Into the Matrix - AI to rescue banks?

AI is skyrocketing (again) while the panic is all around in the Financial Services Industry God knows what the next economic storm is going to be; along with the rise of digital banking, and the increasing complexity of financial transactions, the banks are struggling to keep up with the pace so it won’t go belly up. The question in thought leaders' minds is, can AI proactively rescue and manage the banks to avoid it?

The good news is that artificial intelligence (AI) has the potential to revolutionize the way banks operate and serve their customers. By harnessing the power of AI, banks can transform their operations, streamline their processes, and offer new products and services tailored to their customers' needs.

Let's see how AI can help rescue banks from the challenges they face and propel them into the future.

Prediction goes hand in hand with risk management – the power of AI

As we all know, banks face various risks, from credit risk to market risk to operational risk, while innovating with multiple partners. Utilizing the power of AI algorithms:

1. Early detection of Risks: Banks can analyze vast amounts of data from various sources, such as financial statements, and transaction records, in real time and detect potential risks before they become significant problems to mitigate them
2. Fraud detection: It can also identify fraudulent transactions and prevent financial crime, a growing industry concern, while capturing the trust of the consumer and providing the best customer digital banking services faster and more personalized.
3. Best customer experience: If banks explore AI-powered chatbots and virtual assistants which can provide customers with instant support and guidance, freeing up human agents to handle more complex queries. If used well AI insights into customer behavior and preference can enable banks to offer tailored products and services to delight customers.
4. Real-time Monitoring: Monitor and flag any suspicious activity to unusual transactions to repond to potential threats and prevent losses
5. Improved Risk Management: AI can help banks improve their risk management practices by implementing accurate risk assesments and modelling. AI algorithms can analyze historical data and identify trends and patterns to make more informed decisions about risk management.

Great…I understand AI has the potential to significantly improve the risk management practices of banks and help prevent bank failures.

BUT..what about the ethical implications of using AI?

... especially in areas such as lending and risk management? According to KPMG US, 73% of their respondents reported that a degree of regulatory oversight of predictive models is required, which is constrained by skilled resources, budgets, and tools. Most expect auditors to go after these models within the next 1-4 years. While using AI, banks can focus on three major areas: 

1. As we all know, garbage in, garbage out means – data integrity.
2. Statistical validity
3. Model accuracy

 Now that the bank knows what to check if they can address these concerns, AI can potentially transform the banking industry for the better. AI can rescue banks from the challenges to create a more efficient, effective, and customer-focused financial services industry that benefits everyone.