Artificial Intelligence and Machine Learning

Abstract

In this chapter, we discuss the impact of artificial intelligence (AI) and machine learning (ML) application on Finance with the principal focus on the banking sector, how AI affects customers, maintains the customer relationship, influence the business performance and finally how the AI will change future of banking sector. AI is one of the front digital transformation strategies which can spread in the area of finance today. The use of this AI can improve core banking operations and tailor services which in turn will deliver over $250 billion in value across the industry (According to the McKinsey Global Institute). The banking sector of India as a financial service have recognized the potential and prospects of AI and ML and therefore it is being applied in almost all activities of banking operations. Analysts and experts estimate that AI will save roughly $1 trillion of the banking industry by 2030 [3]. According to Narrative Science, 32% of the participating banks in their 2018 report are already incorporating predictive analytics, recommendation engines, voice recognition and response times in their processes. ML is just a subset of AI which helps banks in bringing several benefits through analyzing mounds of financial data. Nowadays the traditional banking business is undergoing an exciting period of disruption, and at the same time it is evident from the 21st century that the worldwide banking sector is becoming digitalized as the trend spreads across the globe. Due to enormous changes with customer preferences, all industries now, including the banking sector, are adopting innovative methods to match the pace with changing demand and AI, ML and robotics are few among them. AI and ML impacts are clearly manifested in many areas of banking sector like credit scoring, creditworthiness, personal assistance, market research, fraud detection and asset management etc. AI is rapidly reshaping the business landscape of the financial industry including the banking industry. Banks should implement the AI technology in order to become more relevant and competitive, to provide personalized experience to customers, to improve and enhance the profit margin and to survive in the market amongst cutthroat competition. With the numerous available relevant technologies, application of AI and have deeply penetrated the banking sector and it is not only modernizing but also transforming this sector into a new horizon. Through the use of AI and ML the banks are leveraging the benefits of reduction in human error, strengthening customer base, reducing fraud, enhancing security and defence through utilizing knowledge data base and also controlling risk through minimizing credit score of customers. Nowadays, operation of banks is becoming more methodical and AI and ML have metamorphose every aspect of banking sector and has made its process faster. There are so many digital platforms used under AI and ML which are helpful to the banks for doing their business and operation smoothly. Some of them are handy while handling customer service, detection of fraud, creation of facial bio metrics and others are generous for computing the credit score and handling the customer queries. Few of these techniques used by the banks especially under AI are KASISTO (KAI), PEPPER, HooYu, DATAVISOR. PLAID and ZESTFINANCE etc. which prove to be, crucial for the banking sector for their glossy performance. So, it can be concluded form the study that in the banking sector the application and adoption of AI and ML enhances efficiency, increases profitability, serve customers more efficiently, offers data insights and manages risk of banks. AI and ML is proved to be the poised agitator for the banking industry. It is estimated by the experts that AI will bring huge gain to the banking industries which could be realized over the coming decades.