Artificial intelligence offers great potential in terms of fraud detection, automation and customer experience optimization; but it comes with responsibility and risks that must be managed carefully.
As millennials and Gen Zers prepare to overtake baby boomers as the largest banking consumer group in the US, financial institutions (FIs) face increasing pressure to increase their AI budgets in order to meet higher digital standards – this requires faster insights that support decision making, trading communications, risk management and regulatory compliance.
Financial services organizations routinely process vast amounts of raw data daily, and predictive analytics can be an invaluable asset in streamlining operations, improving fraud detection techniques and increasing customer retention. But this transformative technology may come with some drawbacks.
AI can automate tasks and reduce human intervention, leading to job loss in areas like data entry and analysis. Furthermore, an AI system trained on data that contains biases or discriminatory patterns will reproduce them resulting in adverse consequences for certain populations.
Though predictive analytics might have its drawbacks, many financial institutions are already benefiting from it. Credit card companies use predictive models to quickly detect suspicious transactions and protect their customers. Financial institutions can use predictive analytics to develop customer retention strategies based on data as well as analyze customer trends for future trends and changes – this helps better serve customers while increasing profits over time.
AI’s most crucial application in financial services is fraud detection. AI systems are adept at quickly spotting suspicious activities and alerting both institutions and customers of suspicious behavior quickly, giving companies enough time and money to investigate and resolve situations efficiently – potentially saving time and money in the process.
AI can also assist operational efficiency by automating certain processes, freeing employees to focus on more complex tasks. This approach reduces human error while improving quality of work performed.
AI’s key strength lies in its capacity to adapt and evolve over time based on fresh data and input from users, continuously adapting and evolving to detect trends that might not be apparent with traditional manual analysis, such as an unexpected increase in credit card transactions.
AI can also improve compliance with industry standards by identifying breaches in Anti-Money Laundering (AML) laws or other regulations, potentially saving companies significant sums in fines or penalties.
As our world is becoming more digitalized, financial operations must also evolve to take advantage of new technologies without completely revamping their operations. Automating manual processes enables businesses to reap the benefits without disrupting their core operation.
AI can assist businesses in managing the massive amounts of data that enters them daily, helping to improve decision-making, streamline workflows and save time by eliminating repetitive tasks or human error.
One of the greatest challenges associated with AI is ensuring it does not violate basic human values such as equality and justice, which requires computer programmers to incorporate such values into algorithms that control how systems are programmed.
AI technology in financial services has already proven useful for improving credit approval processes and detecting fraud, including unusual debit card usage or large account deposits. Furthermore, virtual customer assistance (VCA) uses voice recognition software to predict and respond to common customer inquiries – this enables the system to handle simple requests before routing them to a live representative for handling.
Personalized Customer Service
Personalized customer service is one of the hallmarks of financial services operations. By collecting customer data and applying machine learning techniques to it, personalized service becomes one of the cornerstones of successful operations – this ensures customers experience seamless and consistent interactions whether it be over phone calls, apps or at physical branches.
AI refers to technologies that mimic cognitive functions we associate with human minds, including perceiving, reasoning, planning, learning and taking physical action. You may have interacted with this form of technology even without realizing it – voice assistants like Siri or Alexa use AI technology, as do chatbots that appear when browsing websites.
The Department of State is dedicated to developing artificial intelligence in ways that support democratic values and respect individual’s human rights, which is why we worked tirelessly towards supporting the OECD Recommendation on Artificial Intelligence development, and became founding members of Global Partnership for AI.