Artificial Intelligence (AI) is revolutionising sectors across the globe, and finance is no exception. From handling mundane tasks to enhancing security and customer experience, AI is revolutionising the functioning of banks, insurance providers, and investment institutions. But, what does this have in store for you as an Indian consumer, investor, or business owner? Let’s have a look at the seven biggest advantages of AI in financial services and how it’s making the industry smarter, faster, and more efficient.
1. Quick loan approvals
The days when applying for a loan meant tons of paperwork and long wait times are over. With AI-based models today, banks and fintech players can assess loan applications in real time. AI does not depend just on income tax returns and salary statements to assess creditworthiness; it evaluates several parameters including transaction history, social media behaviour, and even mobile usage habits, to decide on whether to sanction a loan or not.
For instance, online lenders use AI to approve applications within a matter of hours. This is especially helpful for small business owners and gig-workers who do not have predictable sources of income but would still like funding. AI-based credit scoring allows loans to become more accessible with lower default risks for lenders.
2. Better fraud detection
Financial fraud is on the rise. Whether in the form of identity theft, phishing attacks, or unauthorised transactions, cybercriminals are evolving their modus operandi when it comes to executing fraud. AI, however, is evening the odds for the banking industry.
AI-based fraud detection mechanisms keep an eye on transactions and highlight suspicious activity in real time. For example, if an account makes an unexpectedly huge transaction to a foreign nation or a credit card is used at an uncommon location, AI instantly recognises these anomalies and triggers further security checks.
3. Individualised banking experience
Based on research conducted by Salesforce, 73% of consumers expect personalised experiences from companies. AI is making it possible for customers to obtain what they want. Think back to the last time your bank made you a recommendation, such as an investment strategy or credit card promotion that was tailor-made to your individual needs. That’s AI in action.
Banks and financial institutions use AI to research customers’ behaviour and then suggest personalised financial products. For example, if you’re an active online consumer, your bank might suggest a credit card with a cashback reward. This not only enables a bank to approach customers with the appropriate offers, but also enables customers to feel that they’re more than just a number, but an integral part of the bank’s community.
4. Effective customer service
AI-powered chatbots like SBI’s SIA and HDFC’s EVA now handle customer queries on a daily basis. These chatbots can assist with answers to routine questions such as balance inquiries, transaction history and how to make bill payments. The best part is that they can do this around the clock with no human intervention required. This means an end to long queues or long hold-times. Virtual assistants based on AI take care of mundane jobs and are leaving humans free to solve tougher customer problems that require empathetic solutions.
5. Risk management and predictive analytics
Whether it’s forecasting stock market trends, determining insurance claims, or analysing potential loan defaults, predictive analytics through AI is enabling institutions to make better choices.
For instance, AI uses market trend analysis and historical data to deliver real-time information for investors. AI helps wealth management firms and mutual fund companies recommend investment portfolios to an investor depending on personal risk appetite and investment objectives. AI allows businesses and individuals to make financial decisions more efficiently with lower risk.
6. Cost savings and operational efficiency
AI is not only making banking intelligent, but it’s also saving costs. Using automation for repetitive functions such as KYC verification, document processing, and compliance checking reduces the time taken to do tasks, which results in cost reduction.
Consider robotic process automation (RPA) for example. RPA is used by banks to automate tasks like processing loan applications, authenticating bank transactions, and managing records of customers. Automating these tasks also results in employees being able to dedicate their time to handling more complex business problems.
7. Expanding financial inclusivity
One of the greatest influences of AI on financial services is how it is leading the expansion of financial inclusion. There are crores of Indians, particularly in rural India, who are unbanked or underbanked. AI is bridging this divide.
Artificial intelligence-based credit scoring tools enable banks to lend to people with no credit record. Voice assistants and chatbots in local languages make banking accessible to non-tech friendly customers. Fintech firms are leveraging AI-powered solutions to provide microloans, insurance, and savings to those who previously had no access to the formal banking sector.
Final thoughts
AI is revolutionising Indian financial services to be customer-focused, secure, and efficient. From quicker loan approvals to fraud detection, and from personal banking to insights, AI is reshaping the future of finance in India.
As financial services businesses integrate AI into their operations, its impact will be even more profound. Whether you’re dealing with an NBFC for a business loan or browsing an online marketplace for investment options, AI-driven solutions will be at the heart of these interactions, making financial services more accessible and efficient for all.