Financial technologies, or FinTech, isn’t the most glamorous industry. But AI is being used to modernize archaic financial institutions by automating repetitive tasks, helping drive the adoption of mobile banking and digital transformation.

Chatbots and AI assistants, in particular, represent an exciting opportunity for the world of banking. Digital agents ease the burden on staff by taking care of monotonous tasks, resulting in reduced wait times for customers as well as workplace efficiencies, thus saving both time and money.

According to Juniper Research, the banking industry will save an estimated $209 million this year through the use of chatbots, with operational cost savings expected to rise to as high as $7.3 billion globally by 2023. And banks are expected to save upwards of 862 million hours by adding chatbots to the mix.

How chatbots are different from robots

From a service perspective, customers haven’t always been receptive to automation, and for good reasons. Perhaps the best (or worst) example is robotic customer service reps that listen for specific commands and have a selection of predetermined responses, never going off script. In the end, the customer is often left screaming “live agent!” into their phone in a desperate attempt to talk to a human being. Understandably, then, financial institutions can be skeptical about adopting AI for fear that the results could be disastrous.

The banking industry will save an estimated $209 million this year through the use of chatbots, with operational cost savings expected to rise to as high as $7.3 billion globally by 2023.

But chatbots can interact with customers in a conversational style to resolve issues, reply to queries and provide financial advice. They have more than a small database of cookie cutter responses from which to draw. Natural language processing (NLP) allows AI to pick up on nuances in speech and pronunciation, and understand context.

In other words, an AI can speak and, to some degree, comprehend, more like a human. Juniper predicts that over the next five years, successful interactions with chatbots in the banking sector will grow by an impressive 3,150 percent, especially as NLP continues to improve.

Last year, Bank of America launched a virtual financial assistant named Erica, to help them complete tasks like make or cancel payments, send money to friends, look for past transactions, lock or unlock a lost or stolen credit card and ask questions about finances and services. Three months after launching Erica, one million customers took advantage of the intelligent AI, citing its ease-of-use and financial advice as two big draws.

Automate mundane, time-consuming tasks

AI can also automate typically mundane tasks that would otherwise require employees to spend endless hours plugging in data points. That could include calculating and categorizing clients by their risk scores and assessing credit risk to adjust an offer accordingly; or automating claims. An AI can run through questions with the client, analyze photos, check for fraud and predict payouts.

two seniors reviewing documents

The technology could also analyze contracts and search for anomalies quickly. For example, Manulife is the first Canadian life insurer to underwrite using an AI decision algorithm (AIDA), which it hopes will reduce turnaround times for customers who have filed applications for basic life insurance. The same process could be used for other applications, like credit cards or bank loans.

As more financial businesses recognize the importance of customer retention alongside acquisition, intelligent AI can predict churn so companies can take proactive steps to keep potentially unhappy customers on board before it’s too late.

Nick Maynard, who authored the Juniper study, says the deployment of automated customer service for banks can be “crucial in digital transformation, allowing established banks to better compete with challenger banks.”

Create a more modern banking landscape

Integrating AI presents an exciting new world of opportunity for a seemingly old-fashioned industry that’s begging for modernization. Innovative new services are posing competition for the traditional banking model. Cryptocurrencies are shaking up our notion of money. Apps like Stripe make it easy for anyone to set up a business online and send and receive funds without having to apply with a bank. And peer-to-peer money transfer services like Transferwise let you send money abroad for a fraction of the cost of a bank.

Financial institutions that are looking to remain relevant in a changing world are discovering that adding AI to the mix can lead to greater business efficiencies. And it can enhance the customer experience, helping customers keep on top of their finances and be better prepared for their financial future.