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It is 2030. Imagine walking down I.I. Chundrigar Road Karachi. Imagine what will you see? Imagine if banking becomes totally digital. Imagine if branches disappear. Imagine if AI robots looking humanoid meet you, greet you, chat with you, serve you, advise you, help you.

From Digital to AI, banking will never be the same. Decades-old or new high-rising buildings of State Bank, HBL, UBL, MCB may adorn Chundrigar Road, but working and operating the way they never have before. That banking will be revolutionized is something that most agree upon. That something immediately needs to be done is also a given. What is not a given is what and how this transformational process needs to be addressed right away.

According to a paper published by MDPI on “Banking 4.0-The use of AI in Banking industry”, AI will propel banking industry to new heights. AI can create additional value of up to USD 1 trillion each year for the global banking industry. The global financial services industry is expected to reach USD 28.529 trillion by 2025–2030 at a compound annual growth rate (CAGR) of 6%.

This is mainly because of the substantial use of AI in the rearrangements of banking operations. In Pakistan the banking industry has evolved with time. Digital banking is increasing the options to customers and helping banks reach new segments. The State Bank of Pakistan has played a key role in directing the banks towards technology. Some progress is visible but much more can be done. Some of the areas of potential and exponential development are:

1- Talk and walk as customer- With so much effort in banking on KYC (Know your customer) and a huge focus on customer service quality, AI can really transform this critical area. The AI chatbots in banking and virtual assistants have revolutionized the way banks interact with their customers. These smart technologies employ natural language processing to comprehend consumer inquiries and offer 24/7 individualized support. AI can help banks recommend tailored financial services and products by analyzing customer data and historical behavior. This improves both customer satisfaction and cross-selling opportunities.

2- Fraud detection and prevention-Financial crimes are on the up in Pakistan. Customers are being deprived of millions through fake calls and representatives asking for some codes and data. The banks suffer as the customers blame them. The FIA (Federal Investigation Agency) reported last year that their cybercrime wing received 7,018 complaints of fraud from Punjab alone. Hacking of data is now an organized crime resulting in billions disappearing from accounts.

AI algorithms are able to detect fraudulent activity by analyzing large amounts of transactional data in real time. Machine learning models can learn from past fraud patterns and enable banks to detect suspicious behavior quickly. Fraud detection using AI in banking systems can flag up unusual transactions and help banks to prevent fraudulent activities and unauthorized access. They protect both the institution as well as its customer. The Pakistani banks are facing dire problems with money laundering of huge amounts. Artificial intelligence has multi-layered penetrative ability that can help prevent these crimes and save billions for the banks in terms of fines imposed by global financial bodies.

3- Credit risk assessment

In the past, creditworthiness assessment relied on manual processes. Pakistani banks suffered in the past due to bad debts and portfolios being developed by injudicious lending. AI, aided by machine learning, has streamlined this by analyzing tons diverse data in a matter of a few clicks. A machine learning app development organization can create these models, enabling banks to swiftly and accurately evaluate credit risk, facilitating faster and well-informed lending decisions.

AI can heavily improve the banks’ trading business. AI-driven algorithms have reshaped the trading landscape within banking. These algorithms assess AI trends and perform transactions at a pace and accuracy that is unattainable for human traders using market data, past transactions, and news. Trading systems with AI capabilities enhance portfolios, improve risk management, and thus boost profits.

The customer of tomorrow will reshape the bank of tomorrow. In 2030 the kids of today will be the customers of tomorrow. The Gen Zee will give way to the AI generation. This generation will want a personalized bank just for each one of them. Is it a wish impossible? May be. But it is what these smart kids of today will want tomorrow. Products for each one. Service just the way they want. Connection at their time. A bank for just their own whims and fancies. The fintech and digital revolution will have to use the smarter machines to learn about humans from the machines. The customer experience for banking of tomorrow will need to understand:

1- Each one banking- The AI generation is simply going to reject tardiness and randomness. The normal FAQs on which the customer service representatives are trained are not going to work. It is only the machine-generated multitude of data analytics of the behaviour of this generation that is going to make this generation feel attended, understood and served. Chatbots are already being successfully employed but mere data responses will not be the end. The machines now have brain networks that are not mired by the mind wonderings and wavering of humans. There will be virtual assistants at all odd hours advising each customer about his best deals, etc.

2- Research generative- Customer experiences are all dependent on studies of consumer behaviour. In-depth face-to-face surveys also have limitations. But due to the generative abilities of AI behaviours more than the responses analytics can be done. Insights that even the customer may not be able to explain in face-to-face interviews will be available reducing the elements of failed product launches.

The individual profiling of each and every customer is almost impossible. With AI research and analytics the instant response required to adapt for millions of customers may become possible.

4- Transactional transparency- Retail banking has taken a backseat to Blockchain technology that allows decentralization of transaction in a transparent and secure manner. AI-generated smart contracts have an inbuilt ability to detect and remove blockages creating seamless operations across countries and systems.

Pakistan’s banking industry has been a stellar performer in this recessionary environment. The State Bank of Pakistan has regulated judiciously in the past to save it in the 2007 global financial meltdown when US giant banking industry was crumbling and falling. The State Bank Governor has repeatedly talked about the need for technology innovation. Some urgent and concrete steps to push the AI agenda forward is:-

1- Within the State Bank a special AIU, i.e., Artificial Intelligence Unit, should be formed to lead the technology initiatives.

2- This AI unit should invite all bank heads to do a consultative round-table on the impact of AI in banking.

3- The findings of the impact of this AI should suggest the way forward to capitalize opportunities and counter threats.

4- There needs to be a positive impact strategy of implementation in banks and there needs to be a counter plan for negative impact for job losses, etc.

5- NIBAF (National Institute of Banking and Finance) and IBP (Institute of Banking Pakistan) can be commissioned with the task of reskilling/upskilling human resource to deal with the new knowledge and skills required for the AI interventions in their institution.

If humans have to cope with Artificial Intelligence, they have to be more intelligent, more smart and more trained. The speed at which AI is spreading is not just an alarm bell but a practical reality. This change is going to be like no other technological change and requires actions like never before as AI presents only two options- nourish or vanish.

Copyright Business Recorder, 2024

Andleeb Abbas

The writer is a columnist, consultant, coach, and an analyst and can be reached at [email protected]

Comments

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KU Jan 03, 2024 11:09am
Given the standard of our banking sector and their refusal to take responsibility on digital bank frauds, one needs to be careful when treading unfamiliar Artificial Intelligence ground. Only last year, the President of Pakistan had to step in and direct two banks to refund the money to bank fraud victims, and SBP had to issue guidelines to banks on digital banking to prevent online banking frauds, and we are not even talking about reports by security agencies that majority of the frauds are taking place in collaboration with the bank staff and other public sector data leaks. The over the shelf availability of NADRA’s data or BISP data, is currently being used by scammers to run riot in financial frauds, while in the absence of data protection laws and cyber crime laws coupled with corruption, most of these incidents are not pursued nor the culprits getting caught.
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Syed Zulfiqar Ali Jan 03, 2024 03:42pm
AI technology may also be used by police to curb the crime in the cities like Karachi.
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