Artificial intelligence (AI) has redesigned the entire ecosystem of banking since the 1980s, when computer scientists implemented machine learning specifically trained for the banking industry. It was designed to allow banks to launch automations capable of analyzing vast amounts of banking data in mere seconds with incredible accuracy. Since then, more improvements have been made, allowing nearly everyone in the world to benefit from combining artificial intelligence and banking into a powerful robust system.
How AI works in business banking
While many people feel apprehensive about AI and worry about its capabilities, they are likely unaware of all the ways they are already using it in their daily business banking functions.
Here are a few operations-based banking functions that AI assists in banking processes daily:
- Customer service
- ATM cash dispensing
- Account management
- Mobile banking
- Credit scoring
- Automatic transfers
- Fraud detection
- Loan processing
- Direct deposit
- Check clearing
Fraud detection and AI
When technology advances, unfortunately so does the knowledge criminals gain working daily to beat the system. This may be the reason many fear AI since they’re unsure how to guarantee the security of their funds. This is a classic example of how banks fight fire with fire—and one of the biggest use cases of AI in business banking today.
When someone tries to access your funds electronically with the intention of committing fraud, AI jumps in to save the day. Banks have ‘taught’ AI software how to analyze and predict customer behavior. In this way, banks are using AI responsibly and for the benefit of all.
Fraud Prevention Methods
AI has many built-in capabilities when it comes to fraud detection. These are all examples of AI working for you instead of against you:
- Checks can be analyzed for fraud using an AI-based decisioning program called positive pay
- Check processing software can compare signatures on a handwritten check to determine forgeries and alterations
- Mobile banking apps use two-factor authentication to help keep criminals out
- User names, passwords, fingerprint or face recognition provide an extra layer of security
Examples of AI Fraud Prevention In Action
- If you’re in your hometown and use your debit card to buy office supplies, a transaction is created, and AI takes note of your whereabouts and purchase. If a charge comes through an hour later from an area hundreds of miles away, AI will flag the transaction as possible fraud. Why? The bots are trained to analyze the likelihood of you making both purchases in a short period of time given the geographical distance.
- You write a check and put it in the mail addressed to a vendor to pay an invoice. You enter the check in your positive pay software and indicate the check number, amount of the check, date, and payee. Along the way, the check is stolen in mail and altered.
The criminal presents the check to the bank for payment, but the payee name and the amount have been changed. The bank software does not push it forward as a positive match. Instead, the check is sent to a holding queue for the business owner to view and determine if it’s legitimate or fraudulent. The funds never leave the account because AI saved the day.
How AI improves the customer experience
Today, many banking functions are carried out using AI. Most of them save us enormous amounts of time and make our business income and expenses a breeze. This implementation has brought many positive changes to the banking industry and its account holders such as:
- More accurate record-keeping
- Lightning-quick information retrieval
- Online banking account access
- Automation of bill payments
- Mobile Deposit
- Automated vendor payments
- Payroll Processing
Has AI removed the human element? Many banking professionals feared the advancements in technology would create a disconnect between the bank and the customer. The worry was based on the fact that banking would become impersonal and customers would feel unimportant and forgotten.
Actually, the exact opposite has happened—most customers love the instant access they have to their account 24/7 and may protest if you take away their mobile apps or credit cards in an effort to bring back the personal touch.
Rise of AI in banking
When banks were first introduced in 1791, every transaction was done manually in person and on paper. Large ledger books held the balance of each account holder. An accidental erasure, incorrect entry, missed entry, or miscalculation could greatly change your financial well-being. One of the banks I worked at years ago still had its ledger books. It was amazing to see how far financial technology has come in the last century.
New banking models have slowly replaced those original methods. AI has made it possible for a new class of banks to emerge using cutting-edge banking technology operating in the remote online-only space.
These are known as neobanks, direct banks, and digital banks. These banking models can operate effectively without branches since all transactions are handled using efficient technology, otherwise known as artificial intelligence.
Future of AI in business banking
We are on an upward trajectory when it comes to improvements in business banking. AI is a powerful tool that can be used in many ways. We have actually reached a point where we can ask a chatbot how to improve AI, and we are likely to get an answer that we never imagined. Personally, I’m looking forward to seeing many new advancements made for business banking in the world of AI.
Here is a list of things AI will continue to do in the coming years according to McKinsey & Companies AI-bank of the future:
- Smile to pay facial scanning to initiate transactions
- Micro-expression face analysis with virtual loan officers
- Biometrics voice, video, and fingerprint to authenticate and authorize
- Machine learning to detect fraud patterns and cybersecurity attacks
- Conversational bots for basic servicing requests
- Humanoid robots in branches to serve customers
- Machine vision and natural language processing to scan and process documents
- Real-time transaction analysis for risk monitoring
History of AI: 1920 to present day
Many believe artificial intelligence is a new concept. It seems that lately, we are hearing more and more about it, as new discoveries result in technological advances. If you travel back in time, you can see the workings of AI as early as the 1920s. This started with the idea of teaching a machine to think and perform a function previously done by a human. In banking today, many of the decision-making processes and reporting functions are completed by AI making bookkeeping more time-efficient and accurate.
- In 1921 Karel Capek from the Czech Republic created a play with the first introduction to “artificial people”. Robots in the play were steam-powered and could walk and make facial expressions. Thus the term ‘robots’ was coined.
- In 1929 books began to hit the shelves exploring the idea of machines taking on human characteristics.
- In 1950 an English mathematician and computer scientist Alan Truing released a book called Computer Machinery and Intelligence where he proposed the question, ‘Can machines think?’ This question started a frenzy of testing and discovery.
- In 1955 the term artificial intelligence was officially used for the first time.
- A cartoon called The Jetsons was released in 1962. This gave children a glimpse into the future regarding robots and technology. Some of the sci-fi concepts introduced have come to life in the modern world such as chatbots, smartwatches, and self-driving cars.
- In 1966. Computer science was a new cutting-edge career path for many entering college and new companies started becoming household names like IBM and Apple. Terms like floppy disk, mainframe, terminal, data processing, and desktop publishing were used in corporate offices all across the world.
- On January 1, 1983, the internet was created. Computers were in nearly every home and widely used across most industries. People had dial-up modems that would use analog phone lines clicking, beeping, and whistling in high pitches to perform something called a ‘handshake’. This created a connection allowing you to access the internet by exchanging signals.
- In the early 2000s, we were introduced to Siri, the iPhone speech assistant, and Alexa, the Amazon virtual assistant capable of performing complex tasks that were almost mind-blowing to users.
Today AI is truly amazing. There are 22 Limited memory, theory of mind, artificial general intelligence, reactive machines, artificial superintelligence, self-aware AI, reactive AI, artificial narrow intelligence, machine learning, NLP, robotics, expert system, computer vision, symbolic artificial intelligence, reinforcement learning, speech recognition, neural network, narrow AI, superintelligent AI, evolutionary AI, AI in finance, and general or strong AI different types. The functionality has come full circle and AI can do things that would normally take hours for humans.
We have evolved from data-driven AI that uses technology already in place and analyzes it to predict future actions to generative AI where artificial intelligence has the ability to create, design, and explore new concepts.
It’s amazing to imagine where we go from here. No doubt computers will advance in their ability to mimic the cognitive function of the human brain. Technology is advancing in the world of AI and banking every single day.
Frequently asked questions (FAQs)
AI is used daily in many aspects of banking. The most common tools used at the customer level are mobile banking, direct deposit, bill pay, and electronic withdrawals. Banks have also implemented many daily processes that run in the background such as fraud prevention, data processing, loan decisions, and account maintenance. All these processes use forms of AI where computers are trained to analyze actions and behaviors and follow a series of steps once an action has been taken.
AI continues to evolve making banking apps more user-friendly and creating a seamless banking experience for customers. Measures are in place to continue monitoring accounts for fraudulent activity and prevent customer losses. These processes will continue to be refined, becoming more streamlined and efficient as time goes on.
Banks use AI every day with every transaction. Artificial intelligence has been trained to carry out processes that mimic actions humans would take in record time and with laser point accuracy. AI has changed the landscape of banking and will continue to improve in 2025.
Bottom line
Artificial intelligence entered the business banking scene in a small way and has grown over the years to be indispensable. It’s one of the most amazing advances in technology in the 21st century and will likely never reach a limit regarding the new tasks it can perform. The possibilities are truly endless as new business banking processes continue to unfold every day. It’s clear to see, AI has revolutionized the face of banking as we knew it.
