Financial sector feels effect of AI technology
Begin with telling us what Artificial Intelligence?
Artificial Intelligence (AI) is a broad field, but in its simplest form, it can be defined as a field that combines computer science and robust datasets to enable problem solving.
Talking of problem solving, how is AI transforming the financial service industry?
AI is fast improving the banking industry’s quality of products and services. Not only has it provided better methods to handle data and enhance customer experience, but it has also simplified, sped up, and redefined traditional processes to make them more efficient.
Now more than ever, banks are aware that innovative and cost-efficient solutions, although necessary, will no longer be sufficient on their own to build a successful business. Instead, the success of financial institutions is being measured by their ability to use technology to harness the power of their data to create innovative and personalised products and services. Mobile banking is today making transactions faster, all thanks to AI. Algorithms can determine the creditworthiness of every customer through their transaction history.
As a result, the market is moving towards insights-driven lending rather than expert judgment, which helps maximise the rejection of high-risk customers, increase the acceptance of creditworthy customers, and reduce credit losses incurred by the financial institution. When it comes to servicing customers, chatbots are becoming more accurate in answering customer queries. With the alarming increase in fraud-related crimes and ever-changing fraud patterns, enhanced AI components are being added to the existing systems to identify previously undetected transactional patterns, data anomalies and suspicious relationships between individuals and entities. Banks are using machine learning for accurate forecasting and prediction in revenue forecasting, stock price predictions, risk monitoring and case management.
Have financial service providers in Kenya embraced the use of this technology?
Yes, they have embraced this technology to deliver seamless and secure digital banking experiences. For example, through our IBM Cloud for Financial Services, we have partnered with the United Bank of Africa, Eco Bank, and the Co-operative Bank of Kenya to help unlock digital innovation and develop digital-first solutions to ultimately broaden access to financial services in the country and the rest of the continent. Surprisingly, AI is not only being used by the leading banks, but also even by micro-finance institutions, mobile money platforms and online lending apps. This trust in AI decisions is critical as it allows organisations to understand or explain AI-driven outcomes, making it essential for regulatory requirements and to reduce bias and in the end, achieve higher confidence in quality of predictions in customer experiences,
How can financial service industry capture the AI opportunity?
AI will have a greater impact on banks and their clients in the coming years particularly in a few key areas. The first is fraud detection and cybercrime. Advanced use of AI can reduce the number of false positives in fraud detection and make the overall experience of keeping customers’ money and personal information safe with amore frictionless process.
Another key area will be the use of AI for the identification, mitigation and resolution of cyberattacks, especially the most common breaches, allowing expert talent to focus their attention on the most complex and serious attacks. The other area is hyper-personalisation. By resolving challenges relating to data silos and fragmentation, there remains great untapped potential for hyper-personalisation in financial services in a range of categories, including credit card issuance, loan offers, purchases embedded with relevant insurance coverage and financial advice highly catered to individuals.
Highlight other players who have successfully implemented AI solutions in their businesses or who can benefit from this technology?
This technology cuts across many industries and sectors. For instance, doctors and hospitals use AI to gain insights into a patient’s historical data to give more accurate diagnoses and prescriptions. You must have used taxi-hailing platforms, and you have seen how the automation of time and traffic data helps drivers and commuters reach their destinations faster. Ed-tech platforms transforming education use AI to determine which careers students should follow from their exam performances.
One of the most efficient uses of AI has been predicting weather patterns for farmers and increasing efficiencies in the entire value chain in the agricultural sector. Farmers can know when plating season is near, so they prepare. Additionally, AI connects farmers to buyers of their produce. In shipping and logistics, the technology has been the darling of clearing agents as it makes processes faster.
What are the AI’s pros and cons?
Since every new invention or breakthrough always has both advantages and disadvantages, AI is no exception. Some of the positive side of this invention is when using AI chances of making mistakes are minimal as computers do not make these mistakes if they are programmed properly. Another advantage is that using AI alongside other technologies, we can make machines take decisions faster than a human and carry out actions quicker. AI is also available always to give assistance since machines don’t need a break unlike human who always need to get some time out.
On the other hand, one of the cons of this technology is high cost of creation since hardware and software used need to get updated with time to meet the latest requirements. Other cons include such technology make people lazy, lack out-of-box thinking since machines can perform only those tasks that they are designed or programmed to do and have no emotions.