Technology has penetrated every walk of life and is also changing the face of banks by improving service delivery and enhancing customer experience. Banks have become more adaptive towards smart technologies like artificial intelligence and blockchain besides other information technology-based applications as they now have greater understanding of the functions that these technologies provide.

Earlier, challenges related to cybersecurity risks and loss of data and authenticity held banking institutions back from introducing these intelligent solutions. But off lately introduction of fintechs and chatbots and other smart solutions have changed dynamics of the industry. This has made the traditional banks to rethink their strategy and work upon plan to tap the potential cost savings that can accrue with their adoption.

To further provide an insight, here is a snapshot of how these technologies can be leveraged and the various functions that these technologies provide.

Blockchain

Blockchain technology is one of the major technological breakthroughs that has impacted the banking industry. It has brought in a digital transformation in the way transactions are being done. Blockchain also called as distributed ledger is a peer-to-peer blocks which allows people to send value anywhere in the network where blockchain is accessible.

Unlike the traditional banking where transactions are regulated through central banks, here distributed ledgers are not centrally controlled and are not connected to a common processor and has a time stamp and a link attached to a previous block. With this, the authentication and safety of the transactions is ensured, and frauds are eliminated.

Blockchain for Fraud Reduction

Around the world, banks work on a centralized database which are more vulnerable to cyberattacks as hackers have one point of attack. However, with blockchain technology, distributed ledgers are stored with individual connected on the network with each block having a timestamp and is linked to the last created block. In this way, it will be difficult for hackers to tamper with the distributed ledgers and even if it happens, it won’t affect the entire network of ledgers created.

Making payments

Another critical use case of blockchain is for making payments between clients and even between banks. The transactions made through blockchain are highly secure and involves a low cost as compared to other means of technology such as mobile applications.  Also, with traditional banking there are a lot of intermediaries which at times raise the cost of services. With blockchain, intermediaries are eliminated making the process smooth and cost-effective.


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Artificial Intelligence

Artificial intelligence is another technological advancement that has transformed almost every industry and banking is no exception. Specially designed algorithms are developed using historic data which are imbedded into machines and systems to make them perform complex task with ease. Information about customer preferences based on images, sounds and speech is collected and used to sense their choices. Further, physical actions are taken based on comprehension and understanding of the variety of data that is feed into the system.

Transaction bots

The first use case of AI is transaction bot which act as advisers. In the financial service industry, transactional bots are used to offer users financial coaching and offer advice regarding products. It works as digital assistants which help a user navigate through their financial plans. These bots are built using natural language processing (NLP), which is a type of machine learning language to understand the data and convert it into meaningful insights that are understandable for humans.

Further, layers of product recommendations, reminders for upcoming renewals, transaction limits exhaustion based on customer data can also be added. Ella, for instance, is a real-time example of transaction bot. It has been devised by Sun life to help users get information on benefits and pension plans by letting them stay on top of their investment plan.

Underwriting insurance

Artificial intelligence is also specially adopted by insurance companies for taking up underwriting, pricing and credit risk assessment. The technology offers automated underwriting services mainly for investment and loans which becomes cumbersome to manage manually. With AI-powered models, instantaneous assessment of the credit risk is provided thus enabling customized and adaptable funding solutions for clients. AI Decision Algorithms are used and trained on earlier used pay-out models and underwriting models having varied classifying process. This speed up the underwriting process and improves user experience. 

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Fintech

Through AI, banks can handle large quantum of data such as video, images, location and time series data perfectly well and generate insights. It is widely used by financial technology firms to optimize their functions such as offering best loans for start-ups online, providing information on availability products among other functions. Furthers, tasks such as credit risk assessment, fraud detection and risk assessments which were mostly manual have now been simplified and made effective using AI. Through this, banking managers can effectively screen the risk profile of a client just by using the categorization feature of the technology. Categorization based on low and high-risk profiles is segregated using historical data. To enable this categorization facility, classification models such as Artificial Neural Network are equipped with historical client data. 

Conclusion

Clearly, digital technology revolution in banks is closer than it appears. Traditional banks still relying on their legacy systems needs to buckle up and take steady steps to create a solid footing in the market. Winners will be those who are agile and can foresee the required changes and accordingly innovate. Apart from blockchain and artificial intelligence, other technology trend that is set to disrupt the market will be cloud-based banking facilities. With increasing threat of cyberattacks, banks are shifting their core functions on cloud to ensure safety. Therefore, knowing the upcoming trends and becoming receptive of these changes is in a true sense a right solution for banks.


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