Analyzing the use of AI in the banking system by the SWOT model

Analyzing the use of AI in the banking system
by the SWOT model
A.Strengths
 AI will enable the creation of openness for banks by supporting the
creation of analytical and data processing capabilities according to a
platform-based operating mechanism, allowing the bank to operate
effectively as a platform. ). Allows to modularize transaction nodes, form
open platform APIs (Application Programming Interface) - Application
programming interface, development of microservices. This enables
efficient exploitation of the data capitalization generated from bank
transactions. Vietnamese commercial banks have realized the potential,
challenges as well as urgent need to meet the requirements of the open
banking ecosystem.
 AI will help banks improve learning through and deep learning, develop
smart algorithms and smart transactions. This will help reduce the risk of
transactions, increase the efficiency of data mining, and expand
transaction-related operational capabilities. In the trial period, MB
officially became the first Vietnamese commercial bank to join the
Contour Network and offer blockchain-enabled L/C services to
corporations. MB's L/C (letter-to-credit) services allow a secure process
of delivering L/C services, from issuance to document presentation, to
take place on a single unified platform.
 AI will help the bank automate through optimized processes by
automating processes, automating operations, and optimizing digital
processes.
 AI will help banks develop solutions that enhance and scale digital
architectures. This will help improve the data capitalization of the
transactions that the bank can make
We have reduced costs to store and process data, increased access and
connectivity for all, and rapid advances in AI technology. Especially in the
complicated pandemic situation, the demand for customers to come directly to

banks for transactions has decreased significantly but instead is the support of
online banking apps. Long waits for support at banks are also annoying, and the


emergence of AI virtual financial assistants has significantly improved the
quality of customer experience.

B. Weaknesses
Highly expensive
Production and maintenance of artificial intelligence demand huge costs since
they are very complex machines like advanced software programs which require
regular updates to meet the needs of the changing environment )
Bad Calls
Though Artificial Intelligence can learn and improve, it still can’t make
judgment calls. Humans can take individual circumstances and judgment calls
into account when making decisions, something that AI might never be able to
do. Replacing adaptive human behavior with AI may cause irrational behavior
within ecosystems of humans and things.
Distribution of Power
There is a constant fear of AI superseding or taking over humans. Artificial
intelligence can give a lot of power to the few individuals who are controlling it
-> AI carries the risk and takes control away from humans while dehumanizing
actions in several ways.
Unemployment
The replacement of the workforce with machines can lead to wide-reaching
unemployment. Moreover, if the use of AI becomes rampant, people will be
highly dependent on the machines and lose their creative power.

C. Opportunities
Enhanced Customer Experience

The customer being the key driver of a service industry, customer service is at
the forefront of any business. AI can be used to derive a better understanding of
customers spending patterns, which will help banks customize products by
adding personalized features. This supplements meaningful customer
engagement, building strong relationships, and growth of business for the bank.


Use Of Chatbots
Customer satisfaction is also enhanced as they can avail of the service in the
comfort of their homes without having to visit branches —saving their time.
Chatbots can be enhanced in the future to announce new offers to the customer
like loans, alert customers if they have any EMI payments due, suggest good
discounts based on the tie-ups the bank has with e-commerce sites, etc.
Machine Learning and Cognition can be used to identify suspicious data
patterns and convince banks if the actual source of money is legal or illegal. AI
can also study past consumer behavior to predict future requirements, which
helps banks to up-sell and cross-sell successfully.
Wealth Management And Portfolio Management
 AI-based systems help potential investors by analyzing their salary and
spending patterns. They can also predict market trends and choose the
right funds for their portfolio by determining the adequate sum of money
they should invest every month in realizing their dreams. All this can be
done without visiting branches or hiring experts. In the world of ‘Banking
at your fingertips’, mutual funds, fixed deposits can be created at home,
and the money is redeemed when necessary.
 AI technologies enable banks to bring more efficiency to their operations
and manage costs. They can also help manage contracts and act as
brokers, simultaneously taking over routine tasks, thus improving
productivity and efficiency. All this transforms into increased revenue,
reduced costs, and a boost in profits.

Intelligent Character Recognition System
This system has been used by some foreign banks to recognize, extract
important information from old loan applications, lease agreements and feed it
to a central database that can be accessed by everyone.

D. Challenges
Governance Structures and Regulations: Implementation of any new
technology can be at odds with the highly regulated banking and financial
services industry. Risk and compliance teams may struggle to understand the
potential vulnerabilities or create appropriate internal regulations. Without the


right governance, the deployed AI solution may result in unintended
consequences such as access denied to financial products or privacy breaches.
Lack of Clear Strategy: In a constantly evolving technological environment,
amid high costs for new infrastructure and human capital, executives may fail to
fully embrace AI technology. If that happens, it will be difficult to implement a
successful organization-wide strategy to effectively utilize the AI technological
capabilities.
Many banks face the challenge of an unwillingness to improve or adapt to new
methods. Standardized with set practices in conventional ways, some locations
in tier two and three cities across the country face this challenge. These units
also lack the level of commitment required to upskill their labour force and
human resources skills.
With the lack of supporting data to implement operational changes, the banking
sector is facing a disconnect between the need and response from customers.
The banks adapt to a switch that fails to comply with the actual requirement of
the masses.
Banks with upscaling use of artificial intelligence need to keep up with the
regulatory standards of government. The increasing services like net-banking

and online transactions come under the ambit of privacy regulation policies as
well, which necessitates compliance from the bank’s end.


V. Current situation of AI in the banking system
Current situation
 AI in banking is maturing, bringing the potential for higher-complexity
solutions that generate positive ROI across business segments.
 Most banks (80%) are highly aware of the potential benefits presented by
AI and machine learning, per an OpenText survey of financial services
professionals. In fact, many banks are planning to deploy solutions
enabled by AI: 75% of respondents at banks with over $100 billion in
assets say they're currently implementing AI strategies, compared with
46% at banks with less than $100 billion in assets, per a UBS Evidence
Lab report seen by Insider Intelligence. Certain AI use cases have already
gained prominence across banks' operations, with chatbots in the front
office and anti-payments fraud in the middle office the most mature.
Banks can use AI to transform the customer experience by enabling frictionless,
24/7 customer service interactions — but AI in banking applications isn't just
limited to retail banking services. The back and middle offices of investment
banking and all other financial services for that matter could also benefit from
AI
 AI application in the world
In June 2018, BofA released Erica, an AI-powered virtual assistant that uses
natural language processing (NLP) to understand and respond to customer
queries. In addition, Erica also leverages a constellation of predictive analytics,
machine learning and AI to:
Warn customers if their spending habits are likely to bring their balance to zero
one week in advance
Notify customers if their credit score changes as a FICO scoring system tool is

embedded within the app
Reminding customers of recurring or late payments
Search for account information and past transactions on request


Using anomaly detection software, flagging payments when they are more
expensive than expected
Lock/unlock credit and debit cards at the customer’s request
By applying advanced analytics to historical purchase data, advise customers on
how to reduce monthly spending
Over the past 3 years Erica’s popularity has skyrocketed. In Q1 of 2021, 19.5
million BofA customers used Erica, a significant increase from the 6.3 million
users recorded in Q1 of 2019. In addition, over the course of 2020, clients
interacted with Erica approximately 400,000 times a day, up almost 100% year
over year.
Though Erica was already experiencing steady growth before the pandemic,
especially amongst millennials and Gen Z users, about 8 million people used
Erica for the first time in 2020. In fact, as many physical locations were forced
to close, the bank taught Erica more than 60,000 phrases and questions related
to the Coronavirus to help field questions on the subject.
 AI application in Vietnam
On February 4, FPT Smart Cloud and SeABank officially signed a strategic
cooperation agreement in the fields of artificial intelligence and cloud
computing. Accordingly, SeABank will put into operation the virtual assistant
FPT.AI switchboard.
FPT.AI is promised to provide customers with service experiences that "don't
stop at a quick level, but must be instant" .
At SeABank, FPT.AI helps the bank optimize operations, especially at peak
times, automate processes, and focus human resources on more complex and
important tasks. Besides, the solution allows customers to experience

outstanding services such as consulting and answering questions in the shortest
time, 24/7.
The FPT.AI assistant deployed at SeABank will perform two automatic
operations: card renewal and passbook and reminding customers of payment
schedules.


FPT. AI virtual assistant is a solution that allows automatic conversations
through the switchboard channel, including making outgoing calls and receiving
incoming calls, or intelligently forwarding calls in a friendly way, natural and
seamless. FPT.AI's virtual assistant is capable of handling thousands of
conversations at the same time with high accuracy and uniformity.
In 2020, the virtual assistant FPT.AI switchboard has been applied by Home
Credit Vietnam to the call center service, serving the needs of hundreds of
thousands of customers automatically, from handling inquiries, pay attention to
the payment schedule. After 3 months of operation, the solution helped Home
Credit Vietnam achieve initial successes such as automatically conducting 2
million conversations with customers, with a duration of each conversation
ranging from 1 to 2 minutes and increasing 40% of the operating efficiency of
this financial company.
As a strategic solution of FPT, FPT.AI is a comprehensive AI platform, aiming
to breakthrough business performance, effectively engage customers with
automated customer care processes, and open up opportunities to create value.
new value for businesses in the future through the application of the most
advanced machine learning and deep learning technologies in the field of AI.
FPT.AI currently owns 5 AI technology solutions including: Intelligent
conversation platform, recognizing and extracting content from text captures,
automatic text-to-speech, virtual assistant switchboard, electronic customer
identification.

VI, Trend of AI in banking system
Almost every facet of life nowadays is aided by technology. The use of artificial
intelligence in banking is moving from a leading-edge option to a core
capability.
Customer Service
Customer service is regarded as the public face of every company. When a
customer has a pleasant experience interacting with a company, it is considered
successful. When you visit the bank, you will speak with a customer service
representative about your concerns. Account information, transaction history,
check clearance, and the opening of a new bank account are all things you
should question about. If the queue is large, there may be long waiting chores to


meet a CSR. Artificial intelligence is currently being used by many investment
institutions to speed up this time-consuming and repetitive activity.
Internet and Mobile banking
People are abandoning personal computers in favor of cell phones, which have
grown in popularity. Mobile phones have become the exclusive means of
communication, planning, reading, lifestyle management, and financial
planning. For customer service and banking processes, banks now require more
complex AI software.
AI for Capital markets
A capital market is a place where traders can make money by investing in
bonds, stocks, and other long-term projects. Formerly, capital markets only went
to places where large guns were present. With the advancement of technology,
even a low-income individual can now participate in financial markets. In other
terms, capital markets are not becoming more decentralized, and everyone, even
from home, can engage.
Wealth Management
Today, wealth managers are gradually putting together crucial AI scenarios to

meet the banking needs of high-net-worth individuals. AI assists various wealth
management businesses in performing critical banking tasks efficiently. They
can gain more experience with wealth management responsibilities, making
customers more comfortable.
AI for Compliance in Banking
Compliance is a set of rules that certain banks must follow, with some
exceptions. Because these rules are critical for keeping processes up to date and
avoiding any risks or losses. Without a compliance regulation, the baking
industry faces severe difficulties, including the loss of licenses. Bank officials
can alter the compliance regulations to meet the needs of their particular
banking industry. Various regulatory compliance is growing with wealth
management. The GDPR or MiFID II are two examples of financial advising
services.
Risk Management


For risk management in the market, AI is a great flux. Many frauds and dangers
in the banking sector can be detected using AI technologies and software. To
assess and arrange unstructured statistics, artificial intelligence (AI) and risk
management are required. Risk managers in finance are concerned with losses
and risks, and they use AI techniques to try to control them.
Artificial intelligence is becoming an increasingly important part of financial
and corporate growth. Machine learning allows for the monitoring and
evaluation of unstructured data, which saves both money and time. These also
aid in mitigating and compensating for various hazards by regulating and
minimizing them.
Records Maintenance
In the banking industry, AI software is used to maintain records. Because it is
critical to retain the client’s information or data in a secure format. As a result, a
fantastic piece of software. Good or excellent scanned images of the documents

are generated using optical character recognition. By altering the forms and all
of the characters in the papers, OCR converts the paper records into a digital
display. This can transform official bank documents into a one-of-a-kind format.
Accounting
Accounting aids in the conversion of data into a more precise format.
Traditional computing technologies are slow, and they cost more money and
time. However, AI software now improves accuracy and bookkeeping
capabilities, making them simple and dependable. Accounting may be aided by
AI by using business planning, simplifying statistics, and conducting
investigations.
Human Resources
The human resource department is in charge of job postings, production, and
upkeep. In the past, HR had to deal with significant difficulties in keeping the
entire process running smoothly. However, with the introduction of new AI
technologies, everything is now controllable and manageable. Banking officials
can use AI to create HR methods for handling their work and gaining greater
benefits. It aids in increasing the bank staff’s total output by increasing their
participation and interaction. Artificial intelligence has the potential to increase
average profits and give workers more power.


REFERENCES


Bouargane, A. (2022, 1 11). AI IN BANKING - HOW CAN BANKS MEET
THE AI CHALLENGES? Retrieved from BBN TIMES:
/>Vadapalli, P. (2021, 1 2). Artificial Intelligence in Banking 2022: Examples &
Challenges.Retrieved from upGrad: />PROS AND CONS OF ARTIFICIAL INTELLIGENCE (AI) IN BANKING
Posted by Gaurav Prabhakar Mali | Nov 8, 2018 | Technology
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