In today's evolving banking, financial services and insurance landscape, the integration of artificial intelligence has become imperative for service providers to stay competitive and meet the increasing demands of its customers.
Regulatory pressure, enhancing the customer experience and ensuring platforms are robust and secure against the increasing threat landscape, are all front of mind for business leaders.
So, what are the challenges or opportunities? Here we explore the role of AI in revolutionising BFSI.
1) Market challenges
There are several aspects to the potential challenges facing the market. A few are highlighted below:
Customer service and communication enhancements
Traditional customer service models in BFSI often face challenges in meeting the expectations of modern consumers who demand personalised, efficient, and accessible services round-the-clock.
The tangled web of back office, front office, and mobile integration, means many disparate systems hindering information flow.
Data and network security
With the proliferation of digital transactions and sensitive BFSI data, ensuring robust data security measures is paramount.
Financial institutions are under constant threat from cybercriminals seeking to exploit vulnerabilities for fraudulent activities.
Regulatory pressures
The scrutiny BSFI institutions are under from the Regulators is increasing.
Compliance with anti-money laundering and know your customer) regulations is a critical aspect of BFSI services.
Manual processes are often time-consuming, resource-intensive with data inputs being fragmented, and prone to errors, leading to regulatory risks and BFSI penalties.
Financial advisory services
The evolving needs and preferences of clients necessitate innovative BFSI advisory solutions that offer tailored recommendations, comprehensive insights, and seamless interaction between advisors and clients.
Customer relationships with multiple providers, limited loyalty and fluidity with ever-changing gig-economy workers lead to multiple relationships that can be difficult to manage – from both sides.
Gone are the days of jobs for life and pensions to match.
2) The role of AI
AI presents a transformative opportunity to address these challenges and unlock new possibilities in BFSI services.
Some of these possibilities and opportunities lie in the following areas:
Customer service and communication enhancements
AI-powered chatbots and virtual assistants enable personalised interactions, instant query resolution, and proactive customer support.
Natural Language Processing algorithms analyse customer inquiries and provide accurate responses, enhancing overall satisfaction and reducing service costs.
The challenge is still to ensure that the AI bots involved offer REAL and additional value instead of any further potential deterioration in customer experience, which can sometimes be the case with dealings between humans and AI.
it is clear these can all become faster and more efficient with AI.When we look within the institution, the opportunity for AI to facilitate seamless collaboration and information exchange among stakeholders offers huge value for those improving operational efficiency.
Integrated systems leverage AI algorithms to aggregate and analyse data from disparate sources, enabling real-time insights, personalised recommendations, and efficient communication across the BFSI ecosystem.
Data and network security
AI-driven cybersecurity solutions employ advanced algorithms to detect anomalies, identify potential threats, and build defences against cyberattacks.
Machine learning algorithms continuously learn from data patterns to adapt and pre-emptively thwart emerging threats therefore safeguarding sensitive BFSI information.
Open APIs and technology adoption driven by regulation (such as Open Banking/PSD) pull together parties from the wider ecosystem.
Collectively these data points and the patterns they uncover, can help build stronger defences.
Regulatory pressure
AI streamlines AML processes by automating transaction monitoring, risk assessment, and compliance reporting.
Machine learning algorithms analyse vast datasets, flag suspicious activities, and generate actionable insights to facilitate timely intervention and regulatory adherence.
When we explore the role of AI with KYC, image recognition and liveness tests, to help identify and potentially re-KYC (during a customer lifecycle with an institution) it is clear these can all become faster and more efficient with AI.
Financial advisory
AI-powered ‘bot-advisors’ leverage data analytics and predictive modelling to offer personalised investment strategies, portfolio optimisation, and risk management recommendations.
By analysing client preferences, BFSI goals, and market trends, AI enhances the quality and relevance of advisory services, empowering clients to make informed decisions.
This can happen in a fraction of the time it takes to manually seek and distil information.
Notice something? The challenges and opportunities are in the same areas - two sides of the same coin, if you like.
Mitigating risks
While AI offers immense potential, it also presents risks, particularly concerning ethical considerations, algorithmic biases, and susceptibility to malicious exploitation.
To mitigate these risks, robust governance frameworks, transparency measures, and ethical guidelines are imperative.
Additionally, AI-powered cybersecurity solutions play a crucial role in identifying and neutralising threats posed by malicious actors leveraging AI techniques for nefarious purposes.
Continuous monitoring, ethical AI training, and collaboration among industry stakeholders (using humans) are essential to harness the transformative power of AI responsibly and sustainably.
Changes to longstanding regulation may be required. Compliance teams may need further investment to respond to a strategic shift and ensure their organisation is ready for this new wave.
My personal AI
The use of AI isn’t exclusive to the institutions we deal with.
We are rapidly facing a world where AI is in the power of the consumer and the interactions and transactions we make financially, are no exception.
Imagine a world where your digital wallet nudges you to make prudent financial decisions, or positions the right card for the right transaction?
Or perhaps your wallet acts as the token of entitlement for better insurance rates based on your driving experience.
This pulls together your behavioural biometrics that the big data institutions have been collecting for years, to help deliver a better customer experience. And, of course, the key to this? Your mobile device.
Conclusion
AI is reshaping the landscape of BFSI services.
Driving innovation, increasing operational efficiency and regulatory compliance, and improving customer-centric service will help institutions stay ahead of the game.
By embracing AI technologies, BFSI institutions can unlock new opportunities for growth, differentiation, and value creation.
Imagine a world where your digital eallet nudges you to make prudent financial decisionsHowever, these still need to work alongside its human ‘partners’ to ensure that proactive measures are taken to uphold or address ethical concerns, ensure data privacy, and mitigate risks to safeguard the integrity and trust of the BFSI ecosystem.
Together, we can embrace the transformative power of AI to redefine the future of BFSI services, empowering individuals and businesses to achieve their BFSI goals with confidence and security.
Claire Maslen is payments and commerce adviser, and Nick Millward is anti-fraud and AI adviser, at the Mobile Ecosystem Forum.
