Page 35 - Banking Finance August 2025

ARTICLE

formation of modern businesses. In simple terms, AI refers more efficient but also by creating better customer experi-
to a computer's ability to perform tasks and make decisions ences. However, like every technology, it has both advan-
without constant human instructions. In today's tech-driven tages and challenges.
world, where everything is becoming smart-from phones to
homes-AI is also making banking smarter. AI can learn from Benefits of AI in Banking:
data, make predictions, and act based on what it learns by
Speed and Efficiency: AI allows banks to complete
the type of command given. This ability helps banks provide
tasks faster. Whether it's verifying a transaction, an-
faster and more accurate services to their customers.
swering a customer query, or processing a loan appli-
Whether it's detecting fraud, answering customer queries, or
cation-AI reduces the time taken to minutes or even
analyzing spending patterns-AI is being used in many areas.
seconds.
Let's look at some key ways AI is help- Round-the-Clock Customer Support: With AI-powered
chatbots and virtual assistants, customers get support
ing the banking sector: anytime-day or night. This helps improve customer sat-
Customer Service with Chatbots and Virtual Assis- isfaction and also reduces the burden on employees.
tants: Instead of waiting in long queues or on phone Enhanced Security and Fraud Prevention: AI keeps an
calls, customers can now get instant help from AI-based eye on millions of transactions in real-time and can im-
chatbots. These bots are available 24/7 and can answer mediately flag suspicious activity. This helps banks re-
common questions, help with transactions, and solve spond to security threats faster and protect customer
many issues-instantly and efficiently. data and money.
Fraud Detection and Risk Management: One of the big- Personalization and Customer Engagement: AI uses
gest advantages of AI is its ability to identify suspicious customer data to suggest customized services like sav-
activities. AI systems continuously monitor customer ing plans, investment advice, or offers. This makes cus-
transactions and immediately flag anything that seems tomers feel valued and helps them make better finan-
unusual. This helps in preventing fraud before it happens. cial decisions.
Personalized Financial Services: AI analyzes the spend- Cost Savings: By automating routine tasks, banks can
ing and saving habits of customers and offers personal- reduce operational costs. This not only improves profits
ized suggestions. Whether it's helping them manage bud- but also allows staff to focus on more complex and cre-
gets, recommending investment options, or offering sav- ative tasks.
ings plans-AI creates a more tailored banking experience.
Data Analysis and Decision-Making: AI can process
Faster Loan Approvals and Credit Analysis: Traditional huge amounts of data and find patterns that would take
loan processing takes time. With AI, banks can quickly humans a long time to notice. This helps banks make
evaluate a customer's credit score, financial history, and smarter decisions and plan better strategies.
behavior to make faster and more accurate decisions on
loan approvals which is beneficial to bank and the customer. Challenges in Using AI in Banking:
Improved Compliance and Regulatory Reporting: Data Privacy and Security Risks: AI systems need a lot
Banks operate under strict regulations. AI helps in moni- of customer data to work effectively. Protecting this
toring compliance with these rules by automatically data is a big responsibility. If not managed properly, it
analyzing transactions and generating reports, reduc- can lead to data leakage or misuse.
ing human error and increasing efficiency.
Job Displacement: Automation of tasks might reduce
the need for human employees in certain areas, raising
Benefits and Challenges of Using AI in concerns about job loss-especially in customer service

Banking and back-office operations.
AI is changing the way banks work-not only by making things Bias in AI Decisions: If the data fed to AI systems is

32 | 2025 | AUGUST | BANKING FINANCE