Imagine a world where you can access your bank account, get personalized financial advice, and secure your transactions with just a few clicks or voice commands. This is not a distant future, but a reality that may have existed prior, but with the addition of Artificial Intelligence (AI), standards have escalated for good. AI in banking redefines new possibilities to analyze customer behavior in a better manner. 

The analysis enables financial services and institutions to provide more customized and relevant solutions, ultimately improving customer loyalty. AI is not just a tool but an integral part of the support chain that helps financial institutions (FIs) create value for their customers in innovative ways and through intuitive financial applications.

From a digital banking standpoint, a personalized mobile banking experience isn’t just a feature; rather, it is what customers now expect as par for the course. The increasing prevalence of home-based banking is not merely a fleeting trend; rather, it signifies a substantial transition that is giving rise to the development of more user-centric banking applications. Let’s understand it better through multiple touchpoints.

AI in banking and financial services: usage and pivotal roles

1. The rise of mobile banking and customized services

The modern banking experience is no longer confined to brick-and-mortar branches. Omnichannel banking applications are becoming the new norm, with over 45% of respondents considering mobile banking among the top three features influencing their choice of financial institutions. This shift emphasizes the importance of reaching customers without having them visit the branch, prompting institutions to invest in technologies that enable more convenient banking experiences.

2. AI’s impact on customer preferences

Leaders in the banking, financial institutions, and insurance (BFSI) sector are leveraging AI to understand consumer preferences. AI in banking is influencing strategic decisions for consumers when it comes to signing up for a banking service, with 78% of customers expressing a willingness to continue using their bank if it delivers personalized content. Even institutions that were initially hesitant to embrace AI are now utilizing AI agents to handle customer queries.

3. Risk management through AI

With the advent of technology, cyber threats and fraud have increased, such as newer ways of money laundering as well as an increased number of data breaches. To mitigate these risks, FIs must capitalize on AI technologies that can be useful in real-time risk management.  This helps them better understand and interpret customer behaviors, thereby preventing financial crime.  

Recent data breaches, such as the one at Flagstar Bank, which suffered a third-party data breach and leaked sensitive information of over 800000 loyal customers in May 2023, underscore the need for vigilant monitoring and evaluation of high-risk accounts. The MOVEit data breach exposed names and personal information like SSNs of their 800k users. 

4. AI’s role in fraud prevention

AI in banking and FIs can significantly reduce false positives in fraud alerts by an impressive 60%. This reduction helps streamline operations and improve fraud detection, ensuring genuine transactions are not unnecessarily flagged. Effective communication and due diligence with the team are essential for the seamless implementation of AI strategies, allowing financial institutions to achieve their goals rapidly.

5. Enhancing customer satisfaction 

The ability of AI and ML to evolve with time and learn from previous interactions is a game-changer in decoding complex data compilations. Standard Chartered, for instance, utilizes machine learning (ML) to extract insights through data analytics, enabling the creation of targeted marketing strategies and providing a good example of banks using AI. The bank’s Retail Banking Group Head, Vishu Ramachandran, stated, “Ensuring transparency and explainability in AI-based decision-making is not just a competitive advantage for us, but also the right thing to do by our client.” 

6. Streamlining efficiency and improving ROI

As mentioned earlier, AI emphasizes modernizing and fortifying banking systems. The technology enables institutions to collect, compartmentalize, and utilize vast amounts of data efficiently. The result is enhanced security and streamlined efficiency, promising customer satisfaction and an improved return on investment (ROI).

Key takeaways

Upgrading mobile banking with AI is not just about financial transactions; it’s about crafting an experience that resonates with each individual. The integration of AI in banking and financial services is a strategic imperative for BFSIs today. Decoding customer behavior, preventing fraud, and enhancing efficiency are integral components of the digital transformative journey that financial institutions are undertaking to stay relevant in an ever-changing landscape. This signifies a technological evolution and a profound shift in how FIs connect with their clientele.