A survey by Deloitte claims that the use of AI in banking can boost revenues by 17%. Clearly, the notion that banking is too old-school or traditional in terms of embracing futuristic technologies is now changing.
Let's understand the critical role AI plays in driving a happy customer experience and padding up the bottom line for banks and the BFSI sector at large.
Role of AI in the Banking Sector
There's no doubt about AI making inroads across the banking value chain. Granted that the BFSI sector is still in its nascent stages when it comes to embracing AI solutions, banks are already reaping the benefits of an AI-powered service.
The 360-Degree Benefits of AI in Banking
- Increased revenues, and decreased costs: One of the biggest benefits of becoming AI-first for banks is reduced costs and skyrocketing profits. According to the MIT Sloan Review, "AI can increase the banks’ revenues by as much as 30% and potentially reduce their costs by 25%."
- Improved customer engagement and product personalization via automation: According to McKinsey, "A staggering 75 to 80% of transactional operations (e.g., general accounting operations, payments processing) and up to 40% strategic activities (e.g., financial controlling and reporting, financial planning and analysis, treasury) can be automated." An automated process directly translates to productivity gains for the team in terms of saved time and effort.
- The banking officials can utilize this time to creatively problem-solve and focus on improving the customer experience as well as cater to disgruntled customers for instance. Plus, it leads to greater accuracy and efficiency, particularly for labor-intensive work such as compliance reporting, customer on-boarding, communications, and backend documentation.
- Furthermore, leaders can leverage actionable insights into what's driving their users and personalize the communication, sales and marketing campaigns, ongoing offers, and so on.
Key Applications of AI in BFSI
- Data-hungry AI solutions can help banks: Banks generate terabytes of vital customer information every day. AI solutions can drive supervised learning, where a machine can be taught to mimic human interactions and drive informed decision-making based on relevant examples. This is where AI solutions can help as they feed on the data and continuously self-learn.
- AI solutions can elevate the customer experience: Another major benefit of deploying AI solutions such as chatbots, for example, can empower banks to deliver a hyper-personalized and customer-friendly user experience. Customers can self-serve and find answers to common queries within seconds. Chatbots can interact with users to provide instant answers or redirect users to the right agent.
- AI solutions can engage in fraud detection and compliance: Fraud detection and compliance are essential cornerstones on which the BFSI sector thrives. AI-powered tools can successfully engage in real-time sensing and spot anomalies with greater accuracy as well as speed, making it well worth the investment.
- AI-powered initiatives can provide banks with the required flexibility and scalability: All the data that banks collect are pointless if the data is not extracted and analyzed for actionable results. This is where AI solutions can lend a helping hand by:
- Improving the data assets
- Scaling up the infrastructure and driving widespread experimentation
- Solving customer pain points and delivering a tailor-made banking experience
- Driving productivity and developing proactive compliance/risk management systems
The Bottom Line: Transformational AI Services is About Going Beyond Banking
Long story short, it is safe to assume that AI, when used strategically, can elevate the bank's operations and services across the board. Instead of adopting a scattered approach, the need of the hour is to pave the way for a comprehensive, end-to-end, and clear AI strategy.
Going for a revolving door AI-initiative approach will only end up costing more time, effort, and money on behalf of the bank—a clear-cut recipe for failure.