AI in banking: How banks can use AI to boost profitability

Businesses have been quick to implement AI into their offerings, including major companies like Microsoft, Google and Apple. In banking, the opportunity is particularly significant, with AI-powered solutions able to transform everything from front-line customer service to operational efficiency.

But while there are many opportunities for AI to positively transform the digital banking sector, many leaders are legitimately concerned about the potential risks of doing so. In this article, we’ll look at some of the opportunities AI presents for banks and address the concerns that might be holding banks back from embracing this transformative technology.

AI presents a significant opportunity for banks that choose to embrace it. It’s estimated that the global banking sector could generate $1 trillion of additional value each year by incorporating AI into their operations.

Some of the biggest opportunities include:

1. Increasing customer revenue

Banking is one of the last remaining sectors to still offer a largely one-size-fits-all user experience. But surveys show that banking customers want more personalised experiences. For example, 73% of Gen Z say they want their bank to provide a more tailored service, including advice on budgeting, spending habits, paying off debts and taking out loans. AI-powered systems enable banks to efficiently analyse large amounts of personal data and tailor the experience such as offering timely content, suitable products or important alerts for each user. As well as offering customers a better experience, this level of personalisation boosts engagement and retention.

2. Reducing fraud

Security is an area that’s always a top priority for banks. And rightly so... in 2022 alone, the Swiss Financial Market Supervisory Authority (FINMA) noted 48 attack reports involving banks. AI is particularly useful when it comes to conducting risk assessment and identifying fraud because of its efficiency and speed processing large amounts of data. Combined with passwordless systems and biometrics, AI-enhanced security can significantly improve a bank’s fraud detection. It’s estimated that using AI to improve fraud systems could generate an additional $371 billion of value for the global banking sector.

3. Streamlining operation costs

AI can boost operational efficiency behind the scenes too, automating and supporting back-office processes like data entry and analysis. For example, Netcetera’s DocDive uses generative AI to enable bank systems to provide quick and accurate answers to employees who would otherwise have to spend time searching through multiple documents in different locations to find what they need.

There are lots of other ways that AI can help banks deliver a better and more efficient service, including powering virtual customer service assistants, discovering emerging market trends and optimising hiring and retention.

As an emerging technology, many banking leaders are unfamiliar and concerned about the possible implications of integrating AI into their established businesses. 50% of business executives are worried about incorporating AI into their operations, according to research.

Some of the main concerns include:

1. Lack of in-house expertise

Despite the clear benefits of AI, some banks feel unable to implement it due to a lack of suitable internal expertise. Rectifying this skills gap by training or hiring new employees can be time consuming and expensive, resulting in a reluctance to pursue the benefits of integrating AI into their operations.

2. Trusting AI with customer interactions

Another key concern is the potential risks associated with AI-driven decision-making, particularly in customer-facing roles like virtual customer assistants. Potential errors, biases and inappropriate responses have the potential to damage customer relationships and lead to non-compliance with regulations. In such a heavily regulated industry, penalties for providing inaccurate or unsuitable information can be both damaging financially and reputationally.

3. Not knowing where to start

Despite making significant advancements in recent years, AI is still in its infancy and there are lots of options available - each with their pros and cons. Having so many options available is causing decision paralysis for some banks that recognise the potential but struggle to take concrete steps to implement AI in their operations.

Other concerns include managing data security and privacy, integrating the technology with their existing infrastructure and the potential impact on employees.

At Netcetera, we’ve been helping banks successfully implement AI in various areas of their business for many years. We’ve taken care to listen to their concerns and develop suitable solutions so they can benefit from the many opportunities AI provides.

One of the most important steps for banks we’ve worked with has been to articulate the problem correctly at the very beginning. There’s a lot of interest in AI but to say it’s always the right solution - or that one particular solution is going to work for all banks - is ineffective. Instead, we work with the bank to understand their needs and concerns, and we use those insights to develop a solution that creates tangible value for them and their customers. Throughout the process we consider the security, ethical and compliance aspects of AI to make sure the end solution meets the highest standards.