2018 was a significant year for AI innovation, with a 47% increase in AI venture capitalist investment in the UK alone. Adoption of AI solutions is also on the rise, with a huge uptake in personal assistants - including more than 100 million Alexa devices worldwide - and personalised recommendations from platforms like Spotify and Netflix.
For all the talk of how AI is disrupting multiple industries, the sector that is expected to benefit most is banking. Analysts estimate that AI will save the banking industry as much as $1 trillion by 2030. Potential opportunities come in the form of improved efficiency, risk management, customer service and fraud detection - as well as capitalising on the wealth of data provided via open banking.
Open banking: twelve months on
This month marks a year since the launch of open banking - a series of government-backed reforms that grant consumers the ability to securely share their financial data with authorised third-party providers. The initiative intends to cultivate a more competitive and innovative financial services ecosystem.
Before open banking, valuable financial data was locked away in silos and ultimately underutilised. As more of that data becomes available, we will see significant advancements in the field of AI, leading to better services for consumers.
Yet one year on, we are still to see the full potential of open banking. According to one survey, fewer than one in four of us has heard of the initiative, and of those that had, only one in five said they knew what it meant. So despite a wave of new apps that offer better mortgages, cheaper utility bills and more control over direct debits, consumers remain largely unaware and/or reluctant to part with their data. (FT Money has a great user’s guide on these apps, which you can read here).
The issue of trust is at the forefront of many consumers’ minds, with 73% of respondents to one survey reporting rising concerns over the use of their personal data. Moving forward, building trust with customers will be number one priority for banks and app providers - and that can only be a good thing!
It’s fair to say that open banking is still in its early stages and has yet to find its feet. But the market is young and filled with innovative fintechs.
Putting fraud to the sword
Third-party financial services providers aside, one way that banks could utilise AI and potentially build trust with their customers is through improved fraud detection. Human brains can quite often be outsmarted by expert fraudsters who produce paper trails that appear legitimate. AI, on the other hand, is not so easily fooled.
Equipped with tools that can detect suspicious activity early on, banks may be able to prevent countless expensive fraudulent transactions. And once one instance is detected, machine learning can help prevent copycat attempts - a common occurrence in the world of financial fraud.
As we see AI become more and more integrated into financial services, the algorithms will improve and grow more robust. If the AI raises a red flag for a non-fraudulent transaction and a human being corrects the error, the system will learn from its mistake and make more informed decisions about flagging behaviour in the future.
Ultimately, it’s bad news for fraudsters - and we can expect to experience a much more stable financial industry in the coming years.
The future of banking
AI has an enormous role to play in the transformation of the banking industry - and as brands begin to build more trusting relationships with their customers, we will start to see the value that open data can bring to the wider financial ecosystem.
As more consumers adopt intelligent tools that are able to make sophisticated tailored recommendations on financial products and services, we will likely experience a ripple effect as larger pools of data result in more accurate recommendations and better financial advice.
It’s an exciting time for all of us in the AI industry: Viva la revolution!