By Sean Narayanan – CEO, Apexon
Artificial intelligence (AI) and other transformational technologies like Data Science are being rapidly adopted across industries, including the banking and finance industries (BFSI), to increase productivity and gain a competitive advantage. In fact, during the pandemic, several businesses have increased their spending on artificial intelligence, while 75 per cent plan to launch new initiatives in the new normal. According to IDC, global spending on AI systems will jump from USD 85.3 billion in 2021 to more than USD 204 billion in 2025. The compound annual growth rate (CAGR) for the 2021-2025 period will be 24.5 per cent.
BFSI was one of the first sectors to deploy tech-based solutions during the pandemic to enhance customer experience and improve sales and revenue as companies started working remotely. Several functions witnessed the involvement of AI and cloud-based platforms for seamless connectivity and user experience.
However, the important question is, can AI and Data Science be leveraged to manage risk while ensuring quality customer experiences?
Financial institutions are prone to disruption, and this makes it imperative for the BFSI industry to consider technologies like AI as part of its risk mitigation process. This makes it crucial for organisations to enable the human-digital synergy to the next level and leverage data to shape human-first digital experiences.
Addressing credit risk
Traditionally, the process of assessing and approving loans and similar lending instruments is based on a rules-based system, along with some subjective opinions of the assessor. However, those systems are based solely on historical trends, and not adaptable to changing and uncertain times. With AI integrated data science and digital experience solutions, financial institutions can do real-time credit scoring and react to events as they happen. This helps reduce the risk of credit losses, while still creating a positive customer experience. AI-based tools can also monitor risk across the entire customer lifecycle.
Addressing the risk of data security
Daily functions at financial institutions involve processing and managing personal data and critical data. The question of data security becomes more important particularly when enterprises are functioning remotely. Moreover, organizations are not sure that migrating from local servers to cloud platforms to simplify accessibility is a safe decision. With AI and Data Science integrated solutions, financial institutions can help process applications, detect patterns of abnormal activity, and execute screening processes.
The 2021 AFP Payments Fraud and Control Survey, found that 65 per cent of finance professionals blamed the pandemic for an increase in fraudulent activities at their organizations. AI can increase fraud detection by 50 per cent as it analyzes the data in real-time and detects fraudulent transactions. The technology can be taught to boost its accuracy in monitoring signs and can augment human intelligence. According to Forrester, AI models can help build cases and report them by priority for security teams to investigate. Also, while AI models may come with detection models and risk scoring systems, it is important to ensure that they can handle large streams of data.
Further, AI/ML and automation solutions help financial institutions improve processes based on subjective decisions by helping ensure they are unbiased and within programmed parameters. This also helps deliver a customised and meaningful experience for customers, thus enhancing customer satisfaction and retention.
Creating human-centric experiences
The recent pandemic is a testament to how companies reworked their business models to suit changing requirements and win new customers. While new-age solutions help businesses adapt and scale, it is equally important to understand end-to-end requirements, processes, and risks that might entail. It is not enough to simply provide solutions that work logically.
Thus, deploying new technologies like AI delivers a great competitive advantage to financial institutions, from better managing risk to delivering great personalized and customer-centric experiences.
The content of this article is the author’s personal opinion.
Sean Narayanan leads Apexon’s strategy to help customers improve their digital experience by leveraging its expertise in AI, analytics, and cloud technologies. Apexon is a digital technology services and platform solutions company that partners with clients to improve their digital experience and insight.