Artificial Intelligence is becoming increasingly widespread, shaping various industries and helping them improve customer support and the quality of their services. In banking, AI has been mostly associated with risk mitigation and chatbots that automate various financial operations, allowing banks and online businesses to work 24/7, providing their services even during weekends. Currently, most AI software is working behind the scenes, helping financial institutions make tailored loan offers and accept more applications than ever before. Let’s look at how AI is actually used by modern financial institutions and whether it has a future in the banking industry.
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Digital Lending Is on the Rise
With the appearance of AI chatbots and advisors, digital lending has experienced a revolution of its own. While interactive AI systems that can recommend certain loans or services to clients are slower to take hold due to compliance risks, Artificial Intelligence is still used in banking to improve overall customer service. Chatbots are the most common example, and they’ve really done a good job at relieving human customer service teams from repetitive tasks. If you’re looking for a digital lending company, you can borrow at LendUp, SoFi, Upstart, Avant, Better, LendingClub, and others.
As a rule, most of these lending businesses offer a mix of human customer support and AI-powered algorithms to provide clients with a seamless experience. According to a recent study, 48.80% of people still prefer to interact with a real person for customer support. 25% of respondents admitted that a lot depended on the situation and the complexity of their issue. Only 7% would prefer a mix of both. Still, using AI is unavoidable, and most bank clients don’t even know that the technology has already arrived and is being widely used by the majority of financial institutions.
The Pros and Cons of Using AI in the Banking Industry
While experts predict that the future of banking is to become fully digital with more automation than we can imagine right now, the process of getting there is gradual and slow. Apart from personalized guidance, AI software offers other benefits as well. Let’s review some of them.
- Improved efficiency and money-saving. AI-powered software can greatly speed up the lenders’ workflow, resulting in a higher number of reviewed applications. Their productivity can grow as high as 30% compared to traditional banking systems that don’t use as much automation.
- Time for innovation. AI allows human teams to focus on the matters at hand, such as developing new business solutions and improving customer services. AI-driven analytic tools can help assess market trends and predict the outcomes of various financial choices, helping companies make data-driven decisions.
- Following compliance requirements. AI can help companies save time and money by following the changes in the law and automating checks. Financial compliance regulations evolve all the time, thus, business leaders can use AI-driven algorithms to always stay up-to-date.
Naturally, every new technology has its drawbacks, and AI is no exception. Let’s look at some of the potential concerns that still prevent the majority of business leaders from fully implementing AI tech into their financial operations.
- Data inaccuracies. There are instances when AI software can sacrifice factual correctness in favor of originality. As a result, AI-driven models can give misleading outputs, making everyone question whether AI should be used in the financial industry at all. Thus, the decisions proposed by AI should always be checked by a human employee.
- Privacy concerns. Cybersecurity is a huge issue when it comes to LLMs that have access to huge amounts of sensitive information. The majority of people are highly concerned with data privacy, urging lending company owners to look for AI solutions that have top grade security.
- Job security. Many companies are reluctant to implement AI-driven software as they face job loss concerns and changes in various financial departments. While that is true to some extent, according to research, AI automation tools can help employees save at least an hour per day, relieving them from repetitive tasks.
AI Makes Lending More Accessible
Applying for a loan can be a cumbersome process, as well as waiting for you application to be reviewed. Digital lending companies have greatly sped up the application review time, and AI has played a pivotal role in helping businesses analyze huge bulks of data faster. Financial institutions can also use alternative data sources to gather more information about the borrower in a short period of time. A low credit profile may no longer be an issue if the collected data from other banking platforms reveals the client has strong financial habits. Thus, more people can be eligible for loan approval.
AI promotes inclusivity while streamlining various financial operations due to machine learning and in-depth data analysis. These algorithms help banks say ‘yes’ to clients that could have been previously overlooked – all thanks to a wholesome financial history provided by AI software. While leaders of financial companies are still worried that the overuse of AI may impact the bank’s relationship with the customer, they have to admit that AI software has huge implications that can no longer be ignored.
Conclusion
AI tools are becoming an inseparable part of our everyday lives, including various industries and the financial sector. Many business owners are reluctant to implement AI-powered software due to major security concerns and data privacy issues. Nevertheless, AI technology is already being used behind the scenes of many financial operations to streamline various processes and improve the customers’ experience. These tools can also help companies stay up-to-date with compliance regulations and analyze huge amounts of data to speed up their decision-making.
