5 ways how Gen AI is set to revolutionize the financial industry

Generative AI has gained widespread popularity in a remarkably short time, emerging as a transformative force globally. Among the sectors witnessing a profound transformation, banking stands at the forefront, embracing the potential of Gen AI to redefine traditional models and revolutionize banking operations. According to Goldman Sachs, Generative AI has the potential to drive a $7 trillion increase in global GDP and increase productivity growth by 150% in the coming decade. Therefore, Generative AI is probably still the hottest topic in the world of business, and its most likely here to stay.  

So, what exactly does Gen AI mean for banks? 

With the early adoption of Gen AI, banks and financial institutions can equip themselves to predict customer expectations effectively, craft hyper-personalized user journeys, detect fraud in real-time, streamline internal processes as well as automate customer services. This plethora of benefits is enticing banks and FIs to quickly embark on their digital transformation journeys to incorporate Gen AI into their daily operations. 

Let’s explore how Gen AI is expected to revolutionize traditional banking models.  

Creates meaningful, hyper-personalized user journeys to meet customer needs  

For starters, Gen AI gathers and analyzes data like no other. It allows banks to leverage data for insight-driven decision-making and to identify evolving customer trends and expectations. This allows banks to assess how they can improve their services at various touchpoints to meet the needs of the customers. This new wave of AI also allows banks to provide hyper-personalized user journeys through suggestive ads and product recommendations that are based on the behavioural patterns of customers.  

Transforms and automates banking operations for greater productivity   

Generative AI is also going to significantly contribute to how banks manage their mid- and back-office operations. Automation of repetitive tasks like data entry and transaction processing will effectively drive down costs, enhance productivity, and allow banks to focus more on innovation. Tools like ChatGPT and other LLM set the tone here, showcasing how Gen AI’s natural language capabilities to extract insights from unstructured data can enhance banks' engagement with customers using conversational chatbots and virtual assistants. 

Innovation leads to structural changes in job roles and the emergence of new occupations 

It’s worthwhile to notice that several Gen AI tools may impact the nature of some existing roles and occupations by partially automating tasks for those roles. AI and innovation will also result in the emergence of new jobs and have far-reaching implications on the augmentation of human capital at banks. It will require upskilling and reskilling a major chunk of the existing workforce as well as the creation of new roles and departments. 

Detects and combats fraudulent activity effectively  

Gen AI has also enabled banks to deflect the risk of fraudulent activities by early threat detection capabilities. In the light of fraud activities becoming more complex and sophisticated than ever before, traditional models often struggle to keep up with them. However, Gen AI leverages synthetic data to continually refine its detection algorithms, allowing banks to efficiently identify and prevent suspicious behaviour. 

Safeguarding the integrity of Banking data by using Gen AI responsibly  

Despite its immense potential for revolutionizing the finance and banking sectors, generative AI does come with its own set of challenges and limitations. There may be ongoing concerns about the responsible use of AI and setting boundaries for data privacy. There is a possibility of unintentional disclosure or misuse of sensitive information, such as personal identification details, account balances, and transaction history. Financial institutions must ensure that proper safeguards are in place to protect customer data and maintain trust in their AI systems. Furthermore, the numerical accuracy of generative AI in banking is a limitation to be aware of. Generative AI models should strive for the highest accuracy possible, as incorrect but confident answers to questions regarding taxes or financial health could lead to serious consequences. 

When used responsibly, it's safe to say that Gen AI is emerging as an unbeatable force growing in importance exponentially across industries such as healthcare, insurance, banking, and many more. In shaping their Gen AI strategies and plans, banking leaders must recognize Gen AI’s position alongside blockchain, Big data, Web3, open banking, and other disruptive technologies. Long-term roadmaps of banks must reflect how these technologies, when deployed in the right combinations, can transform core business functions effectively and overall contribute to the growth of the global banking industry. 

To learn more about how you can transform your bank and accelerate innovation with Gen AI, reach out to our experts at Inceptial It Solutions today.