A. Gostatuto g. 40-1, Vilnius, LT03163, Lithuania
It’s not uncommon for a bank user applying online to be told that a physical visit to the branch is necessary to complete the process. Branch visits are also essential for a variety of procedures and this fits strangely into today’s highly digitized world. Consumers express much discontent related to manual back-office procedures that disrupt a seamless digital banking experience they are aiming for.
Most of traditional banking institutions have already felt the consequences of their reluctance to embrace digitization and started to reshape their value proposition with innovative products and services. While the FinTech sector is showing very rapid development dynamics, banks are only starting to view data analysis and AI adoption as important elements for future success.
The concept of artificial intelligence is often mistakenly narrowed down to mere automation, which leaves aside all the opportunities it provides to eliminate the gap between back and front office operation. The gap does not allow for the deployment of AI-based tools that extracts insights from the available data and improves decision making. This holds institutions back from developing customer-centric solutions and prevents them from optimizing processes through getting a more holistic view on data.
However, it is important to say that artificial intelligence has not yet been democratized and is not prepared to be used widely across operation chain. We have analyzed three areas where companies could leverage the use of AI-based tools the most.
Credit Risk Scoring
This mainly relates to the opportunities of onboarding the unbanked individuals. There are certain segments in the potential customers pool that are more complex and difficult to analyze, such as young migrant families or students that have just entered the employment world. With the help of sophisticated AI algorithms, it is possible to automate the risk scoring of such individuals, bringing new clients to banking institutions. AI enables firms to get valuable insights on customer behavior, which can potentially improve customer journey and offer services these users would be unable to get elsewhere.
Fraud has been plaguing the finance industry for years. Some companies continue to suffer losses, while others have leveraged optimization opportunities that innovation has opened. Complex digital infrastructures have been developed and are continuously perfected to counter fraud and prevent unmanageable situations.
AI can also be applied to capital markets in form of algorithmic trading or other tools that help analysts and portfolio managers to analyze micro and macro trends and detect patterns in the market environment. Tas a result, AI (combined with other mechanisms) can boost alpha generating capacity and maximize returns across asset classes.