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This story was originally featured in FinTech Weekly by Rosalia Mazza.
Artificial Intelligence (AI) is no longer a supplementary tool in banking but a transformative force redefining the industry. Originally implemented to improve back-office efficiencies, AI now drives strategy, helps personalize customer interactions, and reshape services. Technologies like generative AI, machine learning (ML), and natural language processing (NLP) are helping to facilitate more hyper-personalized experiences, with initiatives such as tailored credit offers and predictive savings plans, while also automating processes like loan reviews and fraud detection. AI's potential to add $200–$340 billion in annual value is significant, yet banks must navigate challenges around data privacy, algorithmic bias, and ethical usage.
The ongoing evolution of AI brings both opportunities and complexities. Sagar Bansal highlights how fraud continues to be a challenge for the banking industry and how firms are utilizing AI to combat it:
"Payment fraud is an escalating challenge for neobanks and payment startups, with global losses reaching $38 billion in 2023. Digital-first institutions, due to their streamlined onboarding processes, have become prime targets for fraudsters. While this presents significant hurdles, particularly for smaller FinTechs, the industry continues to see strong growth.
Many firms are turning to advanced technologies like machine learning to combat fraud in real time, but the increasing cost of fraud prevention is raising barriers to entry, favoring larger players and driving consolidation in the market."
-Sagar Bansal | Director at Stax Consulting
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