AI strategies to cut costs, curb fraud and improve customer experiences

Cost pressures in the banking industry are certainly not new, but they seem to have grown in scale and intensity in recent years. Despite your best efforts to control spending, reduce waste and automate processes, it’s become more costly to keep the money you manage in harmony as it leaves its state of rest, moves through the global payments system and goes to work in the capital markets.

So what has changed?

A combination of factors has contributed to this tough new cost environment. Digital banks that operate strictly online are aggressively luring customers with high deposit rates that are hard to compete with if you’re operating a network of physical branches. Pair that with recent softening in the lending arena brought on by heightening economic uncertainty, and your margins are being squeezed tighter than ever.

Another huge contributor to worsening cost pressure is the frantic pace of change as customers continually raise the bar on digitalization. They expect every banking need to be met instantly and seamlessly, and there’s a high cost associated with keeping up. Apart from the technology itself, you’re faced with a talent gap and the elevated risks associated with cyberattacks and compliance missteps.

Finally, social engineering fraud has ramped up over the past year, both in frequency and sophistication. Ironically, the digital platforms and AI-powered tools that help you improve your bank’s performance are also available to criminals who grow more skilled by the day in exploiting human vulnerabilities such as fear, trust and curiosity.

AI’s role in changing the cost control dynamic

According to recent research by FIS® and Oxford Economics,* which is based on a survey of more than 500 C-level executives in the U.K., U.S. and Singapore, cyberthreats and fraud top the list of risks that can drain your bottom line and destroy your reputation. Entitled “The Harmony Gap,”* the research focused on the financial technologies companies have invested in to alleviate tensions caused by geopolitical instability, regulatory challenges, cyberthreats and growing customer demands for seamless digital experiences. Respondents reported that cyberthreats are responsible for nearly one-third (32%) of their annual losses, with fraud a close second at 22%. With an average loss of $98.5M per year per bank, cyberthreats and fraud together represent more than half (54%) of those losses at $53.3M.

But according to the research, banks that are turning to AI and machine learning have achieved success in identifying patterns, anomalies and behaviors that indicate criminal intent. In fact, many of them (80%) report that these remedies have enhanced their risk management and fraud detection effectiveness.

Financial crime, however, is not the only area where AI has proven instrumental in bringing down costs. When applied to customer service, for example, the latest AI technologies allow you to more precisely anticipate accountholder need and effectively route them to specific, helpful information without ever engaging by phone. If you’re battling high costs in your efforts to remain compliant, AI enables you to avoid unnecessary exposure by identifying and addressing gaps as soon as they become a source of risk. AI also delivers tremendous savings in product delivery expenditures, thanks to its efficiency in writing requirements, generating and testing code, and designing front-end components.

As you consider the array of leading-edge solutions that promise greater cost effectiveness, it’s important that you don’t overlook an investment that goes hand-in-hand with AI: clean, accessible data and the analytical tools to turn it into revenue-enhancing action. This goes well beyond the data within your four walls; the growing prevalence of open banking makes it possible for you to tap into a more faceted picture of your customers’ financial relationships. Armed with this intelligence, you’re better equipped to fine-tune your value proposition and nurture added revenue streams that offset costs.