AI In Banking: An Effective Approach For Personalized Banking Experiences

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Over the years, the banking sector has undergone significant developments – from the introduction of ATMs in the 1960s and card payments in the 1970s to digital banking in the 2010s. And with the advent of AI technologies in banking, the industry is poised to experience a major transformative change once again. 

This shift has come as a result of evolving customer needs and market trends, which banks and financial institutes need to meet to stay competitive. Therefore, they are leveraging the latest AI technologies, i.e., conversational AI and generative AI to provide personalized experiences to their customers. 

According to a McKinsey report, artificial intelligence (AI) can unlock up to $1 trillion of potential incremental value for banks, annually. Thus, it is imperative to have a clear understanding of every aspect of AI in banking and how it can contribute to tailored user experiences and increased revenue for the financial bodies. 

Read this article to find out more!

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Need For Personalization In Banking

The recent shift in customer interests and rising competition in the market are some of the predominant reasons for the increased need for personalization in banking.

‍Changing Customer Expectations: According to research by Salesforce, 52% of consumers expect personalization in offers. Similar to Netflix and Amazon, customers today demand personalized financial products that suit their requirements and do not involve too much paperwork. Therefore, banks are considering AI the best medium to meet the evolving customer requirements.

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• Competitive Benefits: An AI-powered personalized experience can give you a competitive edge in the market. Customers today prefer brands that genuinely address their requirements. For example, a bank offering cash rewards tailored according to age groups and spending habits will always stay ahead of one giving similar kinds of obsolete offers every time. 

• Increased Customer Loyalty and Engagement: For any bank or financial body, the ultimate goal is to win their users’ trust. According to a survey by Statista, involving over 75000 customers from 33 global markets, the primary consideration of users about their bank was trust, followed by digital services and customer support. Therefore, to drive customer engagement and loyalty, personalization of services is a must.

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Role Of AI In Providing Personalized Experiences

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Given below are some of the major roles of AI in offering personalized user experiences and productivity boosts: 

• Data-Driven Insights: With the help of AI and business intelligence softwares, banks can analyse large clusters of customer data and figure out patterns, helping them create custom products and services for their users. The best part is that since the products are backed by real-user data, they have a high chance of success. 

• Predictive Analytics: One of the major advantages of AI models is their ability to predict outcomes based on a given set of data or records. Banks are leveraging the same ability to predict customer needs and behaviours and are offering tailored services, like loans, credit cards, ODs, etc. to their users.

• Automated Customer Interactions: AI chatbots and assistants have gained huge traction recently, as they are enabling businesses to interact with potential customers intuitively. Unlike normal chatbots with a pre-build set of questions, AI chatbots generate real-time responses and can address even the most complex queries. 

• Effective Workflow Management: The integration of AI models in banking has led to the automation of time-consuming tasks like data entry, KYC (Know Your Customer), and customer support services, allowing banks and financial institutions to focus on other important tasks and services.

• Tailored Advice On Single Click: The AI technology has enabled banks to offer customized financial advice on a single tap. With advanced generative AI tools and LLM models, banks can analyse customer data and generate desired results within minutes of request, providing personalized services to their customers quickly. 

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Benefits of AI-Powered Personalization For Banks

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The primary objective of integrating AI into the banking industry was to foster a strong customer relationship backed by tailored services and custom product offerings.

• Increased Customer Relationship and Loyalty: The technology of AI can help banks in offering custom financial products to users based on their income, spending patterns, and risk assessment. This will develop a sense of care and trust in the user's mind, allowing banks to develop sustainable customer relationships and loyalty.

• Increased Revenue: According to a report by Accenture, generative AI can increase the revenue of banks by 6% effectively. With automation tools and AI assistants, banks can save a huge chunk of money rather than deploying a human workforce. 

• Reduced Churn Rates: Lacking personalization in services can do worse than reducing the chances of conversion. It can lead to an increment in the churn rates as well. Therefore, tailoring your offerings according to customer needs will not only help you reduce the churn rates but also increase the lifetime value of a customer. 

• Enhanced Operational Efficiency: As per a report by Accenture, leveraging technologies like gen AI and machine learning can help banks boost their productivity by 22-30%. Along with sales and marketing, using AI, banks can also perform critical functions like compliance and risk management, legal and HR seamlessly with little or no human interventions.  

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Use Cases Of AI In Personalized Banking

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Like all other industries, AI has hundreds of applications in banking as well. Here are some of the major use cases of AI in personalized banking:

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• AI Chatbots: Powered with gen AI and conversational AI, AI chatbots and virtual assistants are one of the major use cases of AI in banking. Along with quick addressing of user queries and feedback, these chatbots also boost the bank’s website engagement. 

• Customized Product Offerings: With the help of AI, banks can offer a bundle of products, like tailored investment schemes, loan packages, and shopping offers by just analyzing their customers’ spending patterns and preferences. 

• Tailored Up-sell and Cross-sell Opportunities for Better Conversion: AI-powered personalization opens up doors for various upsell and cross-sell opportunities. For example, by analyzing the spending habits of a customer, banks can offer a premium credit card in place of a basic credit card. Similarly, while getting a house loan, banks can offer additional insurance and add-ons.

• Fraud Detection and Prevention: With advanced fraud detection and prevention mechanisms, AI can help mitigate unauthorized transactions by constantly monitoring unusual activities and implementing biometric access and facial recognition. 

• Self-Service AI Models: Conversational AI technology has transformed banks to offer robust self-service platforms, allowing customers to perform various banking tasks in the comfort of their homes with minimal or no external intervention. 

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The Roadblocks

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While AI technology has significantly benefited the banking industry, here are some challenges that still need to be overcome: 

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• Data Privacy and Security: Data security is the primary concern for banks looking to integrate AI for personalized services. However, with ongoing developments in technology, attackers are also advancing and therefore, the larger the data, the higher the risk. 

• Integration with Existing Systems: AI has emerged recently, with the most advancement taking place in the last 3-4 years itself. Therefore, the main problem is its integration with legacy banking systems and infrastructure. To integrate it properly, banks will have to expand their IT teams by hiring well-trained AI experts.

• Customer Acceptance: AI is a relatively new field and many customers still lack knowledge about its implementation in the banking sector. Therefore, banks need to educate customers about its potential and how they can benefit from AI-driven services.

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Future Image of AI-Powered Personalized Banking

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In such a short span, AI has brought notable advancements in the banking industry. And with upcoming evolutions and development, the future of AI in banking is inevitably bright. 

• Continued Evolution Of AI Assistants: AI assistants are being trained extensively to become more smart, intuitive and capable of addressing even the toughest queries of the customers. In addition to AI chatbots and virtual assistants, banks and financial institutions are working on customer-facing chatbots that can prevent fraud and expedite time-consuming processes like developing codes, summarizing regulatory reports, analyzing user data, and more. Furthermore, along with gen AI and conversational AI, chatbots are also using NLP (natural language processing) technology to interpret human sentiments and generate responses accordingly. 

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How Choosing Alltius Can Help You With AI-Powered Personalization?

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Alltius is a next-gen AI platform developed as an outcome of decades of research at Wharton and Carnegie Mellon. Alltius offers an array of ingenious AI assistants that can seamlessly integrate with your existing business systems and boost your sales by 3X and slash customer support costs by 50% within weeks of their implementation, saving time and budget for more important activities. 

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In addition to empowering leading enterprises to offer personalized customer experience (CX) and enhance their productivity, Alltius has helped major banks reduce their monthly customer support costs by $50K. Therefore, if you're looking for a trusted AI partner in banking, Alltius is the perfect choice. 

Conclusion

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In order to stand out from the competition, leaving a lasting impression on your customers is a must. However, to do the same in the banking industry, one must quickly adapt to the ever-evolving consumer needs and market trends. And this is where artificial intelligence (AI) plays a critical role. 

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Technologies like gen AI and conversational AI can not only interpret, but generate content in a completely humanized manner, helping banks in various tasks, like quality content creation, customized services and product recommendations, tailored financial advice, and much more. Further, AI chatbots and assistance are helping banks in addressing queries and feedback quickly and seamlessly. 

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Thus, it is high time that banking partners accept AI with open arms and enjoy advantages like personalized user experiences, increased revenue, enhanced customer loyalty and relationships, and optimized operational efficiency. 

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