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Trixy Castro is the founder and CEO of TRX Capital, as well as a partner and board member of Verifee.
Artificial intelligence has spurred changes in various industries—and the financial services industry is no exception.
Specifically, AI can help financial services companies in several key areas, ultimately enabling them to provide a smoother experience to their customers.
How Financial Services Providers Can Leverage AI
Financial services providers can leverage AI in several ways to create better outcomes for their customers.
First, there’s fraud detection and prevention, which is one of the most significant ways that AI is shifting how financial services providers operate. As noted in a 2023 report by PwC and Stop Scams UK, throughout “the banking industry, it is common for historical data on fraud cases to be fed into machine learning models to enable behaviours or transactions with similar features to be more effectively identified as possible fraud.” Additionally, the research explained, “This kind of approach to monitoring is well embedded across card payments fraud detection and increasingly in models to detect potential payments to scammers to enable more effective, specific warnings to be given to customers at the point of payment.” By using AI, financial services companies can further safeguard their customers, particularly older customers who might be more susceptible to getting scammed.
Risk management is another area where AI can benefit financial services providers. Specifically, AI can help banks quickly analyze and assess credit approvals. According to a 2021 McKinsey report, “AI-first banks have designed streamlined lending journeys, using extensive automation and near-real-time analysis of customer data to generate prompt credit decisions for retailers, small and medium-size enterprises (SMEs), and corporate clients. They do this by sifting through a variety of structured and unstructured data collected from conventional sources (such as bank transaction history, credit reports, and tax returns) and new ones (including location data, telecom usage data, utility bills, and more).” AI-powered risk management can help financial services providers quickly reach decisions and enable them to avoid entering arrangements that could have negative consequences for all parties involved.
Another key role AI can play in the financial services world? Customer service. As noted in “The Financial Services AI Dossier” published by the Deloitte AI Institute in 2021, “conversational AI solutions such as chatbots and virtual assistants” can tackle various tasks, “from helping consumers find a better credit card or cancel unneeded accounts, to negotiating collections.” In my view, by adding AI-powered tools to the mix, financial services providers can point customers in the right direction without overextending their staff.
The Risks Of Using AI In The Financial Services Industry
Despite all the benefits that AI can bring to the financial services industry, there are drawbacks as well.
For one, too much reliance on AI can run counter to providing customer-centric solutions. Consider AI-powered chatbots. While they can help financial services providers respond to customers faster, there are many situations where it’s best for customers to speak with support agents to solve issues. Moreover, these chatbots can create an impersonal customer experience. For those reasons, I believe that financial services providers should never do away with human support agents.
Additionally, an overreliance on AI can lead to biased decisions that create unfair outcomes for customers. Financial services institutions should be aware of these risks and take steps to mitigate them, such as having a staff member double-check every credit application that was denied by an AI algorithm.
Financial services leaders should carefully and thoughtfully navigate AI—and strike the right balance between implementing the technology and overseeing its usage to avoid serious consequences.
How Financial Services Leaders Can Prepare To Successfully Navigate AI
In order to carefully and thoughtfully navigate AI, financial services leaders need to start by identifying how they want to leverage AI at their companies and then be transparent about those goals with their teams.
From there, leaders should ensure that they and their team members have the necessary skills and knowledge. Leaders should learn as much as they can about AI and create opportunities for their staff members to get AI training. Staff in various departments, such as marketing and compliance, can benefit from acquiring AI skills. As they upskill their team members, leaders should also identify where it might be necessary to hire additional talent. Along the way, leaders should position AI to their staff members as a way to enhance how they work, rather than as a tool that will replace jobs. By doing so, leaders can assuage any fears team members might have about AI eliminating their jobs and make team members more eager to embrace learning about AI.
Alongside making sure their team members have the necessary skills, leaders need to make sure they have the right tools and processes in place so they can successfully implement AI. They should thoroughly research available AI solutions and then update their processes accordingly. As they research tools and update their processes, financial services leaders must keep compliance, data security and privacy top of mind. Banks and other institutions are bound by local and federal laws, and they deal with large amounts of sensitive data. They can’t risk glossing over compliance, data security and privacy.
Once financial services leaders implement AI solutions and update their processes, they need to continuously monitor usage to catch any problems before they spin out of control. AI is not a one-and-done initiative. It needs to be an ongoing one. By staying on top of their AI systems and technological advancements, financial services leaders can responsibly use AI to deliver better customer experiences.
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