Artificial Intelligence (AI) has been taking over the industries. The typical business practices and operations are being transformed. Businesses are moving towards automation and investing in AI-based solutions to keep up with the requirements of the digital age.
According to a survey, 27% of global organizations have implemented AI organization-wide in 2018. The reason behind this inclination of global organizations towards AI-based solutions is due to its numerous advantages, a few noteworthy of which are increased revenue, customer value, a gain of competitive edge and improved decision making.
Artificial intelligence has been a value generation tool for businesses. The businesses from every corner of the world are using AI-based services for enhancing their operations and services. Among all types of businesses, AI has impacted the financial industry also.
For instance, banking operations have been transformed by the fintech industry. Also, fintech has transformed the way financial institutions exercise organization-wide KYC/AML compliance.
How fintech has impacted the financial industry?
Below are a few examples of how fintech has transformed the financial industry. The operations of banks, insurance companies, brokerage houses, and investment companies have evolved in the recent past. Also, the advent of the fintech industry has added more competition to the financial industry.
Digital compliance solutions
Artificial Intelligence-based compliance solutions have been provided by many businesses. KYC/AML compliance regimes have evolved during the last few years. All due to increased magnitude of global identity-theft-related frauds and money laundering instances which influenced nations and not only a single industry. The AML and KYC regimes in different territories of the world have made it necessary for the financial and other institutions to exercise in-depth due diligence on their clients.
AI has given cost-effective and time-effective solutions for global AML compliance. Manual compliance is more costly and also takes a lot of time and effort. Other than that AI-based compliance solutions provide a more accurate solution with a precision of 99.6%.
Using the digital AML and KYC compliance solutions the frauds like money laundering, credit card fraud, online banking fraud, insurance fraud, and other fake identity frauds can be eliminated quite easily.
Smart data management
Artificial intelligence solutions are used by the financial industry for smart data management. The AI-based system records the customer’s online transaction behavior and gives an alert or straight away blocks the transaction in case it finds any irregular pattern of transactions.
The use of these systems not only adds security to the business portfolio it also helps the financial industry in devising new and improved strategies to improve their operations and services.
Data management is made hassle-free and time-effective with AI solutions. Now there is no need to maintain piles of files to store the data. Such data collected was often just for the sake of record and it was not used for any other productive purpose like decision making. Also, manual data collection and management was more risk-prone.
Important data was lost and the organization did not have any backup. AI-based solutions are less risky and provide effective data management which can be used in decision making, risk management, and product enhancement.
The advent of the fintech industry
The fintech industry is also the fruit of artificial intelligence advancements. It has transformed the banking industry largely and also impacted the other financial institutions. Certain banking operations like money transfer, loan generation, and mortgages have been drastically changed by fintech.
The launch of cryptocurrency has added and extra competition and a lot of risk in the global financial sector. Fintech was invented with the aim to facilitate global funds transfer but it was largely used for the purpose of white-collar crimes like money laundering and terrorist financing.
According to a PWC survey, 2% to 3% of global GDP is lost to money laundering. Hence the reason the banks and other financial institutions, the victim of such illegal transfers are directed to exercise vigilant AML compliance on their customers. In the case of noncompliance, the organizations are liable for heavy fines by regulatory authorities.
Online banking the big thing
Thousands of brick and mortar banks in Canada, the USA, and the UK have been closed due to the increasing popularity of online banking among the customers. Online banking has increased customer value and also increased the effectiveness of banking operations.
Although online banking comes with its own risks and liabilities, it is also cost-effective for the banks. Automated AML compliance has made it easier for banks to prevent fraud in online banking.
A 2018 UK-based bank study revealed that the banks lost millions of pounds to online banking fraud and they plan to mitigate this risk through the use of online identity verification tools to keep the fraudsters at bay.
AI changing decision making
AI-based solutions are used for effective decision making. The data is entered into the system and the AI-based tools analyze the data and give suggestions and insights based on relevant stats. Apart from that expert systems are used for building prospective marketing strategies.
These systems give insights after a complex algorithmic analysis of the data about client preferences, sales, and goals of the company. Hence using these systems the executives of different departments can devise strategies based on the suggestions given.
Chatbots and enhanced customer experience
The businesses are using chatbots to enhance their customer experience. Chatbots are used for customer relations. The clients are directed to AI-based chatbots when they call for some query hence it takes less time to solve the client’s problems or to redirect them to specific departments. It is also cost-effective.
Enhanced services bring in customer value for the banks. According to a survey, 69.95% of the traffic of online banking websites pooled in from direct sources. Hence it shows the fame of online banking among consumers.
Cybersecurity through AI-based
Cybercrime is the biggest threat to the digitally evolved financial industry. According to a survey, UK-based banks lost 152.9 million pounds to remote banking frauds, including online banking, mobile banking, and telephone banking.
Hence the reason more and more banks are investing in cybersecurity tools like online identity verification and document verification. Artificial intelligence is used to protect businesses from cybercriminals.
Businesses offering a secure environment and show transparency in their operations and usage of data are more famous among the consumers. Financial institutions are considered a more secure platform for sharing information online, all because of the general notion that financial institutions are more efficient in securing their customer data. This increased confidence of the customers is due to the use of top-notch artificial intelligence and machine learning systems.
To conclude the financial industry is offering an array of services to its global clientele. Artificial intelligence is assisting it in securing the confidence of its clients along with a huge share of global revenue.
The impact of artificial intelligence is positive as well as negative on financial intelligence. The negative impact is the threat of cybercriminals and this risk is effectively managed by the banks using artificial intelligence solutions.