How Artificial Intelligence Is Transforming Financial Services

By Alaa Bawab, General Manager, Lenovo Infrastructure Solutions Group (ISG), Middle East and Africa

The financial services sector is taking its first tentative steps on its journey into artificial intelligence (AI) with the technology predicted to change everything from the way financial institutions detect fraud to the way they serve customers. The bank of the future is likely to see more AI-powered talking avatars, reduced queue times and more efficiency for people looking for better deals on mortgages. The challenge for business leaders in the coming months is to work out where AI can deliver results, and how to implement it safely and effectively.

Business leaders in the sector already recognise the transformative potential of AI, with 50% of leaders in the banking, financial services and insurance (BFSI) sector seeing AI as a ‘game changer’ according to new research. With expectations that the biggest impact of AI will be in intelligent automation and more personalised customer services, these technology pioneers are moving quickly – 67% have already invested in generative AI for use cases such as customer service chatbots. The rewards are potentially enormous: used correctly, artificial intelligence could add up to $340 billion in annual value to the banking sector, according to a 2023 McKinsey report.

But challenges still remain, from employees fearing the impact of AI on jobs, to difficulties making a business case for investment in AI. It’s key for business leaders to take lessons from other sectors which have implemented AI successfully, and crucially from their own customers, to deploy this technology effectively. Staying ‘as is’ is not an option: if legacy financial services companies don’t keep up, there’s a real chance that in ten years, they won’t exist anymore.

Boosting security

Leaders in financial services have vast amounts of unstructured data at their fingertips, some of it from less obvious sources, for example security camera footage of ATMs and in physical branches. All too often, this data is used only to respond to security incidents, whereas it holds the potential to do everything from reducing queue times in branch to identifying potential cases of fraud.

In certain cases, AI algorithms can be used to monitor and red flag transactions by using real-time monitoring, analysing transaction patterns to identify unusual behaviour. For example, a single person withdrawing money from several different ATMs in a day, which can be a strong indicator of fraud. By harnessing AI, banks can bolster their security measure and safeguard against threats.

A new face of banking

For business leaders in the sector, AI can help improve customer experience using virtual assistants, and could even create entirely new ways to interact with banks. In the very near future, people will go into a bank branch and have a live, real-time conversation with a customer care agent that looks human, but is actually an avatar powered by AI. It sounds like science fiction, but the seeds of this technology are here now. AI Human from DeepBrain works as a conversational kiosk, able to talk to people in real time, but also able to respond to touch responses. It cuts wait times and boosts customer satisfaction, offering intelligent, personalised interactions. I recently spoke to an AI avatar, and I felt the quality of responses were comparable if not better in some cases than many bank customer service phone lines. AI has the potential to revolutionise customer experience in banking.

As a bank, there is a tremendous amount of data that comes in, and business leaders need to work out how to derive the most benefit from this. For instance, many people simply don’t have time to read about financial markets and stocks, so artificial intelligence can suggest where they can get the best returns. The more intelligent decisions that the bank can make, the better it is for the customer. This isn’t easy of course: it takes a complete modernisation of the IT infrastructure. For companies at the start of this journey, or dealing with legacy software and infrastructure, there is plenty of help out there. Organisations such as Nybl are helping companies in the sector drive forward with AI software. The deep tech company puts AI in the hands of organisations such as banks, offering assistance with everything from financial forecasting to fraud detection and chatbots for customer services.

The optimal approach

In the Middle East, there is high eagerness for AI and forward looking, where a large proportion of CEOs and IT leaders see AI as a potential game changer. However, the adoption of AI is further backed by a dedication towards customer experience and satisfaction, while focusing on driving digital business innovation and cost optimization as top business priorities.

Many banks have been historically reluctant to take the lead in technology, due to compliance with regulations, data privacy and anti-money laundering checks. According to new research, tech leaders in the BFSI sector cited regulatory compliance and cybersecurity among their top challenges. But leaders in the sector need to be aware they can’t simply continue to do what they are doing today, and they can’t hide behind compliance to avoid innovating and evolving. Business leaders need to stop being afraid of technology.

Banks are taking a cautious approach, with 67% opting to build their own AI solutions rather than buy in technology. Compliance matters, and business leaders need to think carefully about how to ring fence where AI integrates within their infrastructure in order to protect sensitive data. The problem for leaders in the sector is that regulation is often retrospective. When I speak to leaders in the sector, I sketch out a diagram with ‘risk’ on one side, and ‘opportunity’ in the other, and ‘common sense’ in the middle. My advice is always to not lose that common sense.

In Lenovo’s research, the biggest challenge leaders say they face when deploying AI is employees fearing for their jobs. This is an area where business leaders have a responsibility to play an active role in talking about these changes, and an area where they can make a real difference. When the personal computer arrived, people feared for their jobs, but it actually generated many, new, different jobs. Business leaders need to ensure their employees are being educated in the skills they need to be able to use AI and thrive, and to make sure that their teams understand that AI is just like a new employee who is going to work alongside them and make things better. Alongside job security and a lack of general training, business leaders in the Middle East have also identified high dependence on third parties, potential misuse or AI hallucinations as the main challenges.

The right time

Artificial intelligence is moving very quickly: technology cycles will no longer be ten or 15 years, and the coming decade will be a time of rapid change for the sector. Business leaders need to move quickly, listen to their customers and find the right approach that balances risk and reward. AI has much to offer for the financial sector, and a balanced, intelligent approach will yield huge rewards for leaders who get this right.