Emily is a tech writer, with expertise in entrepreneurship, & innovative technology algorithms.
Modern technology is revolutionizing different sectors of the world. The banking sector is enjoying remarkable benefits too. Enhanced software for all the processes is encouraging employees to work efficiently and allowing the sector to improve customer experience too.
The year 2020 has been a rollercoaster for all the industries. The banking sector, however, faced the most troubles. The global inflation rate increased and there has been a significant drop in the global GDP.
The IMF reports mentioned that the GDP worldwide has reduced by 4.9 per cent and the post-COVID drop is expected to be more severe. The report further stated that the year 2021 can expect a 6.5 per cent decrease in the global GDP.
All these numbers are indicating that banks have a number of challenges waiting in line to cause some issues for the sector. Nevertheless, it is not just about the challenges because there are a million ways to combat them. Thanks to advanced technology, Artificial Intelligence applications can assist the banking industry to tackle the increasing number of challenges. Here’s what you must know about the banking sector’s challenges and the role of AI.
Advanced technology is also helping fraudsters in fulfilling their malicious intent. Identity theft, synthetic identity fraud, data breaches, money laundering, and other criminal activities have rapidly increased over time. A report from Security Intelligence states that a data breach cost USD 3.92 million on average in 2019. Approximately 71 per cent of the cyberattacks are targeted at finance companies. This means banks are vulnerable too.
Emergence of Digital Currencies
China, Japan, Russia, and many other states of the world are all set to introduce digital centralized currencies. However, the banking sector may find it a little difficult to circulate digital currencies at a national level. Moreover, it will take a lot of effort and strategies to trade in digital currencies initially. Apart from these challenges in digital currencies, the currency giant, the US dollar, will become an obstacle in its implementation too.
High Customer Expectations
In the digital world, the expectations of customers have significantly increased. These increasing expectations are hard to meet when a company uses traditional methods for all the procedures. The banking sector cannot live up to the customers’ expectations without enhanced measures. Due to the same reason, the drop-off rate has significantly increased as well. On average, the abandonment rate was 71 per cent in 2019. Customers demand efficient processes in the digital world, which sounds good, yet continuous to be a challenge for banks.
Stringent KYC/AML Compliance
Due to the increasing number of fraud in the banking sector, regulatory authorities are enforcing stringent laws for KYC and AML in different industries. Banks across the globe face the most stringent regulations chartered by the FATF, FinCEN, and other state authorities. Complying with these laws is one big challenge for the banks, otherwise hefty penalties wait for them.
Artificial Intelligence has numerous applications in the banking sector that can not only help in tackling the challenges but it can also assist in enhancing the overall customer experience better. Here are some ways in which AI can help banks across the globe.
Identity Verification for Better Compliance
Using robust identity verification measures like video interview KYC and digital identity verification solutions for customer onboarding can significantly help the banking sector. All these solutions deploy AI algorithms that not only ensure accuracy, but real-time verification also ensures robust verification. Complying with all the recommendations from the FATF and KYC regulations wouldn’t be a problem.
Automation for Increased Employee Productivity
AI-powered solutions automate all the processes which result in motivated employees. The more motivated the employees, the better it is for the banks. Solutions that are backed by Artificial Intelligence streamline all the processes and ensure accuracy too. All in all, AI-powered solutions result in efficient processes, motivated employees, and automation brings convenience for the customers too.
Effortless Data Processing with OCR
AI-powered optical character recognition is an efficient way of processing data. It uses techniques like normalization, binarization, and deskewing to extract data and fill it in the required fields. Banks can use this software for proficient data processing and eliminate the chances of human errors too.
The banking sector has been facing many problems, especially during the COVID-19 pandemic. The global GDP decreased and many challenges are waiting for this sector.
Emerging digital currencies, increasing customer expectations, cybercrimes, and money laundering are some of these challenges.
However, AI-powered solutions can help the banking sector in combating these challenges and ensuring enhanced procedures. Furthermore, stringent regulations are tough to comply with, but digital identity verification solutions can help them in legitimate customer onboarding and fraud prevention.
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