Banking in the Future: 3 trends in AI for financial institutions

It's no secret that artificial intelligence (AI) is rapidly transforming nearly every industry on the planet. And the banking sector is no exception. In fact, according to a recent study by Juniper Research, AI adoption in banking could save the industry $1 trillion per year by 2030.

What exactly does that mean for banks and other financial institutions? Put simply, AI can be used to automate mundane tasks, like customer service and fraud prevention. This frees up time for bank employees to focus on more strategic initiatives—like developing new products, expanding into new markets, and improving the overall customer experience.

There are endless possibilities when it comes to AI in banking. But what trends should financial institutions be paying attention to? Here are three of the most important ones.

Chatbots

Chatbots are one of the most popular applications of AI in banking. And it's easy to see why: they're cost-effective, 24/7/365 "employees" that can handle simple tasks like answering common questions, providing account balances and transaction history, scheduling appointments, and even approving loans—freeing up human employees to focus on more complex issues.

According to a report by Business Insider Intelligence, 43% of US consumers would be open to using chatbots from their primary bank for general questions about their accounts. And chatbot usage is only going to increase: Gartner predicts that by 2022, 85% of all customer interactions will be handled without a human agent.

Fraud prevention

AI can also be used to prevent fraud and improve security at financial institutions. By analyzing data points like transaction history, location data, and spending patterns, AI can identify suspicious activity and prevent fraud before it happens. That's why 78% of bankers believe AI will have a "very significant impact" on fraud prevention by 2021, according to a survey from Oracle and The Economist Intelligence Unit.

Credit scoring

Traditionally, credit scores have been determined by looking at factors like payment history and credit utilization ratio. But with the advent of alternative data—like utility bills and social media activity—lenders are starting to use AI to get a more holistic view of prospective borrowers and make better-informed lending decisions.

According to a report from FICO, alternative data could help 16 million Americans with limited credit histories get access to mainstream credit products by 2021. ex-Googlers— are already using alternative data sources like property rental payments and utility bills to create more "inclusive" credit scores.