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Ways Artificial Intelligence Impacts the Banking Sector


“75 percent of respondents at banks with over $100 billion in assets say they’re currently implementing AI strategies, compared with 46 percent at banks with less than $100 billion in assets,” UBS Evidence Lab reports.

Artificial Intelligence (AI) has become an integral part of the most demanding and fast-paced industries. The impact of AI in the investment banking industry and financial sector has been phenomenal and it is completely redefining the way they function, create products and services, and how they transform the customer experience. 

In this article, let€™s explore a few key ways AI is impacting the investment banking sector.

Improving customer support

Customer satisfaction directly impacts the performance of any enterprise, including those in the investment banking industry. It directly shapes people€™s perceptions of the financial institution€™s brand. It also influences banks€™ client targeting and retention efforts. One of the major issues users face is that financial institutions never seem to be open when they need them most.

For example, what if a customer€™s account gets blocked during the holidays? Or, what if a customer wants to learn more about the bank loans later in the day when the employees have already clocked off? The customers€™ money never sleeps. Therefore, financial institutions must focus on offering their clients the right services when they need them most.

The AI chatbots and voice assistants are the best for offering customer support. These sophisticated tools are available 24/7 irrespective of their time zone or location, customers can use chatbots for any task that doesn€™t require human interaction, such as familiarizing themselves with the services, solving problems, and seeking answers to any question they may have. Most importantly, AI chatbots are constantly learning more about the customers by observing their previous interactions and browsing history in order to serve them with highly personalized user experiences.

Minimizing operating costs

Even though the investment banking industry and financial institutions already use the latest technologies to make their jobs safer and simpler, their employees still need to manage loads of paperwork daily. These kinds of time-intensive and repetitive tasks can cause an increase in operational costs and harm overall employee productivity, which might result in human error. AI eliminates these error-prone human processes.

For example, machine learning, automation tools, AI assistants, and handwriting recognition can streamline several aspects of human jobs. These tools can collect, classify, and enter customer data directly from their contracts and forms. This is a great opportunity for banks to leave manual and repetitive tasks to AI-backed machines and spend more time on creative, high-value works like serving customers with better, highly personalized services or finding new methods of enhancing client satisfaction.

Supporting customers to choose their credit and loans

Financial institutions still depend on factors like one€™s credit score, credit history, revenue, and banking transactions to determine whether they€™re creditworthy. This is exactly where AI can help, as its analysis goes far beyond the customer data. AI loan decision systems are taking help from ML to observe the patterns and behaviors that help a bank to determine whether a user can really be a good credit customer or not. AI makes credit decision systems more accurate and reliable.

Better regulatory compliance

AI also enhances the way banks impose their regulatory controls. The investment banking industry is one of the biggest regulated industries globally. All banks are required to have reasonable risk profiles to prevent major problems, offer good customer support, and identify the patterns in customer behavior. They rely on tools to identify and prevent the risk of financial crimes like money laundering.

With the growth of AI tools, investment banking has experienced a revolution in its efforts to offer safer and more reliable customer experiences. These pieces of software usually depend on cognitive fraud analytics that observes customer behaviors, track transactions, identify suspicious activities, and assess the data of various compliance systems. Even though these tools haven€™t reached their full potential yet, they are already helping banks enhance their regulatory compliance and minimize unnecessary risk.

Enhances risk management

In banking, AI is a major game-changer when it comes to risk management. Financial institutes like the IB sector are prone to risk due to the type of data they handle every day. For instance, banks employ AI-powered solutions, which have the ability to analyze data in huge volumes and can quickly spot patterns from many channels. This helps predict and prevent credit risks and can identify individuals and businesses who might default on their obligation to repay their loans. It can also identify malicious acts such as identity theft and money laundering. AI tools and algorithms have revolutionized risk management in offering a safer and more trusted banking experience. Thus, it is clear that the impact of AI in the IB sector has enhanced risk management.

Wrapping Up      

As the world is pacing briskly towards complete digital transformation, advanced technologies like AI will have a greater impact on the banking sector in the future. The AI will offer more flexible and agile business models for the growing requirements in this digital world.

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