By Rishi Aurora

As banking gets revolutionized with digital technology, it is a relief to know that the days of endless paperwork and queues at bank counters are gone – well, almost. Now, a customer in India can transfer funds, review spending, and apply for loans anywhere and anytime through online banking platforms and applications, quicker and with fewer errors. The quality and speed of services differ from bank to bank, but it is safe to say that a good majority of banks offer at least basic online banking services.

India’s growing open banking system has been instrumental in transforming traditional banking institutions, opening opportunities to partner with 3rd party financial services providers. A case in point is the popularity of the United Payments Interface (UPI), which currently handles almost half of India’s digital financial transactions. The integration of Artificial Intelligence (AI) in UPI has improved the model so much that the government has been expanding access to UPI networks to non-resident Indians in several other countries, including Europe, UAE, and Singapore. 

Also read: Automation and AI as digital business enablers: winning customers with faster service

Chatbots have been a widely adopted AI-based model that are helping banks handle product-related queries, requests for reports, or forms with very little human intervention. Certain well-known Indian banks are also using natural language processing to understand customer sentiments and craft responses accordingly.

From the digital know-your-customer (KYC) verification process to creating credit scores, or predicting when cash in an ATM needs replenishing, the industry is improving services as AI usage becomes more widespread. But to match the demands of a customer base accustomed to the convenience of digital tools, the banking industry needs more, not less, of AI.

The case for AI

With services and products becoming available, literally at our fingertips, consumers have come to expect a certain level of customization – and banking and financial services are not exempt from these expectations. As we move forward, traditional banking products and services will need to be revisited and reshaped to match the unique needs of every customer. 

And to accomplish this, there has to be a clear understanding of customers, spending patterns, and investment portfolios, which will allow the creation of relevant and personalized messaging and take products and services across omnichannel platforms and locations. This is where AI can deliver value by creating a single source of truth from an ever-increasing wealth of information within and outside the banking enterprise.

A few established big banks have been leveraging AI to build experiences beyond their platform and are opening up their networks with APIs to slowly but steadily change a consumer’s perception of banking solutions and services.

Another pressing reason traditional players in the banking industry need to transform with AI is the growing interest to enter the banking space from established players with technical prowess and deep insight into customer needs. Although AI will not completely replace physical branches, the technology can enable better access to banking services. In tier 2 and tier 3 cities, for example, where customers are more inclined to visit branches, banks need to balance technology and human touch points and build trust that technology-led transactions are secure. 

As technology’s role in banking also increases, banks are also more vulnerable to malicious cyber-attacks than before. The AI capability to spot patterns from numerous activities, learn from past incidents, and alert teams to potential attacks can boost a bank’s security posture.

Yes, we need AI, but how do we get there?

The decision to implement AI needs to be followed by a detailed strategy that considers existing processes, systems and infrastructure, avenues for improvements, and include a clear understanding of what AI solutions to deploy and the ROI expected. A haphazard deployment of AI solutions can deter usage and make it hard to scale up or integrate with existing solutions. 

Educating and changing employee mindsets toward technology is another essential element of any AI strategy. Given transaction volumes and the sensitivity of operations handled daily, there can be a tendency to continue operations with existing tools and systems. The mindset that technology can improve rather than impede services needs to be driven intentionally. 

With the government also championing advanced technology, such as AI, to bring Indian products and services on par with global standards, banks can benefit from various national level initiatives that accelerate research and development. Truly, the time to take charge and reinvent with AI is now. 

(The author is a senior partner and FSS sector leader, IBM Consulting, India and South Asia. Views expressed are personal.)