Financial industry worldwide is increasingly turning to Artificial Intelligence for various reasons. AI enables financial service providers to manage customers better, detect suspicious or fraudulent transactions and above all, helps the client to maintain their accounts better.
Whether AI will reign supreme to take over several functions that require human intelligence remains to be seen. However, in the current scenario, AI is the finance industry in several ways. Understandably, AI integration in financial services differs in every country.
While the US and some countries in Europe have AI to manage several functions, upcoming economies in Asia utilize it for essential functions- which are required by a majority of customers. Here we look at three different ways AI is changing the financial industry in the developing world.
Artificial Intelligence or AI is helping banks better manage ATM networks. It is particularly useful for growing Asian economies including China, India, Thailand, Malaysia and the Philippines, to name a few.
Unlike in America and Europe, banks in Asia are at the disadvantage when it comes to providing financial services in rural areas. Unavailability of premises continues to impede banks that have stated intentions of fanning into rural areas. Here, ATMs are the only contact between rural folk and the banks. Often, an ATM operated by one bank will have multiple withdrawers from others.
Here, AI is helping banks to predict cash withdrawal patterns, choice of currency notes among customers, fraud prevention and in some cases, the deposit of counterfeits. AI is enabling banks to maintain sufficient currency stock at ATM locations by predicting withdrawal patterns.
For example, banks are ensuring that sufficient currency is available around payday and during festivals. AI enables people to place requests for opening accounts by directly keying in their mobile number. Once an application is placed through the ATM, a prospective customer receives an SMS within seconds that the application is being processed and issues a reference number.
AI is increasingly utilized at ATMs following a surge in cloned credit and debit cards in certain Asian nations. It is possible because AI records usage patterns of customers and sounds an alert should transactions appear suspicious.
AI is capable of triggering alarm bells for any reason such as excess withdrawals, use of ATMs outside the usual geographical area of a customer or even while spending at merchant outlets on Point-of-Sale machines.
In case of suspicious transactions, a genuine client gets an SMS on the mobile and in some cases, a One Time Password (OTP). Sans this OTP, a fraudster cannot complete the transaction, the card gets blocked, and the customer is alerted to suspicious or fraudulent use.
With remote banking now possible, Artificial Intelligence driven Interactive Voice Response systems are also making an appearance in some parts of the world. AIRV is nothing more than but an intelligent version of IVRs used by various types of service providers.
However, AIVRs defer in one significant aspect: Unlike IVRs where a customer is given voice prompts and can access the requested information, AIVRs are capable of more complex functions.
AIVR can be programmed to recognize the voice of a customer. This feature is very useful in fraud prevention and detection and its uses in some country are helping banks to limit access to sensitive information by unscrupulous or unauthorized elements.
AI enables customers to make specific queries on telephones about investments and various options available. Customers can learn about investment options from multiple websites. However, they can get the details through AIVR. Secondly, AIVRs eliminate the possibility of human manipulating a scheme’s features to attract customers. They can get accurate information about how much returns will accrue for a specific amount put in a savings plan.
It helps them know how much instalments they have to pay before fully paying off loans or mortgage, spending on credit card and other essential information that otherwise needs human intelligence.
AIVR technology is yet to develop fully. Existing technologies are helping financial institutions and their customers. It is eliminating the need for banks to cut costs by running elaborate call centres and engage in Business Process Outsourcing from foreign countries.
ATMs and AIVRs are facilitating fraud detection. There are several other areas too where financial institutions are utilizing Artificial Intelligence to detect frauds and prevent losses.
For example, businesses require multiple documents from banks such as letters of guarantee, letters of credit and other resources for various activities. Their issue by banks and Non-Banking Financial Companies (NBFCs) are dependent upon human intelligence.
An officer has to physically check records of business before issuing any instrument that guarantees credit to a business. A letter of guarantee issued by oversight can land a bank or NBFC in severe losses. Should the business that has availed credit through such guarantees flounder and fails, the lender will find it difficult to recover money.
Alternatively, the lender will have to engage in expensive litigations and lawsuits. An error on the part of the lender will quickly be noticed in court and result in the unfavourable ruling. AI can prevent these losses.
Nowadays, lenders use AI over human intelligence to decide upon the amount of credit that can be safely given to businesses. AI is capable of computing complex data from multiple sources and scans records and history of transactions within a few minutes.
This is enabling financial institutions to provide credit and guarantees only to those businesses having a consistent record of stability and repayment. It helps financial institutions override the possibility of some unscrupulous official doling undue favours to a business house by deliberately overlooking its financial discrepancies and bad credit history.
Creditworthiness checks for individuals availing loans, credit cards and mortgages can be completed almost instantly or within a few minutes using AI. Human intelligence, on the other hand, would require hours to compute complicated financial history to arrive at any plausible conclusion.
As discussed earlier, penetration levels of AI in the financial industry are gathering momentum. Financial operations have become complex over decades since needs of corporate and individual customers have changed.
Almost every financial service has shifted to Internet-based platforms. It is now possible for anyone to conduct a transaction from any location in the world by just using a smart-phone. In such scenarios, AI is helping financial institutions bridge the gap between speed and human intelligence. It is ensuring a seamless, round-the-clock, round-the-year service.
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