Artificial Intelligence use in Banking Sector
Author: Omkar Gawde
Smart Banking Revolution
Alaburo et all (2024) presented a study which explores AI’s growing role in banking, enhancing automation, customer service, and risk management while improving efficiency. AI-driven tools like chatbots and predictive analytics transform customer experiences and financial inclusion. However, challenges such as digital literacy gaps, infrastructure issues, and regulatory concerns hinder adoption. AI also aids decision-making in stock market predictions and credit assessments, providing strategic insights. Ethical AI usage, transparency, and strong regulatory frameworks are essential for secure and fair banking operations.
AI in Banking: Adoption & Challenges
Noreen et al (2023) the research identifies key factors influencing AI adoption, including awareness, attitudes, subjective norms, perceived usefulness, and knowledge of AI technology, all of which positively impact consumer intentions. However, perceived risk negatively affects AI adoption. The findings highlight AI’s role in enhancing banking operations, improving customer experiences, and increasing financial inclusion, while also emphasizing the need for regulatory frameworks to build consumer trust. The study provides valuable insights for banking management to develop strategies that foster AI acceptance and mitigate risks.
Boosting Digital Banking Adoption
Ruzyieva Olima Shukhratovna & Ruziyev Shukhrat Narmuradovich (2023) This study present strategies for increasing the adoption of digital banking services through customer-centric technology integration. It highlights four key strategies: user-friendly digital tools with personalized experiences, robust security measures like encryption and biometric verification, financial product innovation using AI and blockchain, and effective digital marketing. The research emphasizes the importance of trust, seamless integration with other services, and customer feedback in driving digital banking adoption. By implementing these strategies, banks can enhance service popularity, improve customer satisfaction, and stay competitive in the evolving financial landscape.
Customer Satisfaction
Shaikh et all (2024) this study examines customer satisfaction with AI-driven banking services in India, focusing on whether AI is perceived as a reliable and efficient alternative to traditional banking. Based on a survey of 189 customers from four major Indian banks, the findings reveal that AI enhances banking accessibility, efficiency, and customer experience. However, human service remains more satisfying than digital interactions, suggesting that AI should complement rather than replace human expertise. The study highlights AI’s potential to save time and streamline financial processes while emphasizing the need for a balanced approach integrating AI with human services for optimal customer satisfaction.
AI in Sustainable Banking
This study investigates the role of Artificial Intelligence (AI) in sustainable banking, focusing on customer acceptance of AI-driven devices (AIDs) like chatbots and virtual assistants. Using the Artificially Intelligent Device Use Acceptance (AIDUA) model, the research analyzes factors influencing adoption, including social influence, hedonic motivation, and perceived anthropomorphism. Findings show that AI improves banking efficiency and sustainability, but trust, technological literacy, and ethical concerns remain key challenges. The study highlights the importance of integrating AI with customer-centric strategies to enhance user experience while promoting green banking practices.
Enhancing Banking Experience with AI
Prieto et all (2023) this study present the impact of customer perception factors on AI-enabled customer experiences in the Ecuadorian banking industry. Using a survey-based analysis, it examines five key factors—convenience, personalization, trust, customer loyalty, and satisfaction—and their influence on AI-driven banking services. The results confirm a strong positive relationship, showing that AI enhances customer experience, particularly through AI-hedonic interactions (user enjoyment) and AI-recognition services (personalized banking). The study highlights AI’s role in improving efficiency and customer engagement while emphasizing the need for security, trust, and ethical considerations in AI adoption. Findings offer insights for banks to refine AI strategies and enhance customer satisfaction.
AI-Driven Banking Automation
Sami Ali et all (2022) it examines the role of Artificial Intelligence (AI) in automating banking services in Jordan. It highlights AI’s impact on cost reduction, risk management, convenience, and customer trust. AI-driven tools such as mobile banking, chatbots, data collection, and transaction data enhancement improve operational efficiency and customer experience. Despite slower adoption in developing economies, the findings suggest that AI significantly enhances banking services, urging Jordanian banks to integrate AI for financial growth. The study also emphasizes the need for regulatory support and digital transformation strategies to maximize AI’s benefits in banking.
Enhancing Customer Experience & Efficiency
Qadiri et all (2020) This study explores the potential of Artificial Intelligence (AI) in transforming the banking sector, particularly in improving customer relationships, service efficiency, and public relations. It highlights AI applications such as chatbots, machine learning, robotic process automation (RPA), and natural language processing (NLP) to streamline banking operations. AI-driven innovations enhance customer support, fraud detection, credit assessments, and risk management, reducing operational costs while improving service delivery. The study emphasizes AI’s growing role in future banking and its ability to replace outdated legacy systems, enabling banks to remain competitive in an increasingly digital landscape.
AI-Driven FinTech: Innovation, Security & Challenges
Muhammad et all (2024) this study explores the role of Artificial Intelligence (AI) in revolutionizing the FinTech sector, focusing on personalized banking, fraud detection, credit scoring, and algorithmic trading. AI enhances efficiency by automating financial services, improving risk assessment, and optimizing investment strategies. The research highlights AI’s ability to detect fraud through vast data analysis, streamline loan underwriting, and enable real-time algorithmic trading. However, ethical concerns such as data privacy, algorithmic bias, and regulatory compliance remain challenges. The study emphasizes the need for responsible AI adoption and regulatory collaboration to ensure fairness, transparency, and security in financial services.
AI and FinTech Disruption: Central Bank Challenges
Milena Vučinić & Radoica Luburić, (2024) This study explores the transformative impact of Artificial Intelligence (AI) and financial technology (FinTech) on central banks, emphasizing opportunities and risks. AI enhances financial efficiency through automation, risk management, and fraud detection but introduces challenges such as cyber threats, data security concerns, and regulatory gaps. The study highlights the role of AI in financial stability, monetary policy, and economic growth, urging central banks to adapt to digital innovations while ensuring financial security. Additionally, the rise of generative AI and machine learning necessitates human-centric AI policies, regulatory frameworks, and cybersecurity measures to balance innovation with risk mitigation.
Conclusion
The research explores AI’s transformative role in banking and FinTech, focusing on automation, customer experience, risk management, and financial efficiency. AI enhances banking services through chatbots, predictive analytics, fraud detection, and personalized banking, while also improving financial inclusion and operational efficiency. However, challenges such as regulatory concerns, cybersecurity risks, ethical considerations, and digital literacy gaps hinder adoption. Studies emphasize the need for strong regulatory frameworks, customer trust, and human-centric AI strategies to balance innovation with security. Central banks must adapt to AI-driven disruptions while ensuring financial stability and economic growth.
Reference
Ana Belen Tulcanaza-Prieto & Alexandra Cortez-Ordoñez & Chang Won Lee,2023.”Influence of Customer Perception Factors on AI-Enabled Customer Experience in the Ecuadorian Banking Environment,” Sustainability, MDPI, vol. 15(16), pages 1-22, August.
Asmat Ara Shaikh & Arya Kumar & Apoorva Mishra & Yasir Arafat Elahi, 2024. “A study of customer satisfaction in using banking services through Artificial Intelligence (AI) in India,” Public Administration and Policy: An Asia-Pacific Journal, Emerald Group Publishing Limited, vol. 27(2), pages 167-181, August.
Hengjun Mei & Simona-Aurelia Bodog & Daniel Badulescu, 2024. “Artificial Intelligence Adoption in Sustainable Banking Services: The Critical Role of Technological Literacy,” Sustainability, MDPI, vol. 16(20), pages 1-25, October.
Milena Vučinić & Radoica Luburić, 2024. “Artificial Intelligence, Fintech and Challenges to Central Banks,” Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 13(3), pages 5-42.
Mohammad Sami Ali & Issa Ahmad Swiety & Maan Hussein Mansour, 2022.”Evaluating the Role of Artificial Intelligence in the Automation of the Banking Services Industry: Evidence from Jordan,” Humanities and Social Sciences Letters, Conscientia Beam, vol. 10(3), pages 383-393.
Roheed Mehmood Qadiri & Nairah Shabir & Monisa Qadri, 2020.”Conceptualizing Possibilities of Artificial Intelligence in Furtherance of the Banking Sector: An Effective Tool for Improving Customer Relationship, Customer Service and Public Relations,” International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 10(2), pages 44-65
Ruzyieva Olima Shukhratovna & Ruziyev Shukhrat Narmuradovich, 2023.”Enhancing Bank Service Popularity Through Digital Innovation: Strategies for Customer-Centric Technology Integration,” International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 9(6), pages 7-12, September.
Tajudeen Alaburo, ABDULSALAM & Rofiat Bolanle, TAJUDEEN, 2024. “Artificial Intelligence (Ai) In The Banking Industry: A Review Of Service Areas And Customer Service Journeys In Developing Economies,” Business & Management Compass, University of Economics Varna, issue 3, pages 19-43.
Tayyab Muhammad & Asad Yaseen & Kriya Shah, 2024. “Empowering Financial Services: The Transformative Impact of AI on FinTech Innovation,” American Journal of Computing and Engineering,AJPO Journals Limited, vol. 7(4), pages 35-49.
Umara Noreen & Attayah Shafique & Zaheer Ahmed & Muhammad Ashfaq,2023.”Banking 4.0: Artificial Intelligence (AI) in Banking Industry & Consumer’s Perspective,” Sustainability, MDPI, vol. 15(4), pages 1-16, February.