MINI PROJECT REPORT 2

ON

EMERGENCE OF ARTIFICIAL INTELLIGENCE IN BANKING INDUSTRY

SUBMITTED BY

Prashant Pandey
(MBA 2ND Semester)
ROLL No-2201790700025

UNDER THE GUIDANCE OF

Dr. Shirish srivastava
(Associate Professor)

in partial fulfilment of the requirements

for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

of
A P J Abdul Kalam Technological University

Jeevandeep Institute Of ,Management & Technology (2022-2024)

BADALALPPUR, Varanasi, 221007

i
 MASTER OF BUSINESS ADMINISTRATION
Of
Jeevandeep Institute of Management & Technology

CERTIFICATE

This is to certify that the report titled “Emerging the Aartificial

intelligence in banking industry” being submitted by Prashant Pandey
of roll no. 2201790700025, in partial fulfilment of the requirements for
the award of the Degree of Master of Business Administration, is a
bonafide record of the project work done by Prashant Pandey of
Jeevandeep institute of management & technology.

Dr. shirish srivastava Dr. shirish Srivastava

Director

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 ACKNOWLEDGEMENT

Through this acknowledgement I express my sincere gratitude towards all those

people who helped me in this project, which has been a learning experience.

This space wouldn’t be enough to extend my warm gratitude towards my project

guide Dr. Shirish Srivastava for his efforts in coordinating with my work and
guiding in right direction. I escalate a heartfelt regards to our Institution Director
Dr. Shirish Srivastava for giving me the essential hand in concluding this work.

It would be injustice to proceed without acknowledging those vital supports I

received from my beloved classmates and friends, without whom I would have
been half done. I also use this space to offer my sincere love to my parents and all
others who had been there, helping me walk through this work.

Prashant Pandey

MBA 2nd Semester

ROLL NO. 2201790700025

iii
 PREFACE

Remodeling our outlook on banking begins with keeping up to date with the latest
and most effective approaches, such as Artificial Intelligence (AI). Hands-On
Artificial Intelligence for Banking is a practical guide that will help our advance in
our career in the banking domain. The book will demonstrate AI implementations
to make our banking services smoother, more cost-efficient, and accessible to
clients, focusing on both the client- and server-side uses of AI.

We'll begin by learning about the importance of AI, while also gaining insights into
the recent AI revolution in the banking industry. Next, We'll get hands-on
machine learning experience, exploring how to use time series analysis and
reinforcement learning to automate client procurements and banking and finance
decisions. After this, we'll progress to learning about mechanizing capital market
decisions, using automated portfolio management systems, and predicting the
future of investment banking. In addition to this, we'll explore concepts such as
building personal wealth advisors and the mass customization of client lifetime
wealth. Finally, we'll get to grips with some real-world AI considerations in the
field of banking.

By the end of this book, we'll be equipped with the skills our need to navigate the
finance domain by leveraging the power of AI.

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 Table of Content
SI No. TOPIC NAME PAGE NO.
1. INTRODUCTION 4-8
1.1. Problem definition 4-5
1.2. Purpose 5
1.3. Research questions 5-6
1.4. Delimitation 6
1.5. Definition 7-8
2 PROFILE OF THE INDUSTRY 9-22
2.1. History 10
2.2. Structure 11
2.3. Business Division 12-13
2.4. Performance 13-14
2.5. Global Banking Trends 15-20
2.6. Concern 21-22
3. MARKET PLAYERS 23-31
3.1. HCL Tech 23
3.2. Infosys 23-24
3.3. Tech Mahindra 24
3.4. Persistent System Ltd 25
3.5. Tata elxsi 26
3.6. Bosch AI 27
3.7. Zensar Technologies 28
3.8. LTIMindtree 29
3.9. The NineHertz 30
3.10. Builder.ai 31
4. DEMOGRAPHIC DESTINATION 32-50
4.1. Building the AI bank of the future 33-34
4.2. Banks become AI first 34-36
4.3. AI Bank future 37-49
4.4. The impact of Artificial intelligence in the banking Sector 50
5. SWOT ANALYSIS 51-54
5.1. Strength 51
5.2. Weaknesses 52
5.3. Opportunity 53

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5.4. Threats 54
6. Limitation 60-75
6.1. Gaining Credibility 61
6.2. Stress Testing Complexities 62
6.3. Uncertain Future 62-63
6.4. Lack of transparency 63-74
6.5. Reduced Customer Loyalty 74-75
7. Findings And Conclusion 76
8. Bibiliography 77

List Of Table

SI No. Topic Name Page No.

1. Overview of customer interviews 55-58
1.2. Usage data for Nina web 59-60

LIST OF FIGURES

SI No. Figures Page No.

1 Figure 1 10
2 Figure 2 11
3 Figure 3 13
4 Figure 4 13
5 Figure 5 14
6 Figure 6 34
7 Figure 7 35
8 Figure 8 38
9 Figure 9 42
10 Figure 10 43
11 Figure 11 44
12 Figure 12 45

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13 Figure 13 46
14 Figure 14 47
15 Figure 15 48
16 Figure 16 49
17 Figure 17 51
18 Figure 18 52
19 Figure 19 53
20 Figure 20 54
21 Figure 21 60

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 1. INTRODUCTION

The first section of this thesis starts with a brief introduction into the topic of artificial
intelligence and banking. Further, the problem definition, the purpose of the thesis and
the research questions are stated. The section ends with delimitations of the research
and key definitions.

The ongoing era of digitalisation, decentralisation and disruption is shaping industries

and consumption on a broad scale (Desai, 2014).
Digital technologies are connecting billions of consumers and allow the deployment of
low cost connected devices in every business sector. The current generation is adjusted
to the digital environment and naturally expects services and products to meet the
current digital technology standards. Further, investments into digital technologies and
businesses have risen and are rewarded by the public markets (PWC Editorial, 2016).
Artificial intelligence (AI) technologies are part of this development and the banking
sector is hereby deemed to see a major impact. According to a report by Accenture,
a global management consulting and professional services company, four out of five
bankers assume that AI is going to revolutionise the way banking is executed. The
report suggests that artificial intelligence will affect banking by enhancing the customer
experience. Banking products and service may become increasingly personalised giving
customers the impression that their banking institutes know their specific habits and
needs (Accenture, 2016).
But the introduction of AI technologies comes with potential challenges and risks. Banks
are processing highly sensitive data. Thus, privacy and data security concerns are
essential elements of the process. Additionally, customers might prefer the contact with
persons regarding certain issues, leading to a rejection of AI based interfaces
(Kelly,2017). Hence, the introduction of such technologies into the active process
should be executed with consideration of the possible risks.

1.1 Problem Definition

The way private customers are interacting with banks is changing. Ashoka and Vinay
(2017) are differentiating between millennial generation banking, which is also referred
to as digital banking and traditional brick and mortar banking. They described that the
banking industry as a whole is making a consistent effort to shift progressively towards
digital channels. This shift is embracing a change from an account based view of a

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banking customer to a perspective, which sees customers as unique individuals with
different needs. The challenge is to provide digital services that improve the customers
experience by considering their personalised and specific needs. This is a key factor for
the creation of banking services and products of the future.
Consumers have already in multiple areas of their lives adapted a digital lifestyle
Substituting daily habits with various digital channels. Skinner (2014) states that digital
social networks have large effects on the digitalisation process of various industries. As
a result digital solutions are increasingly becoming an extension of traditional social
interactions. During this conversion consumers are increasingly expecting that financial
services are continuously digitally available in a customer friendly manner (Cuesta et
al., 2015). Thus, one field which is supposed to leverage AI technologies are customer
services. The development of solutions involving artificial intelligence approaches are
seeing an increase in popularity within research and business (IBM - Watson, 2016).
According to a report created by Oracle (2016) already eight of the ten investigated
businesses implemented or are planning to implement artificial intelligence technologies
into their customer service processes until the year 2020.
The author has identified a knowledge gap regarding the usage of artificial intelligence
technologies in banking and customer service. The problem is that specific research
is absent in respect to the motivations and reasons for Swedish banking institutes to
implement artificial intelligence solutions including the customer perspective. For this
purpose, the Swedish banking sector with Swedbank as a case is studied.

1.2 Purpose

The purpose of this thesis is to analyse the motivations, challenges and opportunities
for Swedish banking institutes to implement artificial intelligence based solutions into
their customer service process.

1.3 Research Question

The intention of the following research questions are to frame the present knowledge
gap within the banking sector regarding the usage of artificial intelligence technologies.
The first research question addresses specifically the research problem by investigating

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the case study of Swedbank in detail. The second research question is formulated in a
broader scale and intends to address general concerns, challenges and chances
regarding
the usage of artificial intelligence technologies in banking.

Research Question 1

What are the main motivations for banking institutes in Sweden to implement artificial
intelligence technology solutions into their customer service?

Research Question 2

What are the challenges and opportunities for banking institutes to implement artificial
intelligence technology solutions into their customer service?

1.4. Delimitations
The following list includes topics which are out of the scope of this thesis.

Engineering

The thesis is not going to provide a description on how named artificial intelligence
solutions work in detail. Instead, the thesis will focus on their impacts and functionalities.

Institutes/Organisations

Elements from multiple financial sectors are relevant for the thesis but the focus is on
banking institutes whose main customer base are private customers.

Outcome

The outcome of the study focuses on the Swedish banking sector and the implications
are limited to the European market.

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1.5. Definitions

The following list of definitions includes key terms used in the thesis, which are
described shortly for a better understanding. New terms were added to the list during
the period of the creating of this thesis.

Artificial intelligence

Artificial intelligence (AI) refers to simulated intelligence in machines. The computer

programs of those machines are intended to make decisions in a way comparable to a
human being. The goal for AI computer programs is to mimic human behaviour (Barr
and Feigenbaum, 1982).

Artificial neural networks

The term artificial neural network (ANN) refers to computational modelling tools, which
are inspired by the biological neural network of the human brain. ANN’s can be used
to address problems with high complexity (Basheer, 2000).

Brute force search

Brute force search or exhaustive search describes a method in informatics for solving
general decision based problems. The main concept is about calculating all possible
solution candidates and then select the solution, which best addresses the
problem(Robin,2009).

Chatbot

Chatbots are software programs which can interact with human users via written or
spoken communication channels using natural language (Shawar and Atwell, 2007).

Direct contact/Communication

During the thesis the term "direct contact" or "direct communication" is used multiple
times. These terms both refer to communication which addresses a specific human
person using channels such as telephone or face-to-face contact.

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Intelligent automation

Intelligent automation describes software, which is able to make decisions within a

specific business unit comparable to a human being. To give an example, an intelligent
production robot would not simply redo its manual activities, but it would execute
them depending on dynamic information and handle errors and exceptions
autonomously (Javed, 2015).

Keyword spotting

The term keyword spotting describes a sub field of the speech recognition research
field. Its aim is to detect predefined keywords within natural language. This task is
important in numerous applications such as voice mail retrieval, voice command
detection or when communicating with a chatbot system (Gragier et al, 2009).

Soft computing

"Soft computing differs from conventional (hard) computing in that, unlike hard
computing, it is tolerant of imprecision, uncertainty, partial truth, and
approximation. In effect, the role model for soft computing is the human mind.
The guiding principle of soft computing is: Exploit the tolerance for imprecision,
uncertainty, partial truth, and approximation to achieve tractability, robustness
and low solution cost." (Jin, 2014)

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 2. PROFILE OF THE INDUSRTY

The Indian banking sector has emerged as one of the strongest drivers of India’s
economic growth. The Indian banking industry (US$ 1.22 trillion) has made
outstanding advancement in last few years, even during the times when the rest
of the world was struggling with financial meltdown. India's economic
development and financial sector liberalization have led to a transformation of
the Indian banking sector over the past two decades.

Today Indian Banking is at the crossroads of an invisible revolution. The sector has
undergone significant developments and investments in the recent past. Most of
banks provide various services such as Mobile banking, SMS Banking, Net banking
and ATMs to their clients.

Indian banks, the dominant financial intermediaries in India, have made high-
quality progress over the last five years, as is evident from several factors,
including annual credit growth, profitability, and trend in gross non-performing
assets (NPAs). While annual rate of credit growth clocked 23% during the last five
years, profitability (average Return on Net Worth) was maintained at around 15%
during the same period, while gross NPAs fell from 3.3% as on March 31, 2006 to
2.3% as on March 31, 2023.

The Indian banking sector is a mixture of public, private and foreign ownerships.
The below table highlights top 10 banks which contributed 58% share of the total
credit as on March 31, 2023. The State bank of India has recorded highest market
share. The Net Interest Margin of HDFC Banks is 4.2% which is highest among
others.

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2.1 History

Although some form of banking, mainly of the money-lending type, has been in
existence in India since ancient times, it
was only over a century ago that proper banking began. The first bank in India,
though conservative, was established in
1786. From 1786 till today, the journey of Indian Banking System can be
segregated into three distinct phases. They are
as mentioned below:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms

• New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991

The banking industry has moved gradually from a regulated environment to a

deregulated market economy. The market developments kindled by liberalization
and globalization have resulted in changes in the intermediation role of banks.
The pace of transformation has been more significant in recent times with
technology acting as a catalyst. While the banking system has done fairly well in
adjusting to the new market dynamics, greater challenges lie ahead.

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 2.2 Structure

The Reserve Bank of India, the nation’s central bank, began operations on April
01, 1935. It was established with the objective of ensuring monetary stability and
operating the currency and credit system of the country to its advantage.

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 2.3 Business Division

Retail Banking

Loans to Individuals (Auto loan, Housing Loan, Education Loan and other personal
loan) or small businesses.

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Wholesale Banking

Loans to Mid and Large corporate (Working Capital loans, Project finance, Term
loans, Lease Finance)

Treasury Operation

Investment in Equity, Derivates, Commodities, Mutual Funds, Bonds, Trading and

Forex operations

Other Banking Businesses

Merchant Banking, Leasing business, Hire purchase, Syndication services etc..

2.4 Performance

The empirical studies have found a strong relationship between economic growth
and financial development. Finance plays an important role in the economic
growth. The charts depict the performance of Bankex in last 10 year and Relative
performance of BSE Bankex & BSE Sensex in 2010-11. The performance of Bankex
accelerated during the period March 2002 to March 2008. The performance of
bankex decelerated during March 2008 – March 2009 but thereafter it has shown
increasing trend till March 2011.

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The four-month period (November 2010-February 2011) was marked by a
consistent decline in all the indices caused by a number of global and domestic
developments. The Sensex declined by 12.4%, while the Bankex Index declined by
18.3%.

Some of the global factors, such as increase in crude oil prices and high
commodity prices contributed to inflation in the domestic economy. High inflation
coupled with low growth rate in the Index of Industrial Production (IIP) and
tightening interest rates has caused some concerns over the short-term economic
growth, hitting the stocks in all the sectors, particularly those in the financial
services sector.

In recent years, Deposit, which constitutes 78 per cent of total liabilities of the
banking sector has registered higher growth. The higher growth in deposits
emanated mainly from term deposits. The accelerated growth in term deposit
could be as a result of higher interest rate environment. The Deposit and
Borrowings chart depicts that the dependence of foreign banks and new private
sector banks on borrowings was relatively high as compared with other bank
groups.

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 2.5 Global Banking Trends

The Global financial crisis makes significant changes in the operating framework
of banks. The performance of banks improves owing to strong lending growth and
low credit losses. The present global macro-economic situation is differentiated
by an unbalanced economic recovery across advanced and emerging economies,
high levels of unemployment, inflationary pressures, and elevated levels of
government debt. The Return on Assets (RoA), an indicator of banking system’s
profitability and soundness showed a moderate increase in the US and France in
2010. The RoA of US banks turned positive by 2010 after staying in the negative
zone in 2008 and 2009; it showed a further increase in 2011. The RoA of Indian
banks showed a modest rise between 2008 and 2010.

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PUBLIC SECTOR

 State Bank of India

State Bank of India is the largest banking and financial services company in India.
In addition to the banking services, the Bank through their subsidiaries, provides a
range of financial services, which include life insurance, merchant banking,
mutual funds, credit card, factoring, security trading, pension fund management
and primary dealership in the money market. The State Bank Group, with over
16,000 branches, has the largest banking branch network in India. The bank has
131 overseas offices spread over 32 countries. The bank offers convenience of
over 21000 ATMs in India.

The bank has recorded tremendous growth in Net Interest Income. The Net
Interest Income has registered a growth of 37.41% from Rs.23,671.44 crores in
2009-10 to Rs. 32,526.41 crores in 2010-11on account of growth in interest
income on advances and investments. The total assets of the bank increased by
16.17% from Rs.10,53,413.73 crores at the end of March 2010 to Rs. 12,23,736.20
crores as at end March 2023.

 Punjab National Bank

Punjab National Bank is one of the big four banks of India. PNB is ranked as the
2nd largest bank in the country after SBI in

16
terms of branch network, business and many other parameters. They are
recognized as the bank offering highest levels of customer satisfaction in Delhi
and Chennai. The bank has a wide network of 5189 branches which comprise of
2047 Rural, 1154 Semi Urban, 1111 Urban and 877 Metropolitan branches at the
end of March 2023.

During FY 2022-23, with 39.16% share of CASA to domestic deposits, the Bank
achieved a net profit of Rs 4433 crore. Bank has a strong capital base with capital
adequacy ratio of 12.42% as on Mar’11 as per Basel II with Tier I and Tier II capital
ratio at 8.44% and 3.98% respectively. As on March’11, the Bank has the Gross
and Net NPA ratio of 1.79% and 0.85% respectively.
The Bank's total deposits amounted to Rs 3, 12,899 crore at the end of March'
2011, showing an absolute accretion of Rs. 63,569 crore and a growth of 25.5%
over previous year. Ratio of Gross NPAs to Gross Advances stood at 1.79% at the
end of March' 2011, while the ratio of Net NPAs to Net Advances was 0.85%.

 Canara Bank

Canara Bank with headquarter in Bangalore operates in four segments, namely

treasury operations, retail banking operations, wholesale banking operations and
other banking operations. The bank has a branch network of 3257 including 4
overseas branches as on March 31, 2023.

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PRIVATE SECTOR

 ICICI Bank

ICICI Bank Ltd is the second largest private sector bank in India by market
capitalization. They are a publicly held banking company engaged in providing a
wide range of banking and financial services including commercial banking and
treasury operations. The Bank has a network of 2,752 branches and 8,003 ATMs
in India, and has a presence in 19 countries, including India.
The net profit for fiscal 2023 was Rs. 5151.38 crore, representing a 28% increase
over the previous year because of decrease in provisions and contingencies. The
net interest income has increased by 11% from Rs. 8114 crore in fiscal 2022 to Rs.
9017 crore in fiscal 2011. The total advances grew by 19.4% in fiscal 2011 on
account of strong growth in domestic corporate advances. The return on assets
improved substantially to 1.34% in fiscal 2023 from 1.13% in the previous year.

The total deposits have increased by 11.7% from Rs. 202016.60 crore at March
31, 2022 to Rs. 225602.11 crore at March 31, 2023. The proportion of current and
savings account deposits in total deposits had increased from 28.7% at March
31, 2021 to 45.1% at March 31, 2023. The net non-performing asset ratio has
reduced from 1.87% at March 31, 2022 to 0.94% at March 31, 2023. The capital
adequacy position continued to be very strong, with total capital adequacy of
19.5% and Tier-1 capital adequacy of 13.2%.

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  HDFC Bank

HDFC Bank Ltd is a major Indian financial services company based in Mumbai. The
Bank has an enviable network of 1986 branches in 996 Indian cities and 5471
ATMs during the year 2022-23. The company has recorded an increase of 33% in
net profit for FY 2011 of Rs. 3926 crore over the previous year. The Capital
Adequacy Ratio (CAR) stood at 16.2% as against the regulatory minimum of
9.0%. Of this, Tier I CAR was 12.2% as on March 31, 2023.

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  Axis Bank

AXIS Bank is one of the fastest growing banks in private sector. The bank operates
in four segments, namely treasury, retail banking, corporate/ wholesale banking
and other banking business. The bank has a very wide network of around 1390
branches and 6,270 ATMs.

The net profits have grown at a CAGR of 47.52% during last 5 years. The bank
reported a net profit of Rs. 3,388.49 crores for the year ended March 31, 2023
over the net profit of Rs. 2,514.53 crores in the previous year. The Net Interest
Income increased by 31.14% to Rs. 6,562.99 crores in FY 11 from Rs. 5,004.49
crores in FY 10.

The bank maintain a healthy asset-quality with a ratio of Gross NPAs to gross
customer assets of 1.01% compared to 1.13% in previous year and a Net NPA
ratio of 0.26% compared to 0.36% in FY 10. The deposit and advances has
increased by 33.93% and 36.48% respectively. The Capital Adequacy Ratio under
Basel II stood at 12.65% in FY 11 against 15.80% in FY 10.

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 2.6 CONCERN

Indian economy is one of the fastest growing economies of the world. The
economy with its varied geography and demography has specific requirements in
order to traverse to the next orbit and attain its full potential. Banks enable to
cope with finance requirement for few industries such as Infrastructure, Housing,
Real Estate etc. India’s infrastructural financing needs are not only huge but also
vital. Traditionally banks have been the major source of infrastructure financing
and their exposure to infrastructure is already high at 17 per cent. There are
several major concerns which are noted below.

 Intensifying Competition
Indian banking industry has undergone qualitative changes due to banking
sector reforms. Indian banking sector, which is dominated by state-
controlled banks, has been facing formidable challenges. Due to this new
emerging competition,Indian banks, especially PSBs, are trying their best to
improve their performance and preparing to compete in the emerging
global market. New private sector banks and foreign banks have more
customer-centric policies, high quality services, new attractive schemes and
computerized branches. All these services attracted more and more
customers to their banks.

In this context, there is a need to examine the efficiency of public sector

banks operating in India. Mainly, competition can intensify and banks will become
more efficient. The transaction cost of customers could come down and a bank
which is efficient, nimble and customer focused would always be able to do
better than others. As a result of globalization, many new banks have entered the
Indian banking industry, further intensifying the competition.

 Increasing NPA
The asset quality of banks is one of the most important indicators of their
financial health. It also reflects the efficacy of banks’ credit risk

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 management and the recovery environment. The Indian banks have shown
very good performance as far as the financial operations are concerned.
But Non-performing Assets (NPA) has caused some concerns. Despite
write-offs, gross NPAs have continued to rise significantly. The new
accretion to NPAs has been much faster than the reduction in existing NPAs
due to lower levels of upgradation and recoveries.

To improve the banks’ ability to manage their non-performing assets (NPAs) and
restructured accounts in an effective manner and considering that almost all
branches of banks have been fully computerized, the Reserve bank of India in its
Monetary Policy Statement 2012-13 proposed the following measures:

To mandate banks to put in place a robust mechanism for early detection of
signs of distress, and measures, including prompt restructuring in the case of all
viable accounts wherever required, with a view to preserving the economic value
of such accounts; and

To mandate banks to have proper system generated segment–wise data on

their NPA accounts, write-offs, compromise settlements, recovery and
restructured accounts.

Despite these concerns, it is projected that the Indian banking industry will grow
through leaps and bounds looking at the huge growth potential of Indian
economy. High population base of India, rising disposable income, etc. will drive
the growth of Indian banking industry in the long-term.

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 3. MARKRT PLAYERS

“In the world of Artificial Intelligence (AI), there are numerous successful Artificial
Intelligence companies in India that are leading the way in innovative
advancements and applications.”

3.1 HCL Tech

HCL is a technology innovator that is making waves in the Artificial Intelligence

market. They specialize in tailoring AI solutions to fit the unique needs of their
customers, as well as developing AI systems for a variety of projects. From
developing automated customer service agents to constructing highly
sophisticated AI learning systems, HCL has been at the forefront of Artificial
Intelligence development since its inception. Their experienced team of experts
provides support and guidance every step of the way, ensuring successful and
efficient deployment of your AI solution. By leveraging cutting-edge technologies
and extensive research and development, HCL helps you build a future ready for
intelligent automation and performance optimization.

3.2 Infosys

Infosys is a leading Artificial Intelligence development companies in

India that works on ways to optimize machine learning for business operations.
Established in 1981, the company has been actively helping businesses grow by
providing clients with cutting-edge AI solutions. If your business is seeking state-
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of-the-art AI and machine learning (ML) capabilities, then Infosys is the AI
development company that you need. Their team of AI experts work hand-in-
hand to create innovative AI and ML services tailored to each client's unique
needs and goals. In addition, they also provide AI consultations and assistance
with AI related questions to help businesses of all sizes maximize their AI
potential. Whether it’s developing new AI methods or implementing existing ones,
Infosys can bring your business operations into the future!

3.3 Tech Mahindra

Tech Mahindra is a top Artificial Intelligence (AI) consulting service provider,

offering custom AI development services to clients with their committed and
knowledgeable experts. With tailor-made AI solutions, they help companies to
identify existing technological problems and provide powerful solutions which
automate processes and boost efficiency.Tech Mahindra also uses Data
Scientist models to predict future trends which helps organizations in making
data-based decisions for higher ROIs. Through their IoT platform, they also
ensure secured end-to-end connectivity across devices.

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 3.4 Persistent Systems Ltd

Persistent Systems Ltd is one of the global Artificial Intelligence companies in

India, providing enterprise-grade Artificial Intelligence (AI) solutions. With two
decades of innovation behind them and industrial expertise, they offer robust and
reliable AI services across various industry domains. They provide a wide range
of innovative solutions such as automated information extraction, voice
recognition, natural language processing, autonomous robotics, and more, that
are tailored to meet business objectives. Brands from around the world trust
Persistent Systems as their go-to AI provider for integrating intelligent automation
into their operations to boost efficiency levels. With thousands of successful
projects delivered over the years, Persistent Systems has set the gold standard
in AI implementation.

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 3.5 Tata Elxsi

Tata Elxsi is a leading, global provider of Artificial Intelligence solutions. Founded

in 1989, this organization combines deep domain knowledge and expertise in
driving digital transformations for clients across a variety of industries. From
Automotive and Industrial to Telecom and Hosptality, they have an experienced
team of Artificial Intelligence (AI) developers to help create solutions that are
tailored to customer needs and leverage state-of-the-art technologies.
With Tata Elxsi, businesses get access to a range of services including AI
consulting, analytics services and engineering solutions. From transforming
complex workflows or automating decision-making processes, their holistic
approach facilitates seamless integration into existing systems for organizations
looking to stay ahead of the technological curve.

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 3.6 Bosch AI

Bosch AI is the Artificial Intelligence division of Bosch, a multinational

engineering and technology company. Bosch AI focuses on developing and
delivering cutting-edge AI solutions for various industries such as automotive,
home appliances, and industrial technology.

Some of the key AI solutions offered by Bosch include machine learning,

computer vision, and natural language processing (NLP) technologies. These
technologies are used to create innovative products and services that improve
efficiency, accuracy, and safety in various industries.

Overall, Bosch AI is a leader in the development and implementation of AI

technologies, helping to drive innovation and improve various industries through
the use of AI.

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 3.7 Zensar Technologies

Zensar Technologies is a leading provider of digital solutions and technology

services. The company has a strong focus on Artificial Intelligence (AI) and has
established itself as a pioneer in the field. With a team of experienced AI experts,
Zensar Technologies is committed to delivering innovative AI solutions that help
organizations transform their businesses and achieve their goals.

Zensar's AI solutions are designed to address the challenges faced by

organizations in various industries such as retail, finance, and healthcare. The
company offers a range of AI services, including machine learning, computer
vision, and natural language processing (NLP). These services are used to
automate processes, improve decision-making, and enhance the customer
experience.

Overall, Zensar Technologies is a leading provider of innovative AI solutions,

helping organizations to drive digital transformation and achieve their goals in the
rapidly evolving technology landscape.

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 3.8 LTIMindtree

LTIMindtree Limited is a leading Artificial Intelligence (AI) software

development company pioneering new possibilities and providing innovative
technology solutions. Their experienced developers actively research, develop,
and deploy creative applications of AI to better suit the changing needs of
businesses in the digital age

The company’s team of qualified professionals use cutting-edge technologies to

tailor their services to the individual needs of customers, creating custom
software geared towards improved performance, cost reduction, and data
optimization.

With an ethical approach and dedicated customer service, LTIMindtree Limited

continues to be a reliable technological partner for the creation of advanced AI
solutions that are made to empower businesses both large and small.

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 3.9 The NineHertz

The NineHertz is a leading Artificial Intelligence (AI) development company in

India that has been revolutionizing the AI industry for many years. With a team of
top-tier AI engineers, developers, and data scientists, The NineHertz offers
cutting-edge technology solutions tailored to the specific needs of individuals,
businesses, and industries. Their dedicated AI professionals understand client
requirements thoroughly and deliver superior products that help clients grow in a
dynamic market.

The NineHertz also provide training courses for those interested in learning about
applied AI and comprehensive consultation services to ensure maximum ROI
from their investments in AI. With deep expertise in designing powerful
algorithms and developing user-friendly software, company is an exemplary
organization committed to paving the way for customers to leverage AI and ML
capabilities.

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 3.10 Builder.ai

Builder.ai is a leading Artificial Intelligence development company that has

established itself as one of the global industry leaders. It's innovative AI-powered
software development platform gives businesses of any size access to building
software applications without ever becoming an expert using its software
assembly line, while its unmatched level of customer service ensures clients get
nothing but the highest quality of results.

With Builder.ai, businesses can access Artificial Intelligence resources which can
help automate various tasks so time and money can be allocated for more
creative activities with expansive opportunities for growth. Whether you are
looking for custom AI solutions or just trying to understand Artificial Intelligence
from an investment perspective, Builder.ai brings powerful resources to create
successful projects with tomorrow’s technology today.

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4.DEMEGRAPHIC DESTINATION

The simulation of human intelligence in machines, called Artificial intelligence, has

risen, and plays an important role in the new banking era. The present study aims
to discuss the consumer’s perspective on artificial intelligence’s adoption in Asian
countries. The questionnaire was developed and distributed to collect data from
five Asian countries (Pakistan, China, Iran, Saudi Arabia, and Thailand). The total
useable responses were 799. The results showed that the factors (awareness,
attitude, subjective norms, perceived usefulness, and knowledge of artificial
intelligence technology) had a significant and positive relationship with the
intention to adopt AI in the banking sector. However, perceived risk shows a
negative but significant relationship with the intentions to adopt AI. Overall, the
findings of this study will be a worthy insight for making strategic decision-making
in the banking industry. This will enable the banking management to build a
strategy to increase the trust of consumers, which will help them to overcome
risks and give them confidence in using digital technology while making
transactions. The banking sector also focuses on innovative AI technologies to
improve customer services as well as overall growth by generating more revenue.

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4.1 Building the AI bank of the future

To thrive in the AI-powered digital age, banks will need an AI-and-analytics

capability stack that delivers intelligent, personalized solutions and distinctive
experiences at scale in real time.

Banking is at a pivotal moment. Technology disruption and consumer shifts are

laying the basis for a new S-curve for banking business models, and the COVID-19
pandemic has accelerated these trends. Building upon this momentum, the
advancement of artificial-intelligence (AI) technologies within financial services
offers banks the potential to increase revenue at lower cost by engaging and
serving customers in radically new ways, using a new business model we call “the
AI bank of the future.” The articles collected here outline key milestones on a
path we believe can lead banks to deeper customer relationships, expanded
market share, and stronger financial performance.

The opportunity for a new business model comes as banks face daunting
challenges on multiple fronts. In capital markets, many banks trade at a 50
percent discount to book, and approximately three-quarters of banks globally
earn returns on equity that do not cover their cost of equity.¹ Traditional banks
also face diverse competitive threats from neobanks and nonbank challengers.
Leading financial institutions are already leveraging AI for split-second loan
approvals, biometric authentication, and virtual assistants, to name just a few
examples. Fintech and other digital-commerce innovators are steadily
disintermediating banks from crucial aspects of customer relationships, and large
tech companies are incorporating payments and, in some cases, lending
capabilities to attract more users with an ever-broader range of services. Further,
as customers conduct a growing share of their daily transactions through digital
channels, they are becoming accustomed to the ease, speed, and personalized
service offered by digital natives, and their expectations of banks are rising.

33
To compete and thrive in this challenging environment, traditional banks will
need to build a new value proposition founded upon leading-edge AI-and-
analytics capabilities. They must become “AI first” in their strategy and
operations. Many bank leaders recognize that the economies of scale afforded to
organizations that efficiently deploy AI technologies will compel incumbents to
strengthen customer engagement each day with distinctive experiences and
superior value propositions. This value begins with intelligent, highly personalized
offers and extends to smart services, streamlined omnichannel journeys, and
seamless embedding of trusted bank functionality within partner ecosystems.
From the customer’s point of view, these are key features of an AI bank.

4.2 Banks become AI first

Over several decades, banks have continually adapted the latest technology
innovations to redefine how customers interact with them. Banks introduced
ATMs in the 1960s and electronic, card-based payments in the ’70s. The 2000s
saw broad adoption of 24/7 online banking, followed by the spread of mobile-
based “banking on the go” in the 2010s.

Few would disagree that we’re now in the AI-powered digital age, facilitated by
falling costs for data storage and processing, increasing access and connectivity
for all, and rapid advances in AI technologies. These technologies can lead to
higher automation and, when deployed after controlling for risks, can often
improve upon human decision making in terms of both speed and accuracy. The
potential for value creation is one of the largest across industries, as AI can
potentially unlock $1 trillion of incremental value for banks, annually.

Across more than 25 use cases,³ AI technologies can help boost revenues
through increased personalization of services to customers (and employees);
lower costs through efficiencies generated by higher automation, reduced errors
rates, and better resource utilization; and uncover new and previously
unrealized opportunities based on an improved ability to process and generate
insights from vast troves of data.

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More broadly, disruptive AI technologies can dramatically improve banks’ ability
to achieve four key outcomes: higher profits, at-scale personalization, distinctive
omnichannel.

35
Banks are expanding their use of AI technologies to improve customer
experiences and back-office processes.

low-cost capital. In the past, tech giants have aggressively entered into adjacent
businesses in search of new revenue streams and to keep customers engaged
with a fresh stream of offerings. Big-tech players have already gained a foothold
in financial services in select domains (especially in payments and, in some cases,
lending and insurance), and they may soon look to press their advantages to
deepen their presence and build greater scale.

36
4.3 AI Bank future

The AI bank of the future would leverage artificial intelligence and machine
learning technologies to enhance the banking experience for customers. Some
potential features of an AI bank of the future might include

1.Personalization: AI algorithms could analyze customer data to create

personalized banking experiences tailored to each individual's unique needs and
preferences

2. Predictive analytics: By analyzing customer data, an AI bank could use

predictive analytics to forecast spending patterns, identify potential fraud, and
suggest investment opportunities.
37
3.Virtual assistants: An AI bank could use virtual assistants to provide customers
with 24/7 support and answer questions about their accounts or financial
products.

4.Risk management: AI algorithms could monitor transactions in real-time to

identify potential risks, such as fraud or money laundering.

5.Automated lending: AI could streamline the lending process by analyzing

customer data and making lending decisions in real-time.

6.Enhanced security: AI algorithms could improve the security of online banking

by analyzing customer behavior and flagging any suspicious activity.

Overall, an AI bank of the future would be able to offer customers a more

personalized and efficient banking experience while also improving security and
reducing risk.

Artificial Intelligence (AI) technologies help organisations to get smarter and more
effective over time – ultimately responding to, learning from and interacting with human
voices. It is predicted that by 2025, half of all businesses will be using these intelligent,
self-learning systems. Across its entire breadth and depth, the banking industry is at the
forefront of investigating Advanced Analytics and AI technology for use in a broad range
of applications, such as customer analytics and providing wealth advice for clients. AI
and the Future of Banking provides new and established banking industry professionals
with the essential information on the implications of data and analytics on their roles,
responsibilities and personal career development.

Artificial intelligence has become a critical disruptor in almost every

industry, including banking and finance. The introduction of AI in banking
apps and services has made the sector more customer-centric and technologically
relevant.

38
A report by Business Insider suggests that nearly 80% of banks are aware of
the potential benefits that AI presents to their sector. Another report suggests
that by 2023, banks are projected to save $447 billion by using AI apps.
These numbers indicate that the banking and finance sector is swiftly moving
towards AI to improve efficiency, service, productivity, and reduce costs.

In this article, we will find out the key applications of AI in banking/finance

sector and how this technology is redefining customer experience with its
exceptional benefits.

Applications of AI in banking

Here are some major AI applications in the banking industry through which
you can reap the numerous benefits of the technology. So, let’s dive in!.

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 Cybersecurity and fraud detection

Every day, huge number of digital transactions take place as users pay bills,
withdraw money, deposit checks, and do a lot more via apps or online
accounts. Thus, there is an increasing need for the banking sector to ramp up
its cybersecurity and fraud detection efforts.
This is when artificial intelligence in banking comes to play. AI can help
banks improve the security of online finance, track the loopholes in their
systems, and minimize risks. AI along with machine learning can easily
identify fraudulent activities and alert customers as well as banks.
For instance, Danske Bank, Denmark’s largest bank, implemented a fraud
detection algorithm to replace its old rules-based fraud detection system. This
deep learning tool increased the bank’s fraud detection capability by 50% and
reduced false positives by 60%. The system also automated a lot of crucial
decisions while routing some cases to human analysts for further inspection.
AI can also help banks to manage cyber threats. In 2019, the financial sector
accounted for 29% of all cyber attacks, making it the most-targeted industry.
With the continuous monitoring capabilities of artificial intelligence in
financial services, banks can respond to potential cyberattacks before they
affect employees, customers, or internal systems.

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 Chatbots

Undoubtedly, chatbots are one of the best examples of practical applications

of artificial intelligence in banking. Once deployed, they can work 24*7,
unlike humans who have fixed working hours.

Additionally, they keep on learning about the usage pattern of a particular

customer. It helps them understand the requirements of a user in an efficient
manner.

By integrating chatbots into banking apps, the banks can ensure that they are
available for their customers round the clock. Moreover, by understanding
customer behavior, chatbots are able to offer personalized customer
support and recommend suitable financial services and products accordingly.

One of the best examples of AI chatbot in banking apps is Erica, a virtual

assistant from the Bank of America. This AI chatbot can handle tasks like
credit card debt reduction and card security updates. Erica managed over 50
million client requests in 2019.
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 Loan and credit decisions

Banks have started incorporating AI-based systems to make more informed,

safer, and profitable loan and credit decisions. Currently, many banks are still
too confined to the use of credit history, credit scores, and customer
references to determine the creditworthiness of an individual or company.

However, one cannot deny that these credit reporting systems are often
riddled with errors, missing real-world transaction history, and misclassifying
creditors.

An AI-based loan and credit system can look into the behavior and patterns
of customers with limited credit history to determine their creditworthiness.
Also, the system sends warnings to banks about specific behaviors that may
increase the chances of default. In short, such technologies are playing a key
role in changing the future of consumer lending.
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 Tracking market trends

Artificial intelligence in financial services helps banks to process large

volumes of data and predict the latest market trends, currencies, and stocks.
Advanced machine learning techniques help evaluate market sentiments and
suggest investment options.

AI for banking also suggests the best time to invest in stocks and warns when
there is a potential risk. Due to its high data processing capacity, this
emerging technology also helps speed up decision-making and makes trading
convenient for both banks and their clients.

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 Data collection and analysis

Banking and finance institutions record millions of transactions every single

day. Since the volume of information generated is enormous, its collection
and registration turn into an overwhelming task for employees. Structuring
and recording such a huge amount of data without any error becomes
impossible.

In such scenarios, AI-based innovative solutions can help in efficient data

collection and analysis. This, in turn, improves the overall user experience.
The information can also be used for detecting fraud or making credit
decisions.

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 Customer experience

Customers are constantly looking for a better experience and convenience.

For example, ATMs were a success because customers could avail essential
services of depositing and withdrawing money even when banks were
closed.
This level of convenience has only inspired more innovation. Customers can
now open bank accounts from the comfort of their homes using their
smartphones.
Integrating artificial intelligence in banking and finance services will
further enhance consumer experience and increase the level of convenience
for users. AI technology reduces the time taken to record Know Your
Customer (KYC) information and eliminates errors. Additionally, new
products and financial offers can be released on time.
Eligibility for cases such as applying for a personal loan or credit gets
automated using AI, which means clients can eliminate the hassle of going
through the entire process manually. In addition, AI-based software can
reduce approval times for facilities such as loan disbursement. AI banking

45
also helps to accurately capture client information to set up accounts without
any error, ensuring a smooth experience for the customers.

 Risk management

External global factors such as currency fluctuations, natural disasters, or

political unrest have serious impacts on banking and financial industries.
During such volatile times, it’s crucial to take business decisions extra
cautiously. AI-driven analytics can give a reasonably clear picture of what is
to come and help you stay prepared and make timely decisions.

AI also helps find risky applications by evaluating the probability of a client

failing to pay back a loan. It predicts this future behavior by analyzing past
behavioral patterns and smartphone data.

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 Regulatory compliance

Banking is one of the highly regulated sectors of the economy worldwide.

Governments use their regulatory authority to ensure that banking customers
are not using banks to perpetrate financial crimes and that banks have
acceptable risk profiles to avoid large-scale defaults.
In most cases, banks maintain an internal compliance team to deal with these
problems, but these processes take a lot more time and require huge
investment when done manually. The compliance regulations are also subject
to frequent change, and banks need to update their processes and workflows
following these regulations constantly.

AI uses deep learning and NLP to read new compliance requirements for
financial institutions and improve their decision-making process. Even

47
though AI banking can’t replace a compliance analyst, it can make their
operations faster and more efficient.

 Predictive analytics

One of the most common use cases of AI includes general-purpose semantic

and natural language applications and broadly applied predictive analytics.
AI can detect specific patterns and correlations in the data, which traditional
technology could not previously detect.

These patterns could indicate untapped sales opportunities, cross-sell

opportunities, or even metrics around operational data, leading to a direct
revenue impact.

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 Process automation

Robotic process automation (RPA) algorithms increase operational efficiency

and accuracy and reduce costs by automating time-consuming repetitive
tasks. This also allows users to focus on more complex processes requiring
human involvement.

As of today, banking institutions successfully leverage RPA to boost

transaction speed and increase efficiency. For example, JPMorgan Chase’s
CoiN technology reviews documents and derives data from them much faster
than humans can.

49
4.4 The impact of Artificial intelligence in the banking Sector

Discussions, articles, and reports about the AI opportunity across the financial
services industry continue to proliferate amid considerable hype around the
technology, and for good reason: The aggregate potential cost savings for
banks from AI applications is estimated at $447 billion by 2023, with the front
and middle office accounting for $416 billion of that total, per Autonomous
Next research seen by Business Insider Intelligence.

Most banks (80%) are highly aware of the potential benefits presented by
AI, 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 Business 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 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.

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5.SWOT Analysis
5.1 Strength

Automation: AI can automate repetitive tasks and improve efficiency and speed
of processes such as customer service, fraud detection, and risk management.

Personalization: AI can analyze vast amounts of data to provide personalized

experiences for customers such as tailored recommendations, personalized
marketing, and customized financial products.

Improved decision-making: AI can provide data-driven insights for better

decision-making in areas such as loan approvals, investment strategies, and risk
management.

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Cost savings: AI can reduce costs by automating tasks and minimizing human
errors, as well as identifying and preventing fraudulent activities.
5.2 Weaknesses

Dependence on data quality: AI algorithms are only as good as the data they are
trained on, and inaccurate or biased data can lead to incorrect or biased
decisions.

Cybersecurity risks: AI systems can be vulnerable to cyber attacks, and the use of
AI can also increase the attack surface of the banking industry.

Ethical concerns: AI can raise ethical concerns around privacy, data protection,
and transparency, and there is a risk that AI can be used to unfairly discriminate
against certain groups of people.
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5.3 Opportunity

Improved customer experiences: AI can help banks provide personalized

experiences to customers, improve customer service, and enable faster and more
efficient transactions.

Enhanced risk management: AI can help banks better manage risks by providing
more accurate and real-time insights into potential threats, such as fraud, cyber
attacks, and market changes.

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New revenue streams: AI can enable banks to develop new products and
services, such as predictive analytics, chatbots, and robo-advisors, which can
generate new revenue streams.

5.4 Threats

Competition from fintechs: Fintech companies that specialize in AI-based

financial services can pose a threat to traditional banks.

Regulatory compliance: AI can raise regulatory challenges, and banks may need
to ensure that their AI systems comply with regulations such as GDPR and PSD2.

54
Skill gap: There may be a lack of skilled personnel to develop and implement AI-
based solutions in banks, which can limit the adoption of AI technologies.

1. Expert interview

An unstructured interview with a post-doctoral teaching associate from the

"Knowledge Technology Group" of the University of Hamburg was conducted.
The interviewee is specialised in human- robot interaction and artificial neural
networks. The interview was conducted using themes to navigate through the
conversation. Afterwards, an unstructured conversational interview followed, in
order explore different topics raised
during the interview. The expert interview defines a method of qualitative
empirical research, which is meant to explore the knowledge of an expert within a
certain focus area.

The purpose of the interview was to gain expert knowledge about:

• the overall development of artificial intelligence technologies,

• the usage of artificial intelligence within banking,

• the usage of artificial intelligence within customer service and

• the future development of artificial intelligence technologies.

Secondary data

The secondary data source used for the thesis is a conference transcript with the
marketing channel manager of Swedbank, which can be found in appendix C and usage
data of Nina, virtual assistant.

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Data analysis

Content analysis describes different techniques used to systematically analyse

qualitative data such as spoken or written communication (Cole, 1988). It can be
used to evaluate various types of media such as print media (e.g.: magazines,
articles, newspapers), visual media (e.g.: movies, videos or television) or content
on the internet. Within research, content analysis is used as a technique to
analyse qualitative data in a systematic and objective manner to quantify
phenomena (Elo and Kyngas, 2008). It allows researchers to concentrate
qualitative data into content related categories with the goal to cluster related
statements, phrases or words which share the same meaning (Cavanagh, 1997).
The outcome of a content analysis is a summarised and general description of the
investigated phenomena. Hereby Elo and Kyngas (2008) differentiate between
two types of terms used when describing the outcome – "concept" and
"category". The term concept is used in a more specific context when the aim is
to built a new theory whereas category describes a broader approach. For the
analysis of the interviews, the author has followed the scheme identified by Elo
and Kyngas (2008) for creating a content analysis. Elo and Kyngas (2008) state
that conducting a content analysis involves the three phases: preparation,
organising and reporting.

Preparation phase

During the preparation phase the author read through the material and derived
the core elements from the interviews. These elements or "unit of meanings"
can be single words or whole statements and may contain more then one
meaning relevant for the topic (Elo and Kyngas, 2008). The choice of the unit of
meaning has an impact on the analysis process. Identifying units of meanings with
too many meanings may result in making the analysis process too complex
(Catanzaro, 1988). However the choice of elements which are defined too
narrowly could also negatively impact the analysis process leading to
fragmentation (Graneheim and Lundman, 2004). Further Graneheim and

56
Lundman (2004) specified that while conducting a content analysis it is important
to state whether latent content such as the notice of non verbal communications,
laughter, silence or other types of subtext is to be included into the analysis. The
rules regarding the inclusion of latent content for the analysis are specified within
the Rules for transcription section below.

Organisation phase

During the organisation phase, the author has read through the written material
again‚ and created headings when necessary to describe the content. The
identified units of meaning were analysed in greater detail. Afterwards categories
were created and abstractions were made (Elo and Kyngas, 2008). According to
Dey (1993) the purpose of categorisation should not be to simply group similar
elements together. Instead each element should after its assessment belong
logically to a category. Each category summarises units of meanings belonging to
the same.

Reporting phase

The results of the analysis are summarised within a report. The report includes a
compact overview of the results, the descriptions of the categories in a sufficient
level of detail and the core units of meanings classified for each category. The
meaning and the relevance of each predefined headline is elaborated. A
connection of the data to the results is made to increase the reliability of the
analysis (Polit and Beck, 2004).

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Rules for transcription

In the following the rules used for transcribing the interviews are summarised.
The rules contain the choices the author has made regarding the inclusion of
latent and manifest content as identified by Elo and Kyngas (2008).

• The only latent content included in the transcription is laughter, which is written
as (laughs).

• Further latent content such as silence, pauses, sighs or posture is not included in
the transcription.

• Half and broken sentences are left out, if they do not add any value to the
conversation.

• Inaudible short pieces below 2 seconds, where it is not clearly understandable

what a person said, is written as [inaudible].

• Incorrect grammatical errors such as wrong word choices or faulty sequences of

words are not corrected.

• Filler sounds such as "mhh" and "ehmm" are not included in the transcript.

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 1.2 Usage data for Nina web

1. Nina is customer driven meaning that it only includes information about topics
which the customers ask about. For instance, an insurance company, which works
together with Swedbank, complained on why its products where not mentioned
in Nina’s conversations. The issue hereby was, that the customers did not ask
question about the insurance products.

2. Nina is easily accessible through the web browser of Swedbank and according
to the results, especially the first contact resolution, performs well and solves the
customer’s problems quickly.

3. The facts that Nina is a joint project between Swedbank and Nuance and a
cloud based solution, leads to a less complicated and faster implementation
process. According to Kedbäck (2016) these factors were key aspects in gaining
top level management support.

4.A dedicated staff responsible for the stakeholder management and content
management assure that Nina is supported with the right information pipelines.
The content management teams main tasks are to monitor conversations,
checking if the information used by Nina is up to date and the management of the
various stakeholders in order to assure that product owners, legal parties and
overall communication about Nina are handled in an appropriate manner
(Kedbäck, 2016).

The introduction of Nina web on the website of Swedbank was the first step.
The next step for Swedbank is to integrate Nina into the 58 banks which belong to

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Swedbank but have their own representation and service catalogue. Hereby Nina
is supposed to cover the same tasks, but adjusted for each bank (Kedbäck, 2016).
The next target is to expand Nina to the mobile channel in the form of a dedicated
virtual assistant. This would be a major step since about 40% of the customers use
Swedbank’s digital services only through the mobile channel. The ultimate goal
hereby is to create an intelligent virtual assistant, which can assist the customer
throughout their whole customer experience. A possible banking service named
by Kedbäck (2016) which could be addressed via Nina are consumer loans. A user
could indicate the intent to make a purchase such as a new computer, through
the virtual assistant. Nina would initiate the loan process and guide the user
through the necessary steps. The user could have the possibility to continue the
loan process when at home.

6. Limitation

While AI has brought numerous benefits to the banking industry, there are still
some limitations to its use. Here are some of the key limitations of AI in banking:

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6.1 Gaining Credibility

In the past, “black box” solutions have generally been viewed with suspicion in the
banking industry. The point of credit models was to enable bank executives to gain
greater insight and understanding of the nature and performance of their portfolios,
helping them make better decisions about what risks were worth taking.

Now, it seems, the “machine learning” moniker is gaining credibility and, as long
as the new model works demonstrably better than the status quo, it'll have a good
shot at being implemented at a bank regardless of its complexity.

In cases where the success or failure of a model-based solution can be precisely

determined, such as assessing the credit-worthiness of loan applicants, it's hard to
imagine people-based decision systems surviving for much longer.

For example, I remember working with a risk analyst in the late 2000s who was
asked to assess the performance of a mortgage application review team.
Applications with middling credit scores were parceled off to this team for review,
after which prospective clients were either accepted or rejected.
What the bank discovered was that using just the model-based score, with a strict
cut-off, led to higher revenue and lower credit losses. Even if the team worked for
free, in other words, it still would have been preferable for the staff involved to be
redeployed or laid off.

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6.2 Stress Testing Complexities

In cases where the best model is harder to determine — more strategic problems
like stress testing and capital planning spring immediately to mind — the benefits
of black box techniques will likely be elusive. Stress test models are, after all,
notoriously difficult to invalidate.

The point of the stress test model is to predict behavior during a banking system
crisis, but we have had only one such event during the past 20 years. We can show
that our model exhibits rising losses in a 2008 back-test, but no one can say
whether the Great Recession was a “typical” stress event in any meaningful sense.

If we could measure stress test model performance precisely, and if an artificially

intelligent model was found to perform substantially better than the alternative,
there would be no valid argument against its application. An examiner may
bemoan his lack of understanding of the technique, but he would be unable to deny
its superior performance.

In the real world, given the difficulty in truly validating stress test models, we must
instead content ourselves with the fig leaf of model interpretability.

6.3 Uncertain Future

Of course, if artificially intelligent systems were smart enough, separate stress

testing models would be unnecessary. If the machine had seen it all before
(recession, famine, revolution and war) and developed the smarts to both gauge the
likelihood and calculate the capital needs of the bank in the unlikely event, the
executive's only role would be to feed the dog tasked with preventing human

62
intervention in the prediction process.

However, even if we were armed with data on every banking interaction in human
history, we would still be millennia removed from this point. Such events are just
too strange and infrequent for us to allow data-based methodologies to be central in
crisis prediction and mitigation.

In a world where AI models completely took over, the other key role for executives
would be deciding when and how to check the machines, and, if needed, switch
them off. This could happen — if external conditions change or if customers or
competitors adapt to exploit weaknesses in the artificially intelligent system.

6.4 Lack of transparency

AI systems can be complex, making it difficult to understand how they arrive at

their decisions. This lack of transparency can be problematic, especially when
dealing with sensitive financial information.

Dependence on data quality: AI models rely on data to make decisions, so if the

data is biased, incomplete or inaccurate, it can impact the effectiveness of the AI
system. This is particularly concerning when it comes to decision-making involving
sensitive financial transactions.

Security concerns: AI systems can be vulnerable to attacks by hackers or

cybercriminals. As AI systems become more complex and interconnected, the risk
of a security breach increases, potentially leading to financial losses or data theft.

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Overreliance on AI: While AI can be highly effective in automating certain tasks,
it's important to remember that AI systems are not infallible. There is a risk of
overreliance on AI, which could lead to errors or misjudgments that could have
significant financial implications.

Ethical concerns: AI systems can be programmed to optimize for certain

outcomes, which may not always align with ethical considerations. For example,
an AI system might be optimized to maximize profits, which could lead to
decisions that prioritize short-term gains over long-term stability.

The limitations of AI

Anti-money laundering technology has, in many ways, been our last line of
defence against financial crime in recent years – a dam that is ready to burst at
any moment. Banks and regulators are desperately trying to keep pace with the
increasing sophistication of financial criminals and money launderers. New
methods for concealing illicit activity come to surface every month, and
technological innovation is struggling to keep up.

This is compounded by our need to react quicker than ever before to new threats.
This leaves almost no room for error, and often not enough time to exercise due
diligence and ethical considerations. Too often, new AI and machine learning
technologies are prematurely hurried out into the market, almost like rushing
soldiers to the front line without proper training.

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Increasing scepticism around AI is understandable, given the marketing bonanza
of AI as a panacea to growth. Banks that respect the opportunities and limitations
of AI will use the technology to focus more on efficiency gains and
optimization, allowing AI algorithms to learn and grow organically, before looking
to extract deeper intelligence used to drive revenue growth. It is a wider business
lesson that can easily be applied to AI adoption: banks must learn their
environment, capabilities, and limitations beforemastering a task.

What banks must also remember is that AI experimentation comes

with diminishing returns. They should focus on executing strategic, production-
ready AI micro-projects – in parallel with human teams – to deliver actionable
insights and value. At the same time, this technology can be trained to learn from
interactions with their human colleagues.

But technology can’t triumph alone

Application of AI and machine learning is now being used across most major
aspects of the financial ecosystem, areas that have traditionally been people-
focussed, such as issuing new products, performing compliance functions, and
customer service. This requires an augmentation of thinking, where human and AI
work alongside one another to achieve a common goal, rather than just ’throwing
an algorithm’ at the problem.

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But of course, we must recognise that this technology can’t win the fight in
isolation. This isn’t the time to keep our cards close to our chests – the benefits of
AI against financial crime and ML must be made accessible to everyone affected.

Data must be tracked across all vendors and along the entire supply chain, from
payments processors to direct integrations. And, the AI technology being used to
enable near-real time information sharing must go both ways: from bank to
regulator and back again. Only then suspicious activity can be analysed
effectively, meaning everyone can trust the success of AI.

Over the next few years, the potential of Human AI will be brought to life.
Building trust between one another is crucial to addressing blackbox concerns,
along with consistent training of AI and machines to become more human in their
output, which will ultimately make all our lives more fulfilling.

Expensive

Artificial intelligence is a very expensive technology to implement! It needs to be

understood that right now, technology is at a nascent stage. Hence, it is
considered to be a rare commodity in the technology space. There are very few
vendors who can enable banks to use these technologies. However, among these
vendors as well, there are very few which are capable enough to execute large-
scale transformations.

Since the technology is futuristic as of now, the products and the personnel which
are associated with it come at a premium.

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Banks that have tried to implement artificial intelligence have had to invest
billions of dollars upfront. Also, since the personnel which can enable the
development and maintenance of these systems are in short supply, banks have
to hire this personnel at very high salaries. As a result, banks that are
implementing artificial intelligence are actually losing money in the short run.
However, they are still continuing with their investments since they believe that
the technology will place them in a superior position in the market in the near
future and all their investments will pay off.

The high expenses make artificial intelligence an unviable technology for smaller
commercial banks as of now. They will have to wait for a few more years so that
the technology becomes more commoditized and hence more affordable for
them.

High Cost of Error

Not only is artificial intelligence very expensive to implement, but the cost of
errors made by it can also be very large. This is particularly true for the field of
commercial banking.

Commercial banking loans often have a ticket size of millions of dollars. In the
current process, these loans are carefully evaluated by humans, and systems are
used as an ancillary tool. With the advent of commercial banking, this situation is
likely to be reversed. Hence, systems will play a major role and humans will play
the ancillary role. Therefore, if the system makes an error like disbursing a loan to
a counterparty that is not creditworthy, the consequences will have to be borne
by banks. To overcome this issue, commercial banks are first implementing this
technology in areas where the ticket size is small. This will enable them to
implement the technology in a more controlled manner.

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Reduced Loyalty

At the present moment, commercial banking systems are based on human

networking. Companies do not necessarily take loans from the bank which offers
them the cheapest finance. Instead, companies take loans from banks that they
consider to be a business partner and have good working relationships with.
Relationship banking plays a large part in this process.

At the present moment, commercial banks witness a large loyalty from their
customers. However, with the advent of commercial banking, this loyalty is likely
to be decreased. Commercial banks will end up commoditizing their services. This
is because if there is no human connection involved, then there is no human
connection involved, then there is no differentiating factor for a commercial bank.
Corporations will be encouraged to look at commercial banking in a
commoditized manner.differentiating factor for a commercial bank. Corporations
will be encouraged to look at commercial banking in a commoditized manner.

Unemployment

Commercial banks are planning to implement artificial intelligence on a large

scale. This means that a lot of the tasks which are currently done by humans are
likely to be automated. The end result would be that banks will require a lot less
human workforce. This means that banks will not replace retiring employees and
will have fewer recruitment drives. This also means that a large number of
workers are likely to face early retirements or even layoffs. This could create
discontent amongst the employees of major commercial banks leading to
productivity losses which will partially offset the gains created by the
technological advancement.

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Opaque
Lastly, artificial intelligence-based systems are made out of deep neural networks.
They take data from a wide variety of sources. The sources of their data as well as
the process is undertaken to arrive at a decision can be quite complex and may
not be completely transparent to a layperson. Hence, the end result is that some
of the decisions made by the system are incomprehensible to humans.

For instance, the system may deny a loan to a long-time customer of a

commercial bank and the reasons may not be easy to decipher. This opacity could
create problems in the day-to-day operations of the commercial bank.

The fact of the matter is that artificial intelligence will be implemented in

commercial banks on a large scale. Hence, individual commercial banks also have
to follow the trend. However, it is important for them to understand that artificial
intelligence can also have several disadvantages. Any proposed gains should be
measured against the possibility of losses before steps are taken to roll out this
technology on a large scale.

Data privacy

There are two sides to the data privacy discussion when it comes to AI. One
argument is that due to the vast swathes of data used in AI, some of it will
undoubtedly be sensitive personal information which may not always be
completely anonymised, or could potentially be de-anonymised further down the
line and used to identify individuals. Plus, there is the consent issue: do
consumers really understand how their data will be used? “Companies need to
make a significant effort at clarity and transparency regarding more complex uses
and insights from AI that users may not readily understand, like psychological or

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behavioural insights that can be determined from the data analysis,” say consent
management experts, Usercentrics. “Since AI needs a great deal of data, it is likely
this data would come from a number of sources. This would mean a significant
requirement for strong data protection and security practices when the data is
collected, shared, and stored. If AI processing is done by a third party, they and
the data controller for whom they’re working must also be careful to comply with
regulatory requirements for the safeguarding and use of data for AI analysis.”

The other side of the argument is that AI’s true potential to improve efficiency,
accessibility and usability for the masses cannot ever be fully realised if it is
overregulated. “Probably the greatest challenge facing the AI industry is the need
to reconcile AI’s need for large amounts of structured or standardised data with
the human right to privacy,” says London’s Royal Institute of International Affairs.
“AI’s ‘hunger’ for large data sets is in direct tension with current privacy
legislation and culture. Current law in the UK and Europe limits both the potential
for sharing data sets and the scope of automated decision-making. These
restrictions are limiting the capacity of AI.”

This is not the case in all jurisdictions though. For example, in China, where laws
around privacy and surveillance are far less clear, companies specialising in the
development of AI software have been able to capitalise on access to reams of
publicly available data.

Outsourcing: adding complexity

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Outsourcing in the context of AI provides an added complication to an already
complex journey for consumer data. Not only do you have to ensure you are
building third-parties into your risk assessments, with particular focus on data
security; there are also risks surrounding how that data is handled and processed
by a third party. “If two people with very similar personal information, coming
from more than one system, get merged into one record erroneously, not only
could one person receive offers they’re not interested in, as a mild consequence,
it could be a legal violation, as the person receiving the offers did not opt in,” says
Usercentrics. “It could have been the other person who agreed to data collection
and communications, but who, from the standpoint of the harmonised data, has
ceased to exist.”

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Risks and limitations of artificial intelligence in
business

Businesses are increasingly looking for ways to put artificial intelligence (AI)
technologies to work to improve their productivity, profitability and business
results.

there are also certain barriers and disadvantages to keep in mind. However, while
there are many business benefits of artificial intelligence

Limitations of artificial intelligence

One of the main barriers to implementing AI is the availability of data. Data is

often siloed or inconsistent and of poor quality, all of which presents challenges
for businesses looking to create value from AI at scale. To overcome this, you
should have a clear strategy from the outset for sourcing the data that your AI will
require.

Another key roadblock to AI adoption is the skills shortage and the availability of
technical staff with the experience and training necessary to effectively deploy
and operate AI solutions. Research suggests experienced data scientists are in
short supply as are other specialised data professionals skilled in machine
learning, training good models, etc.

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Cost is another key consideration with procuring AI technologies. Businesses that
lack in-house skills or are unfamiliar with AI often have to outsource, which is
where challenges of cost and maintenance come in. Due to their complex nature,
smart technologies can be expensive and you can incur further costs for repair
and ongoing maintenance. The computational cost for training data models etc
can also be an additional expense.

Software programs need regular upgrading to adapt to the changing business

environment and, in case of breakdown, present a risk of losing code or important
data. Restoring this is often time-consuming and costly. However, this risk is no
greater with AI than with other software development. Provided that the system
is designed well and that those procuring AI understand their requirements and
options, these risks can be mitigated.

Other AI limitations relate to:

 implementation times, which may be lengthy depending on what you are

trying to implement

 integration challenges and lack of understanding of the state-of-the-art

systems

 usability and interoperability with other systems and platforms

If you're deciding whether to take on AI-driven technology, you should also

consider:

 customer privacy

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  potential lack of transparency

 technological complexity

6.5 Reduced Customer Loyalty

There is also a fear of reduced customer loyalty due to less customer contact and
the lack of essence of “human touch.” Banks, especially in India, have an
emotional value as they help many in cherishing their long-standing dreams—be
it a beautiful house or a good education for students. All this could be lost due to
AI and automation. The socio-economically backward groups would be the
biggest losers and most affected in such a scenario due to low levels of education
and the digital divide.

Leakage And Misuse Of Data

Several experts in the U.S. and the U.K. opine that cyber, political and physical
threats arise with the growth in the capabilities and reach of AI. The
recent Facebook scandal highlights the risk corrupt data practices can bring to a
firm. Complete transparency while venturing into new AI projects also should be
ensured so that banks don’t face reputation risks.

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Banks should start building AI systems with a small set of complex data and add
subsequent ones, thus creating a universal record of each client. Adequate
investments should be done on the safe storage of data and prevent it from leakage.
This will help the bank detect potential hazards in the implementation stage of the
project and enable efficient identification—and then execution—of goals and
priorities of the organization. Artificial intelligence will soon become the sole
determinant of the competitive position of banks and a key element enhancing their
competitive advantage.

Complex algorithms

The AI employs complex ML and NLP algorithms for decision making, which are
extensively hard for common man to understand and process.

AI and its technologies use data of the individuals to drive results. Sometimes this
data is misused and results in colossal losses. We all often hear about cases of bank
fraud in the news every day.

AI is a boon as well as a bane to mankind. Though many steps have been taken by the
government and authorities to cover its limitations. Such as the appearance of GDPR,
to control cybercrime related activities.

But still, the technology needs to be embedded with ethics and more control. This
would not only make the entire concept more convenient but even trustworthy for the
general public.

The limitations of AI in the banking industry include lack of transparency, data

quality issues, security risks, regulatory compliance challenges, and dependence
on historical data.

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 Findings And Conclusion

AI has had a significant impact on the banking industry, revolutionizing the way
banks operate and serve their customers. AI-based systems have been developed
to improve fraud detection, customer service, risk management, loan
underwriting, and more. These systems have been proven to reduce operational
costs and improve the overall customer experience.

AI-based chatbots and virtual assistants have made customer interactions more
convenient and efficient, providing personalized solutions and quick responses to
customer queries. AI-powered fraud detection systems have improved the
security of financial transactions, reducing the risk of fraud.

Moreover, AI is being used to analyze large amounts of data to identify patterns

and trends, enabling banks to make more informed decisions about lending and
risk management. This has led to more accurate predictions of loan default rates
and improved credit scoring, benefiting both the banks and their customers.

Overall, the use of AI in the banking industry has been a game-changer, bringing
about increased efficiency, better decision-making, and improved customer
experiences. As AI technology continues to evolve, it is likely to play an even more
significant role in shaping the future of the banking industry.

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