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Realising the Power of AI to Transform Banking

June 27, 2024

  • AI
  • AML Compliance
  • Banking Transformation

Rajan Nagina - Head of AI Practice, Newgen Software Inc.
Rajan Nagina – Head of AI Practice, Newgen Software Inc.

First things first – are banks ready for the artificial intelligence (AI) revolution?

By Rajan Nagina – Head of AI Practice, Newgen Software Inc.

Banks globally are looking to find the answer to this big question while ensuring enhanced customer experience. Modern customers have become more demanding than ever and expect round-the-clock attention and personalized experiences. The evolving expectations of customers are compelling banks to integrate AI into their day-to-day operations.

A 2023 report by Cornerstone Advisors stated that around 18% of surveyed banks wanted to develop a digital transformation strategy this year. The Central Banking FinTech Benchmarks 2024 report claimed that 56.8% of surveyed financial institutions have started relying on machine learning (ML) and AI tools.

The Increasing Adoption of AI and GenAI

Over the years, AI has proved its potential in streamlining operations, enabling intelligent automation, and providing real-time insights, making it an indispensable tool in the financial landscape. The new-age technology is set to tackle the pressing challenges surrounding modernizing legacy systems, data stored across disparate locations, lack of collaboration amongst users, and budget constraints.

Generative AI (GenAI) has also found a special place in transforming banking operations – from detecting fraud to delivering tailored services. McKinsey’s 2023 Banking Report said that GenAI could enhance the productivity of banks by up to 5% and reduce global expenditures by up to a whopping $300 billion.

The International Data Corporation (IDC) claimed that the global AI software market will reach a staggering $251 billion by 2027. In the banking sector, the numbers have been equally impressive. By 2027, the AI market in banking is anticipated to surge to $27.76 billion, with a notable growth of 32.5%.

AI for Gaining a Competitive Edge

Banks that embraced AI have been thriving in the current competitive market. By utilizing AI-driven technologies, banks can deliver superior customer experiences that are personalized and seamlessly integrated across various touchpoints. From intelligent chatbots to advanced data analytics, AI empowers banking users to anticipate and cater to specific customers’ needs, setting them apart in a competitive market.

Use case:

Tailored financial services: With consumer behavioral patterns, banks can recommend specialized financial products/services. AI analyzes the data to personalize customer experiences, streamline communications, and tailor product offerings.

AI for Driving Operational Excellence

AI enhances efficiency and minimizes operational costs by optimizing processes, such as account opening, lending, and helps in meticulous compliance management. Moreover, AI-powered decision intelligence aids in strategic functions like portfolio management and risk assessment, enabling banks to make informed decisions swiftly and accurately.

Use Case:

Efficient content management: GenAI tools redefine content management in banking by automating document classification, data extraction, summarization, and content generation. It streamlines processes, enhances accuracy, and accelerates decision-making.

AI for Data Management

AI helps in updating legacy applications and integrating APIs smoothly, resulting in a flexible IT environment. With AI-driven analytics, banks can extract valuable insights from their data for strategic planning and personalized customer experiences. This approach optimizes performance, scalability, and cost-effectiveness while ensuring a seamless and agile IT ecosystem.

Use case:

Data integration and analysis: AI algorithms can integrate and analyze vast amounts of customer data, including financial history, credit scores, transaction patterns, and even external factors like economic trends. AI simplifies data extraction and analysis, providing valuable insights for faster, data-driven decision-making.

AI for Compliance, Security, and Regulations

AI-powered solutions offer significant advantages in regulatory compliance and security for banks. These tools automate compliance reporting and bolster security measures, reducing the burden on institutions. Through advanced AI-driven security tools, banks can strengthen their defenses against vulnerabilities across various platforms, including data centers, cloud environments, and digital channels. This proactive approach not only safeguards customer trust but also ensures compliance with regulatory standards.

Use case:

Risk analytics and fraud detection: Advanced AI models help detect fraudulent activities and measure risks in real time. AI tools incorporate vast amounts of financial data to generate scenario analysis and
enhanced risk modeling, helping in adhering to compliance and regulations.

The Final Word

With industry leaders reaping the benefits of AI, this crucial tool is shaping the future. It’s time for banks to build up their arsenal with modern technology to prepare for a smarter and faster world.

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