Harnessing the Potential of Artificial Intelligence
FinXTech's New Report, Artificial Intelligence: A Real-World Approach, Explores the Impact of AI in the Financial Services Industry
FinXTech, a resource that connects financial institutions with fintech's, today released Artificial Intelligence: A Real-World Approach. The report, sponsored by Microsoft Corp., explores potential opportunities and real-life use cases for AI in the financial services industry, how financial institutions can approach implementing the technology, and regulatory and ethical considerations.
Financial institutions of all sizes are exploring ways to incorporate AI — from the largest banks with in-house developer resources to regional and small banks and credit unions that can add capabilities via vendors. According to Bank Director's 2023 Technology Survey, 56% of bank executives and board members said they had discussed allocating budget or resources to AI. Most were exploring use cases that touched on customer service and fraud detection and/or prevention; additionally, around 50% saw enhancing sales capabilities or credit underwriting as potential applications.
"For today's banks and credit unions, artificial intelligence is rapidly shifting from what's possible to what's practical," says Emily McCormick, vice president of editorial and research for Bank Director. "While there are real risks tied to the technology, there are also real opportunities to enhance processes, from customer-facing chatbots to back-office use cases."
Big, global banks have experimented with artificial intelligence for years, dedicating time, resources and staff to solve an array of problems. Now, community banks and credit unions have the opportunity to examine how AI can help their own organizations — whether that's fighting fraud, serving customers or generating efficiencies. But successful AI initiatives require support from management, strategic alignment and full compliance with an evolving regulatory landscape.
Key Findings From FinXTech's Artificial Intelligence: A Real-World Approach:
Banks and credit unions are adopting AI as solutions become more flexible and widely available. Customer service and fraud detection/prevention are the top two use cases financial institutions are exploring, according to Bank Director's 2023 Technology Survey.
Generative AI — which is trained on large data sets and can produce text, images, sounds and video — has gained broad interest. Regulators have also flagged its use as a concern, particularly due to data privacy and consumer protection issues.
Given its broad potential use within the industry, individual financial institutions will need to develop their own approach to using AI.
Many banks and credit unions are putting together cross-functional teams to identify and develop use cases for AI. Financial institutions will likely work with vendors to implement AI solutions, which will require additional due diligence.
AI solutions rely on data, requiring organizations to enhance their data management and data privacy protocols.
Regulators are paying attention to AI, but their stance on the technology will evolve as they learn more about its impact on the financial services space. Ahead of specific rules and regulations, institutions should consider creating their own ethical framework as part of their approach to AI.