Evolving Role of AI in Banking and Insurance Sector

AI & Gen AI are reshaping digital transformation of industries across the globe and BFSI sector is not an exemption for the same.

The Banking & Financial Institutions are undergoing through major changes with the evolution of rapid development in Artificial Intelligence (AI). As AI matures and new innovations are getting introduced such as Gen AI, the application of it in BFSI industry is increasing rapidly and it is transforming processes from customer service to risk management. The evolution of AI is impacting BFSI institutions as well as consumers.

Retail Banking: 

With Gen AI evolution, many processes in the retail banking are simplified and customer experience is also enhanced.

Following are few use cases in Retail banking where AI evolution is leveraged –

• Customer On-boarding is streamlined with automation of certain processes such as KYC documents onloading and processing.
• AI powered Virtual assistant to resolve customer queries and inquiries instantly and available 24*7
• Personalized products and financial recommendations which results in enhanced customer engagement and loyalty
• Back-office process automation reducing manual efforts and operational cost
• Fraud detection in transactions and identifying suspicious activities and Risk assessment such as credit risk etc.

Wealth Management:

Providing AI powered solutions to Financial Advisor will increase client engagement which will impact business growth through new client acquisition or enhancing existing client wallet share.

• Create customized portfolio of customers based on data they provide.  Generate personalized investment reports and financial planning for customers.
• Predict needs of client and identify cross-sell and up-sell opportunities
• Analysis of Market situation and recommending insightful reports
• Automate KYC process with non-compliant behaviours
• Predict outcome of different investment strategies based on economic scenarios.

Investment Banking

Evolving role of AI helps to do real-time market analysis and sentiment analysis which help investment bankers stay ahead and make informed decisions.

Some of the detailed benefits of using advanced AI in investment banking is as follows.

• Manual tasks such as data collection, document summarization, drafting emails, generating reports and analysis are automated using AI evolution which helps investors to focus more on strategic work

• Compliance data is monitored and analyzed in real time to identify potential risks so that investors can take proactive action to mitigate risk. It also helps to stay compliant with regulations and avoid penalties if any.
• Customer Service and sale is improvised using advanced AI technologies. Large datasets are analyzed using advanced LLM models to provide personalized investment recommendations to investment bankers.
• Sales Managers are leveraging AI to generate marketing collateral, preparing proposals for finding cross-selling opportunities.
• Large data is analyzed to identify market trends to predict future developments and provides investors a valuable insight.
• Social media, news and articles etc. are analyzed to identify sentiment and to provide insights about how it might impact investments.

Payments

Payment sector is getting revolutionized with advanced AI. It allows financial institutions to optimize the process of how banks process, secure and optimize transactions. Usage of advanced AI in some of the key functions are as follows:

• Tracking and analysis of high volume of transactions for delays, errors or suspicious activities. Summarization of transaction trends to be used by operational teams.
• AI-powered virtual assistant to handle payment inquiries, status tracking and dispute handling
• Automation of matching incoming & outgoing payments with invoices or orders and creating reconciliation report.
• Optimization of cross border payments by selecting optimal FX rates, routes and banks
• Analysis of payment trends to forecast inflows and outflows of cash which assists in liquidity planning
• Ensure payment meets regulatory standards and compliance

Security

AI algorithms analyze large datasets of transaction data to identify transaction patterns, anomalies which indicates fraudulent activities so that proactive prevention is implemented. AI can be leveraged to automate tasks like AML compliance and regulatory reporting which improves efficiency and accuracy and reduces manual errors and efforts.

• Fraud detection and prevention is implemented by analyzing large amount of transaction data to find out anomalies and unusual patterns.
• Predictive analytics is leveraged to predict fraudulent activities before they occur.
• Risk assessment and risk ratings can be derived based on the KYC documents collected during onboarding process.
• Transaction datasets are analyzed to identify suspicious activities & anti-money laundering patterns
• Predictive analysis to identify maintenance activities of banking infrastructure.

Insurance

AI is playing crucial role in Insurance sector as well and transforming it by automating tasks and improvising customer experience. Tailored customer support and streamlined claim processing and personalized product recommendations are some of the benefits of using AI in insurance sector which drives innovation and reduces cost.

Some of the use cases where AI is leveraged in insurance are as follows.

• AI is used to assess risk, automate underwriting process and generate policy recommendations for the clients.
• AI uses fraud scenarios in claims and helps to detect and prevent fraudulent claims
• Claims processing is automated using AI which reduces manual activity and improves accuracy
• AI powered virtual assistant; personalized marketing enhances customer experience.

Conclusion

AI & Gen AI are game changer in BFSI industry by enhancing customer engagement to streamlining operations and managing risks. AI is reshaping BFSI industry to operate in digital way. It will augment human decision-making.

Financial advisors, compliance officer and relationship managers are empowered by AI-driven insights which helps them to serve clients better.

Ai’s role is evolving from support function to strategic enabler in BFSI industry.

References:

https://binmile.com/blog/future-of-generative-ai-in-banking/

https://www.empaxis.com/blog/generative-ai-wealth-management