Traditional banks and FinTech companies are often portrayed as rivals that are in constant opposition for popularity and new customer acquisition. This notion is not entirely false, especially when considering that some of their paths rarely meet such as with disruptive digital-only banks. However, innovative technologies are emerging at a rapid pace and their impact on banking is felt at an almost-daily basis. Artificial Intelligence (AI) happens to be at the forefront of this impact, eventually leading to inevitable change in the finance sector.
From complex machine learning applications to combat money laundering and automated big data processes for fraud detection to customer service chatbots, smart contracts and credit scoring, people have probably already interacted with banking AI software without necessarily knowing it. Here are some of the most happening banking areas that AI is changing:
Although consumer-centric digital banking technically dates back to the 1960s with the introduction of ATMs, today we see that clients’ customer support expectations haven’t really changed since then. Millennials are often blamed for “killing” industries and that includes brick-and-mortar banks, and in the present they can hardly be held accountable for not wanting to engage wit banking services except at a digital level. AI-powered chatbots, voice assistants and smarter-than-regular applications are now the norm in the digital age, and this impact is further amplified into the future by AI-enabled biometrics and similar state-of-the-art solutions.
Security of funds and fraud countermeasures are still an ongoing concerns when it comes to digital finance, and artificial intelligence might be the one application that actually revolutionized this area, commonly known in the industry as middle office functions. Middle office is where banks and financial institutions perform risk management and security processes, including fraud detection, anti-money laundering efforts and KYC verification to identify customers; platforms that have all greatly benefitted from AI incorporation into their systems.
When U.C. Berkeley researchers published a study called “Consumer-Lending in the FinTech Era”, there were two major takeaways from it; firstly, FinTech lenders were revealed to discriminate less than overall lending firms by about one-third, whereas secondly, discrimination still occurs at variable levels. Enter AI applications that ought to enable more equitable credit underwriting in the future, providing that existing AI algorithms will be constantly fine-tuned to make that happen. Expanding beyond lending, AI has also affected risk assessment and management in banks.
For now, artificial intelligence is positively contributing to a seamless, more efficient e-finance age that is still experimental in some aspects. However, banking and financial services are bound to be safer and more secure as we move forward into the future.
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