Artificial intelligence (AI) is changing the global banking industry at an unprecedented rate, bringing it huge transformation opportunities and challenges. McKinsey's report predicts that generative AI will bring hundreds of billions of dollars in revenue growth to the banking industry each year, mainly due to a significant increase in productivity. However, the widespread use of AI also brings new security risks, such as the increase in financial crime. This article will explore the current status, opportunities and challenges of AI in the global and Indian banking industry, and how banking institutions can deal with these challenges.
In recent years, with the rapid development of artificial intelligence (AI) technology, the banking industry is facing unprecedented transformation opportunities. Generative artificial intelligence (GenAI) is expected to increase revenue by $200 billion to $340 billion per year for the global banking industry, an increase of 2.8% to 4.7% of industry revenue, according to the latest report from McKinsey Global Institute. The main driver of this growth is a significant increase in productivity.
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In India, AI applications in the banking industry are advancing rapidly. In 2023, Accenture released a study highlighting the huge potential of AI in improving customer service efficiency and transaction volume. As early as 2017, DFC Bank launched a chatbot called Eva, the first AI-based customer assistant in India. Eva is able to handle millions of customer queries at the same time, greatly improving the bank's service capabilities and response speed.
In 2020, ICICI Bank further expanded its territory, launching the chatbot iPal integrated with Amazon Alexa and Google Assistant, allowing users to conduct simple banking transactions through voice commands. Although the service stopped in 2021, its innovative spirit still attracts Attention. Recently, the National Bank (SBI) has also announced an AI-driven strategy aimed at improving policy capabilities and operational efficiency by building advanced data warehouses and data lakes. SBI also plans to partner with fintech companies and non-bank finance companies (NBFCs) to promote innovation in co-loans.
Internationally, Deutsche Bank has partnered with Google Cloud and Nvidia to actively promote its AI strategy. In 2023, the bank launched a bank-wide plan to launch a number of applications, including AI chatbots and data analytics tools, to enhance its competitiveness in the AI field.
However, with the application of AI technology, security issues are becoming increasingly prominent. Kroll's survey shows that 67% of executives expect financial crime to rise, and 57% believe third-party intermediaries are risk factors. With approximately $2 trillion in money laundered worldwide each year, banks are gradually seeking AI technology to address this challenge. Taking HSBC as an example, the bank cooperated with Guyun to improve its anti-money laundering (AML) capabilities through AI, more effectively identify suspicious transactions and reduce false alarms.
In addition, Infosys Finacle's AI suite bank provides powerful tools to quickly integrate AI to help improve the efficiency of digital operations. Axis, on the other hand, continues to expand its team to further invest in the AI field.
Key points:
Generative AI is expected to add $200 billion to $340 billion in revenue each year to the global banking industry.
Several Indian banks are actively adopting AI technology to improve customer service and operational efficiency.
Banks are also gradually introducing AI to improve anti-money laundering and fraud detection capabilities in preventing financial crimes.
In short, artificial intelligence is profoundly changing the landscape of the banking industry and bringing huge development opportunities, but it is also accompanied by new risks and challenges. Banks need to actively embrace AI technology and strengthen risk management in order to maintain a leading position in future competition, better serve customers and maintain financial security.