The Future of Banking: AI's Impact on Financial Services

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Ola Prejs

Updated Jun 27, 2023 • 10 min read

AI is transforming financial services by improving analysis, fraud detection, trading, and customer service.

The financial services industry is undergoing a profound transformation driven by advancements in artificial intelligence technology. From personalized customer experiences to streamlined operations, AI has the potential to revolutionize the banking sector.

To gain a deeper understanding of this transformative trend, we reached out to financial industry experts and asked them to share their insights on the impact of AI in the financial sector. Their valuable perspectives shed light on the potential benefits and challenges that might define the future of banking.

Achieving efficiency and creating new source of revenue with AI

There’s no doubt about AI being a game-changer for banking. By nature and by regulations banks have to store large amounts of data for customers and clients, and this data is now acting as fuel for AI programs. Traditional high-street banks will be able to utilize this data in multiple areas from fraud to customer service.

On the flip side, with the lowering of interest rates, banks’ traditional model of borrowing cheap and lending it high is no longer viable, so banks are looking for active ways to achieve cost efficiency and new revenue sources. AI will help on both sides by providing better predictions about customer needs while increasing the speed of automation to reduce costs.

Varun Ghatge, Head of Product at Barclays

AI plays an important role in banking, and I think we’ll see financial institutions continue to adopt these technologies primarily based on how they address pain points and priorities.

Innovative customer experiences are a high priority at the moment with the pressure to adapt to a digital world, but AI shouldn’t replace the human touch that customers want in their banking relationships. AI can however make touchpoints even more meaningful by creating holistic views of customer needs, reducing friction around complex processes, and deepening digital engagement.

Jacob Bouer, Director of Strategic Partnerships at The Venture Center

While conventional banks tend to stick to legacy core banking systems, their insistence on maintaining this backward, non-agile technology actually poses an enormous opportunity for fintech companies and their small to medium-sized client banks to break free from the yoke of legacy systems.

Banks will now be able to generate growth not only cheaper but with much more effectiveness. No need to add very expensive capital- and labor-intensive branches.

Providing a truly digital, customer-centric core system will allow these smaller banks to more effectively compete with their larger competitors who are ham-strung on sluggish and expensive legacy core platforms.

These new efficient banks will now be able to offer more competitive rates for both borrowing and lending to many customers now ready for this digital experience.

Clifford Broder, CEO at Civet Consulting

AI is and has been a game-changer for banking. For example, some of the largest banks in the world have been using AI-based algorithms in their most profitable trading businesses for years – systematic trading, mean-reversion strategies, etc. – that take advantage of small price discrepancies and large volumes of trades to make lots of money.

With that said, we are now seeing a shift to AI being used to help customers find better loans or higher interest rates for their deposit accounts.

This shift from a secret intellectual property to a more widely used technology to help banks be better service providers is an important game-changer for both big banks and smaller challenger banks.

Angel Lorente, Founder & CEO at FinTech Connector

AI can recommend solutions to banks’ clients and give them tailored solutions much faster than humans these days. Now, it's just a waiting game. It will change the way banks operate, serve their clients and make more profit. It will definitely be a game-changer. I am curious to see how fast the change will be.

Christian Maines, Software Development at Devhelp

The power of predictive analytics

When we talk about AI-powered financial assistants, we’re just scratching the surface of AI’s potential in banking. AI can enhance internal capabilities and greatly improve fraud detection. It enables banks to assess complex risk profiles and segments that have always been unavailable or too expensive to chase.

But AI’s greatest achievement will be using its unprecedented analytical power to solve the information asymmetry that contributed to the 2007-2008 subprime mortgage crisis, making sure we operate in a more transparent credit market.

Dylan Thiam, Head of Content & Research at Open Bank Project

Yes, AI is definitely a game-changer. Predictive analytics and intelligence will continue to help navigate the wealth gap down and continually drive the adoption of self-driving money.

As consumer spending and savings habits become more accurately modeled over time, it is easy to see a future where banking technology is several steps ahead of the public, whether it be in risk/fraud prevention, investments, lending, or day-to-day banking activities.

Alexander Gillette, Director of Business Development at Rize

Banks are ideally suited to apply AI using their massive databases with information about transactions, and individual and corporate financial behavior. AI will yield useful information on future behaviors. Other applications include fraud prevention and compliance.

Ezra Zask, Manager at Ezra Zask Research Associates

Improving customer experience with advanced technology

Artificial Intelligence and Machine Learning is having a profound impact on all industries and companies regardless of size, especially Financial Services and Banking. The ability to understand customers’ experiences, anticipate their future needs, and seamlessly integrate services, support and value propositions will ultimately redefine the use and management of money both for consumers and investors.

Bob Bonomo, Founder and CEO at NextSTOP Consulting

AI will continue to have a significant impact on the consumer banking experience through enhanced mobile and virtual banking, with a curated set of consumer products.

For most financial institutions, AI plays an integral part of an automated operation to enhance team synergies across a region or the globe, while assisting with productivity improvements as virtual assistants gain traction – as more companies invest in AI plug-ins and internal product development.

Adam Phillips, Senior Designer at Gensler

Ethical AI

As the events of 2020 have shown us, AI has been a game-changer for banks in the areas of operational resilience and customer experience. But as banks continue to evolve into AI-driven enterprises, AI itself, will no longer function as simply a business enablement tool, but more importantly, as the enabler of transformative business strategy.

However, the challenge for banks, no matter the use case, is to establish robust frameworks that focus on privacy, security and a commitment to Ethical AI.

Samrah Kazmi, Chief Innovation Strategist at RESRG

2020 showed us that AI is a game-changer — for banks and their customers. The business case for adopting AI is becoming clearer as banks improve their ability to ingest new data sources, automate business processes and engage with customers across various channels.

Into 2021, we expect new products and services to be made available, especially for underserved segments such as immigrants or freelancers. Nevertheless, as AI is adopted by banks, new challenges emerge. In particular, ensuring that a set of principles regarding ethical use of AI is adopted. This includes identifying and preventing systematic biases that negatively impact the very people their products are made for.

Nicholas Daley, Associate at Plug and Play Ventures

The future of AI in financial services

Utilizing artificial intelligence by financial institutions is becoming increasingly common. Financial services sector can benefit from data analytics as well as AI powered chatbots that help to create services suitable for customers and improve customer satisfaction. Moreover, AI technology can be used for risk management and detection of fraudulent activities.

Yet, an AI strategy and a proactive approach is necessary for implementing AI safely and responsibly.

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Ola Prejs

Head of Growth
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