By Donald Antoine September 6, 2022
Artificial intelligence (AI) is changing how we live, work, and play. And, it’s also changing the way we bank.
FinTech companies use AI to create more personalized customer experiences and offer new financial products and services. Banks are also beginning to use AI to improve their customer service and fraud detection systems.
This article will explore how AI changes the banking industry and what this means for you as a customer. We’ll also look at some ethical concerns associated with AI in banking.
What’s Artificial Intelligence?
There is no single definition of artificial intelligence (AI), but in general, it can serve as a branch of computer science that deals with creating intelligent machines. AI research deals with the question of how to create computers that are capable of intelligent behavior.
In practical terms, AI applications can operate in several different ways, including:
Machine learning: Teaches computers to learn from data without being explicitly programmed.
Deep learning: Refers to a subset of machine learning consisting of several layers of neural networks. Using these neural networks, data can be learned from a large amount of data, simulating the behavior of the human brain – despite being far from matching its capability.
Natural language processing: This involves teaching computers to understand human language and respond in a way that is natural for humans.
Robotics: The use of robots to carry out tasks that would otherwise be difficult or impossible for humans.
The Impact of AI on Banking
AI is already having a major impact on the banking industry. Banks use AI to personalize the customer experience, detect fraud, and automate mundane tasks.
FinTech companies are also using AI to create new products and services. For example, Cleo is an AI-powered chatbot that helps you manage your finances. Cleo can track your spending, help you save money, and even advise you on financial products.
How AI is Changing the Landscape of Banking
Banks are under pressure to keep up with the latest technological trends. This is especially true for FinTech startups using AI to create innovative products and services that cater to the needs of modern consumers.
Banks are responding to this pressure by investing in AI. In 2018, JPMorgan Chase announced that it was setting aside $500 million to develop new technology, including AI. Citigroup has also invested significantly in AI, developing bots that can provide customer support in 2019. According to BusinessWire, a Berkshire-Hathaway company, the market for AI in banking will reach $64.03 billion by 2030, at a CAGR of 32.6%.
The Benefits of AI in Banking
There are many benefits of AI in banking. Perhaps the most crucial benefit is that AI can help banks improve the customer experience.
Banks can use AI to personalize the customer experience. For example, Capital One recently launched an AI-powered chatbot called “Eno.” Eno can answer your questions about your account, perform transactions, and even give you financial advice.
AI can also help banks detect fraud. This is because AI can analyze patterns of behavior to identify potentially fraudulent activity. Banks are already using AI to detect fraudulent credit card transactions and prevent money laundering.
Another benefit of AI in banking is that it can automate mundane tasks. For example, bots can process customer requests or update account information. This frees up employees to perform more value-added tasks.
The Risks of AI in Banking
While AI has many benefits in banking, some risks are associated with its use. One of the biggest risks is that AI could lead to job losses in the banking sector. This is because bots can automate many tasks currently performed by human employees.
Another risk is that AI has the potential to discriminate against certain groups of people. This could lead to unfair treatment of certain groups of people by banks. For example, if a bank uses AI to detect fraud, it could inadvertently target specific groups of people for closer scrutiny based on their behavior patterns.
Finally, there is a risk that hackers could use AI to exploit vulnerabilities in banks’ systems. For example, hackers could automatically use machine learning algorithms to find and exploit security weaknesses in banks’ systems.
How You Can Use AI in Banking
Assuming you’re not a bank executive or software engineer, you might be wondering how you can use AI in banking. There are actually several ways you can use AI to improve your personal finances:
Use a chatbot like Cleo or Eno to help you manage your money: These chatbots can track your spending patterns, help you budget better, and even advise you on financial products.
Use an app like Acorns or Digit to save money: These apps use algorithmic models (Digit) or machine learning (Acorns) to save money for you based on your spending patterns automatically.”
Use an AI-powered financial advisor like Wealthfront or Betterment: These robo-advisors use AI to help you invest your money and plan for your future.
Use FinTech products like Chime or Alpaca to improve your financial life: These companies use machine learning and artificial intelligence to provide better banking products and services.
How Can Banks Prepare for the Future of Artificial Intelligence?
Artificial intelligence (AI) is one of the most transformative technologies of our time. It has the potential to revolutionize nearly every industry, including banking. As AI continues to evolve, it will bring both opportunities and challenges for banks.
Banks must embrace AI to stay competitive in the future. They can use AI to improve customer experience, find new sources of revenue, and manage risk more effectively. However, AI also presents some risks that banks must prepare for, such as data privacy concerns and the potential for job losses.
To prepare for the future of AI, banks need to invest in developing the right talent, building the right partnerships, and creating the right governance structures. With the right preparation, banks can survive and thrive in the era of AI.
How Can You Prepare for the Future of AI and FinTech?
Artificial intelligence is changing the banking industry in a variety of ways. It is helping banks to automate tasks, improve customer service, and make better lending decisions. As AI continues to evolve, it will likely have an even bigger impact on banking. To stay up-to-date on the latest news in FinTech, follow our blog.