed.
Chatbots save banks money, which they may then be able to pass on to customers via higher annual percentage yields (APYs) and lower fees. Common chatbot uses for banks include responding to balance inquiries and fund transfer requests.
4. Alerts and Reminders
If you have predictive alerts set on your checking account, such as low balance warnings or reminders of upcoming bills — that’s AI at work. These features are based on transaction history and patterns, allowing customers to spend less time monitoring and managing their accounts.
Early notifications about potential overdrafts, unusual fees, or better product options can also help consumers save money and make better financial decisions.
5. Automated Payments
While basic autopay (such as automatically paying your cell phone bill each month) doesn’t require AI, more advanced features — like intelligent scheduling, spotting duplicate payments, and alerting you when a free trial turns into an automatic payment or a subscription amount increases — often rely on AI behind the scenes.
6. Robo-Advisors
Many banks now offer robo-advisors. While some investors may still prefer human advisors, robo-advisors can be advantageous. They use AI and complex algorithms to invest consumers’ money according to an individual consumer’s goals and risk tolerance. Using a robo-advisor generally costs less than working with a traditional financial advisor.
7. Better Customer Experience
Overall, consumers may have a better experience at banks using artificial intelligence. AI can make traditional banking processes faster and more convenient. For example, consumers can now open bank accounts online or even on their phones. Chatbots may guide users through the application process, while AI algorithms might pre-fill forms using existing data and ensure compliance with regulations efficiently.
Many banks also use AI-enhanced biometric authentication, like fingerprint or facial recognition, to enhance security and simplify login processes.
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8. Loan and Credit Decisions
AI can help lenders to more quickly and accurately make credit decisions. If you’ve ever applied for a credit card and gotten instant approval, it’s likely that artificial intelligence, not a human, reviewed your creditworthiness and made the decision.
AI can also allow banks to more easily review consumers with limited credit histories by looking at other data that human decision-makers couldn’t analyze as quickly or easily.
9. Business Decision-Making
AI can analyze massive amounts of data and make predictions based on that data. From market trends to new product ideas, banking executives and leaders may use AI for predictive analytics. This can help them to make sound decisions about the business while mitigating risk.
10. Compliance With Banking Regulations
Banks must comply with strict regulations in every country where they operate. Regulations are constantly evolving and are complex by nature. AI has the potential to help in this area by continuously scanning legal databases, regulatory websites, and news sources to track changes in laws and alerting compliance teams about updates and deadlines. This can help reduce the manual workload involved in staying current.
11. Data Collection
Many businesses are drowning in customer data nowadays. As with any industry, AI can help banks collect and analyze their data more efficiently. This data can then enable banks to make better decisions that reduce costs and improve the user experience.
12. Process Automation
Robotic process automation (RPA) in banking involves the use of software “robots” or “bots” to automate human actions on computers, such as data entry and invoice processing. This frees up human employees for more complex and customer-focused work. Now, some banks are using AI to enhance these bots with capabilities like fraud detection and intelligent decision-making. AI-powered RPA can help streamline operations, reduce costs, and improve accuracy across various banking functions.
Should Banks Implement AI?
Artificial intelligence for banking is already making strides. More than two-thirds of banks have implemented AI in some capacity, though it’s more common at larger banks. Because AI can help make banking safer, more convenient, and more profitable, artificial intelligence could be a value-add for banks that have not yet implemented it.
The Takeaway
Artificial intelligence has had a huge impact on the way we live. When it comes to banking, AI has the potential to make the experience safer and more convenient for consumers and more profitable and efficient for the banks themselves.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
How many banks use AI today?
A 2024 report by PYMNTS indicates that more than 70% of banks and financial institutions are using AI for common use cases, like risk management (64%), fraud detection (64%), investment management (57%), and automation (52%).
What is the most important feature of artificial intelligence in banking?
Artificial intelligence offers a wide range of features for banking customers, but perhaps the most important is related to security. AI can help banks prevent fraudulent account activity and also protect banks against cyber attacks. With AI, your money and your personal information may be safer.
What are the pros and cons of AI in banking?
Using AI applications in banking offers several pros: It can make banking safer, faster, and more convenient for customers. AI may also add efficiency to business processes and allow for better decision-making. The largest criticism of using artificial intelligence for banking is that the new, tech-led credit approval processes could lead to discrimination. The Consumer Financial Protection Bureau has taken steps to hold financial services companies accountable, requiring that they explain to rejected applicants why they are being denied.
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