Technology is playing a bigger and bigger role in everyday life — though not in the way films like The Terminator and WALL-E would have you think. Instead, one growing dimension involves artificial intelligence (AI), which computers and machines use to help humans make decisions and solve problems.
AI has transformed 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.
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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 artificial intelligence in banking. In fact, recent data indicates that more than half of banks are using AI for common use cases, like risk management (56%) and new products and processes (52%). Four in five bank decision-makers say they’re highly aware of how AI and machine learning can benefit their industry.
More specifically, 75% of decision-makers at banks with more than $100 billion in assets say they’re currently implementing AI. Nearly half of decision-makers at smaller banks (less than $100 billion in assets) say the same thing.
The rise of online banks — with mobile apps, chatbots, and unique product offerings — is a sign that AI will continue to transform 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 continuously monitoring accounts, AI can flag unusual activity and instantly alert consumers and banks. This is an especially important function of AI as bank fraud continues to rise.
In fact, the Federal Trade Commission, or FTC, reported a 64% increase in bank account fraud (opening new checking and savings accounts) in 2021, with nearly 84,000 reported issues last year. Another 47,000+ people reported fraud with existing accounts or debit cards, electronic funds transfer, or ACH. The FTC also reported massive amounts of credit card fraud (nearly 400,000 reports) and loan fraud (more than 230,000 reports).
2. Cyber Attack Prevention
Another application of artificial intelligence in banking: how it’s used to prevent major cyber attacks. Banks can 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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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 a lot of 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 alerts set on your mobile banking app — think low balance alerts and transaction alerts — that’s AI at work. These features allow consumers to more easily monitor and manage their accounts.
AI also allows consumers to enable reminders in their banking app, like the due dates for when credit card payments are due.
5. Automated Payments
Consumers can also utilize a bank’s AI to automate their banking. Within a bank’s mobile app, consumers may be able to schedule automatic payments and recurring fund transfers. For many, this can help avoid late fees and the resulting drop in their FICO credit score.
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.
7. Better Customer Experience
Overall, consumers may have a better experience at banks using artificial intelligence. AI makes traditional banking processes faster and more convenient. For example, consumers can now open bank accounts online or even on their phones. Everyday banking — from mobile check deposit to fund transfers — can now be done from the couch, offering flexibility and convenience to consumers.
Another win for customer experience? AI can also reduce the risk of human error in banking transactions.
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8. Loan and Credit Decisions
AI allows 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 also allows 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.
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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 can rely on predictive analytics, thanks to AI. This can allow 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. Natural language processing allows AI to analyze regulations to ensure compliance.
While banks have humans working in their compliance departments, AI can ensure more accuracy and help reduce compliance-related costs — up to 50%.
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) makes banks more efficient. AI can handle repetitive tasks and free up employee time to do more impactful work. This may save banks a lot of money on time-consuming tasks and expedite their ability to go to market for new products and offerings.
Should Banks Implement AI?
Artificial intelligence for banking is already making strides. More than half of banks have implemented AI in some capacity, though it’s more common at larger banks. Because AI can make banking safer, more convenient, and more profitable, artificial intelligence could be a value-add for banks that have not yet implemented it.
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Artificial intelligence has had a huge impact on the way we live. When it comes to banking, AI can make the experience safer and more convenient for consumers and more profitable and efficient for the banks themselves.
Are you looking for a new online bank account fueled by artificial intelligence? SoFi’s Checking and Savings Account offers consumers the convenience and security of AI, with features like early direct deposit, transaction alerts, and mobile check deposit. Plus, the combination of no monthly fees and a super competitive APY could help your money grow faster.
How many banks use AI today?
A recent report by Business Insider indicates that more than half of financial services companies utilize AI in areas like risk management (56%) and new products and processes (52%). Also, three in four financial decision-makers at large (>$100B in assets) banks say they are currently implementing AI strategies.
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 helps banks prevent fraudulent account activity and also protects banks against cyber attacks. With AI, your money and your personal information should 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 can 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 this year to hold financial services companies accountable, requiring that they explain to rejected applicants why they are being denied.
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