3 Ways AI Will Impact Banking This Year

The financial sector is one of the biggest adopters of technology, and artificial intelligence (AI) has been at the forefront of most of these technological advances lately. From fraud detection to customer service, AI has proved to be indispensable in making banking more efficient, cost-effective, and secure. Here are three ways in which AI will impact banking this year, as well as the benefits and potential challenges that come with it.

1. Personalization of services

AI-powered chatbots and virtual assistants are quickly becoming common in the banking industry. These intelligent systems offer customers a personalized and interactive experience, usually via text or voice. Customers can ask for checking and savings account balances, initiate transfers, and even troubleshoot issues without having to talk to a human agent. This increased level of control gives customers greater insight into their financial activities in real time.

For example, since its launch in 2018, Bank of America's virtual financial assistant "Erica" has helped nearly 32 million clients with over 1 billion interactions. Here are a few highlights:

• Bank of America clients viewed 37 million proactive insights to help them review their finances, cut recurring subscription charges that may have increased unexpectedly, know when they've received a merchant refund, or have duplicate charges.
• Erica sent more than 4 million proactive notifications about eligibility for Bank of America's Preferred Rewards Program, which have helped clients enroll in the program and enjoy the benefits.
• Erica sent more 60 million Spend Path insights that helped clients understand their finances with a weekly snapshot of spending.
• More than 98% of clients get the answers they need using Erica. In September 2022, the bank launched Mobile Servicing Chat by Erica to connect clients for a live chat with representatives to answer more complex servicing questions, with more than 170,000 chats having already taken place.
• Erica will soon connect clients to financial specialists when they have questions about new products and services, such as a mortgage, credit card, or deposit account.

Bank of America's Erica is more than just an AI virtual assistant. Its capabilities have expanded to cover the entire banking, lending, and investing relationship with the bank. Erica provides insights on portfolio performance, trading, investment balances, quotes, and holdings, and it can even connect clients to a Merrill advisor.

Erica isn't the only financial virtual assistant powered by AI. Wells Fargo will leverage Google Cloud's artificial intelligence to power Fargo, its soon-to-be-rolled-out virtual assistant. And Chase Bank customers can use Chase Digital Assistant. With these bank virtual assistants' growing abilities, customers can continue to expect a better banking experience.

2. Fraud detection and prevention

Financial fraud continues to be a significant challenge for both clients and banks, resulting in billions of dollars in losses every year. With AI, banks can quickly detect potential fraud and take preventive measures before losses occur. AI-powered systems can identify unusual patterns and behaviors in transactions, flagging them for review by security professionals.

AI can also be used to improve physical security systems at banks. For example, facial recognition technology powered by AI can scan customers' faces against databases of known criminals or suspicious individuals and alert security personnel if someone appears from that list.

Similarly, intelligent surveillance cameras powered by AI can monitor activity around ATMs or bank branches for suspicious behavior and alert authorities if something seems amiss. By combining these technologies with traditional physical security measures, banks can ensure that their premises remain safe.

3. Risk management and compliance

With the volatile nature of the financial industry, banks need to have robust risk management strategies. AI-powered solutions can analyze market trends and patterns, offering insights that help banks anticipate potential risks and vulnerabilities. This technology enables banks to make informed decisions, allocate resources effectively, and minimize losses.

With the sudden collapse and failure of Silicon Valley Bank, Signature Bank, and First Republic Bank, we can expect to see more banks adopting AI-powered risk management strategies to optimize their operations and improve their bottom line. In addition, compliance regulations are stringent in the financial sector, and non-compliance can result in hefty fines.

AI-powered solutions can help banks comply with these regulations by automating compliance processes, eliminating manual errors, and cutting down on the time taken to audit transactions. AI can help banks stay ahead of regulatory requirements, reducing the risk of non-compliance.

AI is quickly becoming a game-changer in the banking industry, offering banks and customers alike numerous benefits. From improved customer service to enhanced security, the impacts of AI are continuing to grow. Banks that are not adopting AI-powered solutions will have trouble competing as the technology gets better. AI has the potential to revolutionize the industry for banks, regulators, and customers.