AI APPLICATION IN BANKING

Introduction

“AI is probably the most important thing humanity has ever worked on.”​ –
Google CEO Sundar Pichai

One of the important features which distinguish human beings from

everything else in the world is intelligence. The ability to understand,
learn, apply knowledge and improve skills has played a significant role in
our evolution and establishing human civilisation. ​Artificial Intelligence
(AI) is the intelligence which can be as intelligent as us to perform the
tasks which we do intellectually. It is the go-to technology for almost all
the companies around the world. In this report, we will discuss AI and
banking, how it is especially used in the banking sector, it’s application
and scope in the current market.

What is AI?
According to the father of Artificial Intelligence, John McCarthy, AI has
been defined as “​The science and engineering of making intelligent
machines, especially intelligent computer programs”​ . It is a way of
making a computer, robot, or software think intelligently like us. So,
when a machine mimics a human mind by thinking for itself, it is known
as Artificial Intelligence(AI). It can be used to perform many activities
such as Learning, Speech recognition, Perception, Planning, Reasoning,
Problem solving and also the ability to operate and move objects around.
In today’s modern world, all of us in some way or the other do make use
of Artificial intelligence, be it on our cellular phones or computers.

Banking Industry Role

Banks play a very important role in the development of financial life in
modern society. It handles cash, credits and other financial transactions.
Banks help customers to track their expenditures over savings and
motivates them to save money and earn interest for a safe future. Banks
play such a major role in the development of the world's economy, it is
very important that each and every financial transaction done through
the banks must be properly documented. To do this, the banks primarily
use computers, where they have a detailed record in their databases.
Some of the various channels that banks use for their operations are

through ATM’s, mails, telephone banking, online banking and mobile

banking. Entire banking system is so well connected that each and every
transaction can be tracked. This smooth operation of the banking world
is done through computers which is possible only because banks use
Artificial intelligence.

Artificial Intelligence in Banking Sector

The most essential part of this industry is AI. The main aim of having
Artificial Intelligence in the banking industry is to get insight into the
customers preferences, to ensure that the customers are happy with the
services provided by the banks and help the customers understand their
expectations from the banks.
AI can help banks become more efficient and effective by reducing
costs, mitigating risk, and increasing revenues by applying new capable
technology in analytics, bots, RPA, and report generation.

Advantages of AI
Today the banking industry uses Artificial Intelligence in many ways to
shape the world of banking life. It offers multiple advantages in day to
day life of the banking sector and the associated customers.
These are the following use cases:-

● Predictive Banking :- It is the magic word for a technology that

actually wants to achieve transparency and predictability of one’s
own finances. Historical data can be used to predict future events
and trends. Sophisticated programs rely on artificial intelligence
and data mining to analyze enormous amounts of information. On
this basis, attempts are made to determine what is likely to happen
next under current conditions.Financial institutions also benefit
from risk minimization and cost minimization. For better or for
worse, institutions use a variety of data sources and machine
learning. For example, they have their transaction history and can
integrate demographic information and additional details from
external databases. These applications/companies already use
predictive banking for multiple uses.
a) ​Wells Fargo mobile App :- Enhances personal finance
management such as providing alerts, reminders and notifications
 for various services like recurring bill payments, money transfers
and recharges.
b) ​Erica :- This is the chatbot application built by Bank of America.
Bot is the short form of Robot, and so chatbot is an automated chat
program that is either run automatically or follows a predetermined
path. Chatbot is a way of using Artificial Intelligence in the form of
robotics in banking. Chatbots are a smart way of providing efficient
customer service. It helps customers know their transaction details
and also additional services that they are eligible to receive.
Through the use of chatbots, banks are able to understand each
customer’s requirements and give them the right offers or even
reward them.
c) ​Grip :- This intelligent digital assistant gives clients an insight
into their income and expenditure – for example, how much they
need to save for their summer holiday, or how much money they
need to keep in their household account.
● Convenience :- AI can be used to provide a lot of convenience to
the bank customers. These are the following examples.
a) ​iPal :- It is an AI and Voice based virtual financial assistant that
is available anytime anywhere to answer customer’s questions on
Amazon’s Alexa and Google Assistance device.
b) ​Wizely :- It is another AI-powered money-saving app that allows
 its users to save little by little, offering the choice of Flexi and
Savings Plan. It also claims to be India’s first digital piggy bank
app. It offers the choice to withdraw savings money anytime and
anywhere without deductions.
c) ​Mitra :- It is a humanoid robot developed by Bengaluru-based
Invento Robotics which helps customers navigate the bank.
● Security and Fraud Detection :- Artificial Intelligence has
enormous ability to detect and minimize banking fraud. It captures
banking fraud and protects security breaches by scanning through
the vast transactional data and tracking down any unorthodox
activities or irregular behavior patterns.
a) ​Smart Vault :- It is first-of-its-kind locker service in India. These
lockers are powered by robotic technology that minimizes
human intervention while operating the locker. The advanced
RFID enabled mechanism scans a customer's request and
retrieves the locker using robotic arms. The smart vault uses
multi-level intelligent security systems. The access to the locker
room is secured by Debit card and Biometric authentication.
b) ​Feedzai :- This software can help banks prevent fraud and
money laundering by developing detailed risk profiles on
customers and scoring them based on granular data.
c) ​Natwest :- This bank has launched biometric fingerprint debit
and credit cards to minimise the bank and transaction frauds which
happen due to lost card pin or cvv number.
● Operational Efficiency :- AI also plays a very prominent role in
solving banking operation complexities.
a) ​Eva :- It is an AI-based chatbot developed by HDFC which can
assimilate knowledge from thousands of sources and provide
simple answers in very less time.
b) ​Hyperverge :- It has used AI to do KYC verification using AI
based platforms to do facial matching and personal details
verification across multiple identity proof documents.
c) ​ZAML :- ZestFinance is the maker of the Zest Automated
Machine Learning (ZAML) platform, an AI-powered underwriting
solution that helps companies assess borrowers with little to no
 credit information or history. This doesn’t require much human
intervention.
● Consumer Adoption :- There have been many AI based devices
and systems which help the banking industry directly or indirectly
such as below.
a) ​Wearables :- iWear by ICICI Bank is an application for wearable
smart watches on which you can click and start transacting on your
paired Smart watch.
b) ​Contactless Technology :- The best way to ensure broad
acceptance of contactless technology is to make sure end-users
can use the new feature without any additional action or specific
handling instructions. FlexiTag makes this possible.​ It is designed
to be inserted by the manufacturer of the final device, leading to a
ready out-of-the-box contactless experience for end users.
c) ​Expense Management :- Walnut and iPocket provide an
effortless way to maximize savings.
d) ​Digital Wallets :- The invention of digital wallets like
Paytm,Yono,PhonePe has helped in boosting the level of digital
money to a much higher level. The best part of these wallets is that
customers can purchase any item online either with a mobile
phone or a computer and they can do this through cashless
transactions.

Challenges in AI
Apart from the advantages of implementing AI in banking, certain
challenges are also present such as:-
● Very limited available data and poor quality data
● Stakeholder’s lack of understanding
● Lack of necessary skills
● Longer time to realize the actual benefits
● High cost to develop and implement
● Interpretability of model
● No Ownership and accountability
● Existing threat to humanity
AI Market Entrants
There are many existing and new entrants in the market as shown in the
below images.
Conclusion and Recommendations
As we saw above in the previous sections, Artificial Intelligence is
gaining popularity day by day and banks are exploring and implementing
this technology in transforming the way customers are assisted. So, the
future of Artificial Intelligence in the banking sector is very bright and with
the introduction of Artificial Intelligence, it makes it even easier for a
customer to do transactions from any place and at any time without
waiting in long queues at the bank. Further more tasks can be done and
simplified using the help of AI such as shown in the below image.

Hence, the aim of Artificial Intelligence is to provide personalized and

high quality customer satisfaction along with efficient and time saving
services.

References
https://emerj.com/ai-sector-overviews/ai-in-banking-analysis/
https://www.filament.ai/case-studies/transforming-customer-service-for-h
sbc/
https://builtin.com/artificial-intelligence/ai-in-banking
https://inc42.com/features/how-will-artificial-intelligence-change-the-bank
ing-industry/
https://builtin.com/artificial-intelligence/ai-finance-banking-applications-co
mpanies
https://www.abe.ai/blog/voice-banking-strategy/
https://www.gemalto.com/financial/cards/contactless/wearable/for-banks