In the present day scenario, the role of artificial intelligence and machine learning has gone beyond weather prediction and forecasting. Its influence has been increasing in every sector of the economy, and more importantly in the banking services, where it is responsible for security, compliance, and marketing. According to a joint research carried out by National Business Research Institute and Narrative Science, around 32% of financial service providers are already using AI-based technologies such as predictive analytics and voice recognition.
The future of the banking sector relies on the personalization of banking services, which can only be achieved with the power of data analysis through artificial intelligence. Adenovo, a Taiwan-based fintech startup, is fulfilling that promise.
The banking sector is one of the most highly regulated components of the economy, and it is not just limited to a single country, but to all the major countries in the world.
Governments have enacted specific laws and set up regulatory authorities to safeguard banks and financial institutions from large-scale defaults. These laws also prevent consumers from carrying out financial frauds and crimes such as money laundering.
As a result, banks have to follow a number of different regulations to know their customers, uphold customer privacy, and monitor wire transfers. With this, a load of significant cost and liability is created, which makes the banking services not so ideal for the weakened sections of the economy.
Thus, creating a need for improved financial solutions that are fast, efficient, and unbiased.
“The concept of the digital economy has pushed the banking sector to reinvent itself to remain relevant to the customers,” said Connie Leung, financial services business lead with Microsoft Asia.
To bridge the gap between banks and end-users, smart solutions based on AI provide a promising solution. With services based on AI, it has become easy to monitor transactions and analyze consumer behaviors.
AI has also emerged as a real competitive differentiator for financial institutions to deliver highly personalized customer experience, and contribute towards enhanced decision-making to proliferate operational efficiency.
By understanding specific consumer behaviors, AI-based services can formulate intelligent patterns and help banks to stay on top of their regulatory compliance without any significant risk. In addition, AI-dependent systems can boost banking services by making safe, secure, and profitable loan and credit decisions.
At present, the majority of the banks are still relying on credit scores and credit history to determine whether an individual is creditworthy. Quite surprisingly, the existing credit reporting systems are flawed with errors and lack in providing actual transaction history, often misclassifying the creditors.
Leading banks like JP Morgan Chase and Bank of America have effectively transitioned to AI applications over the last three years. While JP Morgan Chase have incorporated a contract intelligence chatbot (COiN) to analyze legal documents, Bank of America also launched a chatbot called Erica in 2017.
On the other hand, the AI-based systems like Adenovo efficiently analyze consumer behaviors to determine if an individual with a limited credit history can actually turn out to be a good customer. Likewise, individuals with a high possibility of default can also be scrutinized easily through the service.
The biggest challenge for AI-based systems in the banking sector is to minimize bias-related issues. Banks and financial institutions must improve their AI training regimens by including factor bias and ethics to prevent these flaws.
The other major issue is that of explainability, by which all financial institutions operating under regulations have to provide detailed explanations for their credit-issuing decisions.
This can be a problem when AI-based systems are involved that only consider the correlation between several thousand variables, to formulate a decision. While these correlations are certainly out of the scope of the human mind, explaining them can be an even bigger problem that can affect the customer experience.
Adenovo provides AI-based solutions to reduce the gap between financial institutions and customers. The company aims to help millennials between the age group of 20 to 35, and the people who have a not-so-good experience with the banks.
The company envisions that banks and financial institutions have high compliance costs which bar them from serving every individual belonging to different income groups. Adenovo aims to reduce compliance costs through its AI-based risk assessment technique for checking the creditworthiness of an individual.
The company will also exhibit at the SXSW 2020 conference to be held at Austin, Texas from 13 March to 22 March 2020, where they will have the chance to showcase their AI-based service to diverse groups of creatives across different industries, in order to become the proxy to connect financial services with the western world.
Note: SXSW has officially announced that it will cancel its 2020 edition due to concerns around coronavirus.