Generative AI in Fintech & banking

Senior leaders from the Largest Financial institutions say that Generative AI is an evolution and brings a revolution as it transforms the way finance and banking professionals work earlier. 

Integration of Generative AI in Fintech provides several use cases, such as:-  

  • Banks now rely on this AI-powered technology to send personalized messages to customers. 
  • One of the banks (Singapore OCBC Bank) integrated GPT 4 model for coding.  
  • Generative AI can now do all the legal documentation work that human professionals used to do earlier. This saves a substantial amount of time and effort, and they can now focus on strategic and analytical aspects of the job.  

Such groundbreaking technology (ChatGPT) has a significant focus on providing better experiences to customers and helping bank managers make informed decisions in the future. 

Moreover, it is reshaping the Fintech industry as it can create better financial products that satisfy individual customer needs. 

This technology is a BOON for crypto providers, neo banks, and financial institutions as they can enhance customer engagement, provide personalized recommendations, identify potential risks, and resolve customer queries. 

According to Juniper Research, banks will increase their spending on Generative AI by over 1400% in 2030 to provide personalized user experiences at a reduced cost.  

So, this technology has a huge potential in banking and Finance. 

This blog will cover everything about Generative AI in Fintech and discuss its applications and associated benefits. 

What is Generative AI in Fintech? 

Generative AI is no longer a techy BUZZWORD these days as it reshapes the banking and financial sectors whether it is Risk management, fraud detection, portfolio management, or customer service. 

With the help of Generative AI technology, Banks and Finance companies learn from past data and create new insights, helping them make informed decisions. 

Such AI-powered technology is not just confined to crunching numbers and identifying potential threats. It also changes the way banks interact with their customers. 

Moreover, Financial institutions can enhance customer experience by leveraging AI-powered chatbots. These chatbots assist customers at every stage in managing financial management tasks. 

Additionally, it helps financial institutions detect the likelihood of fraud, generates risk scores for customers, and determines which customers are at the higher risk. 

Generative AI, when applied to banking, helps banks synthesize an existing wealth of information to make informed decisions and automates various banking processes. 

There are various use cases that this technology provides in the banking and Finance sector, such as –  

  • AI-generated content  
  • Determining the creditworthiness of customer  
  • Onboarding new customers  
  • Personalized financial recommendations to customers  

Earlier, it was challenging for Fintech companies to analyze the leaps and leaps of complex datasets manually. 

With Generative AI, monitoring market trends, generating reports automatically, and identifying investment opportunities becomes easier. Thus, it takes financial analysts’ burden.  

Another area where Generative AI is making strides in Fintech is enhancing customer experience. It delights customers by sending personalized recommendations and offers. 

Thus, integrating this technology into the Fintech industry opens exciting possibilities in the coming years. 

Generative AI in the Fintech market offers immense growth potential and is expected to grow by 22.5% annually from 2023 to 2032.  

The major reason behind the impressive growth is that this technology automates complex processes, saves costs, and reduces human errors. 

Thus, AI is integral to the Fintech industry and transforms how financial services are delivered. 

Use cases of Generative AI in Fintech 

Let’s discuss some use cases of Generative AI in Fintech-  

1. Fraud detection and prevention  

For any Fintech company to succeed, Risk management and Fraud detection are two areas to pay attention to. As the number of online transactions increases, fraudsters are finding novice ways to steal sensitive customer information.  

Traditional fraud detection systems were trained on predetermined rules to identify potential fraud patterns. More importantly, these rules are created by humans.  

These systems are ineffective as they fail to adapt to evolving fraudulent schemes.  

When implemented in Fintech, generative AI evaluates the likelihood of fraud as it is trained on large quantities of transactional data.  

This AI-powered technology is a game changer for banks and financial institutions for analyzing and mitigating financial risks. 

Fintech companies can create advanced fraud detection systems by training such models on historical data. 

These models are best for detecting anomalies and will help financial institutions and banks by recommending mitigation strategies to combat these risks.  

Thus, it will help financial companies prevent future financial losses.  

As Generative AI technology adapts to new patterns, it reduces false positives.  

According to a study by Forrester, various financial institutions used AI technology and saved around $150 million in a single year. 

Moreover, a data report by Capgemini states that German banks faced challenges in managing fraud and enhancing customer experience.  

They noticed most customers shifted to digital channels to meet their banking needs, leading to increased fraud and online attacks. 

With the adoption of AI-based fraud detection, they reduced their financial losses by 25% and saw a reduction in false positives by 40-50%.  

Sweden’s largest bank, for instance, used Generative adversarial networks (GANs) to detect fraud and money laundering activities by creating graphs.  

This bank employed NVIDIA and Hopsworks platforms to identify suspicious financial transactions. 

Unlike the rule-based fraud detection model, it uses a model-based approach where the model learns from previous financial data to determine whether potential financial transactions are fraudulent or non-fraudulent.  

2. Credit scoring and Risk assessment  

Gone are the days when credit scoring was an uphill task for financial analysts. As credit scoring was done manually, it was subject to various errors.  

Calculating the credit score for each applicant was a time-consuming task, which resulted in delays in loan approval. Overall, it impacts customer experience.  

The advent of cutting-edge technologies, such as Generative AI tools, transformed the financial landscape by automating the credit scoring process.   

It automatically calculates the credit score after analyzing vast amounts of data from various sources, such as financial statements and credit reports. 

Moreover, it provides a 360-degree view of the borrower’s financial profile and assesses whether the business/individual is eligible for a loan.  

This makes it easy for financial institutions to make informed decisions in the future regarding loan approval. 

With a faster turnaround time, it streamlines the loan approval process and provides better customer service. Thus, it builds successful lending relationships between the borrower and the lender. 

For instance, Crediture, a well-known credit scoring platform, uses Generative AI to calculate credit risk for young borrowers and immigrants starting their credit journey. 

The company trained its system using Generative AI to comprehensively analyze how businesses and individuals save and spend their money. 

With the help of a Generative AI, customers get various personalized loan options based on their current financial status. 

3. Personalized financial recommendations  

Earlier, it was challenging for banks and financial companies to offer customers personalized financial advice and recommendations. So, this hampers the overall customer experience. 

Moreover, with the development of chatbots and virtual assistants, financial institutions can now personalize their customer experiences by answering customer queries in real-time and guiding them to manage financial transactions on the go. 

This removes the burden of human agents, who can focus on other areas, such as strengthening customer relationships. 

Generative AI acts as a personal financial analyst for customers, providing customized investment advice that fits customer goals like a glove. 

It uses advanced data analysis and natural language processing (NLP) to analyze customer data and their transaction histories and studies customer interactions to develop suitable investment plans. 

For Instance –Goldman Sachs, a leading global investment bank, uses generative AI to provide personalized investment recommendations for clients based on their financial goals and preferences.  

4. Trading and investment strategies 

Financial institutions deal with enormous amounts of data, so it becomes difficult to understand market dynamics and analyze patterns.  

It was next to impossible for human traders to analyze voluminous, complex datasets. If done incorrectly, it can lead to financial loss. 

Generative AI studies market trends and historical price movements and generates real-time insights.  

When the generative AI model is trained on historical data, it quickly analyzes countless data points and comes up with personalized investment recommendations, strategies to mitigate risk, and optimization of investment portfolios. 

As these models provide real-time minute insights, financial institutions and investors can optimize trade to maximize returns and minimize risks. 

Moreover, investment banks can leverage AI-generated insights to automate trading processes and develop strategies accordingly. 

5. Helps investment banks in managing front-end operations 

Generative AI in Finance is beneficial in those areas where output generations take maximum time and effort, but it’s easy to validate. 

With this capability, it will be easier for front-office employees to perform their jobs in multiple areas, such as sales, marketing, research, trading, etc. 

Earlier, professionals used to spend more time creating industry reports, pitch books, performance summaries, and due diligence reports. 

However, Generative AI creates a bigger impact by cutting the cost of content creation and speedily analyzing data. 

A recent study conducted by Deloitte states that Generative AI will increase the productivity of front-office employees by 27-35% in 2026.  

Such productivity gains will be higher in investment banking because this is where most repetitive tasks are performed. 

6. Regulatory compliance and reporting  

Moody Analytics conducted a study, and the results state that Fintech companies readily adopt AI in compliance and risk assessment.  

For the banking and Finance industry, adhering to compliances such as money laundering and Anti-money regulations is extremely important. 

Integrating Generative AI in Fintech brings more efficiency by automating compliance processes (creation of compliance documents and reports, compliance audit) and identifying the financial gaps or violations. 

This way, companies can avoid penalties as Generative AI can quickly read vast legal documents and promptly inform the institutions about regulatory changes, if any.  

Additionally, they can keep themselves up to date with regulatory changes and ethical standards. 

Employees can take personalized compliance training programs to understand compliance requirements and adopt good compliance practices. 

Thus, leveraging such technology in the banking and finance industry saves time and money on compliance costs. 

Benefits of Generative AI in Banking and Finance 

Here are a few benefits of Generative AI in the banking and financial industry-  

1. Enhances customer experience  

For any banking and finance company, satisfying customer needs comes at the top. And Generative AI is a game changer for fintech companies when providing personalized assistance to customers. 

It analyzes vast amounts of customer data, such as preferences, behavior, spending patterns, investment goals, etc.,  

Generative AI takes the front seat in serving customers with personalized product recommendations and financial guidance. This way, banks and financial companies can better understand their customers.  

Moreover, leveraging chatbots in Fintech powered by Generative AI technology does the work for you by answering customer questions, knowing their needs, and providing real-time assistance.  

In fact, the bot uses sentimental analysis in interpreting questions and adjusting the responses as per the mood of customers. 

2. Faster onboarding process  

Generative AI helps banks and financial companies speed up the onboarding process by automatically identifying and verifying documents.  

So, there is no longer reliance on manual checks as everything is automated. The AI-powered systems will extract information from documents to verify customer identities. 

Thus, waiting times for customers are minimized, resulting in high customer satisfaction. 

3. Boost workforce productivity  

A survey conducted by UK Finance states that nearly 75% of financial service companies started experimenting with Generative AI tools and saw an increase in employee productivity. 

Generative AI automates routine banking tasks, document processing, data entry, and creating personalized scripts for bank employees when they talk to customers. 

As a result, Banks can save around 30 to 60 seconds on each task. Thus, human resources can now focus solely on performing strategic activities rather than dealing with mundane tasks.  

4. Risk management  

The banking sector faces various forms of risk, be it credit risk, market risk, or operational risk; they need technology that can help them predict risks. 

Because Generative AI doesn’t rely on assumptions, it analyzes historical data, finds patterns of what would happen next, and creates different scenarios. 

As the model uses predictive analytics, it can help banking and finance professionals develop robust risk mitigation strategies. 

Also Read: Generative AI In Education – Use Cases, Benefits

Wrapping up 

So, you better understand how Generative AI in Fintech turns out to be a game changer for fintech businesses. 

It revolutionized the financial landscape by enhancing customer experience, automating manual processes, and helping banks and financial institutions make more informed decisions in the future.  

Thus, Generative AI in Fintech is a valuable tool for financial institutions such as Fraud detection, providing 24*7 customer support, and providing personalized financial advice to customers. 

The future of Generative AI tools such as ChatGPT looks promising, and 77% of banking executives felt that leveraging such technology is a major differentiator in deciding the success or failure of banks. 

As a leading AI/ML development company, we help you achieve your business goals by developing intelligent solutions.  

At BigOhTech, we have skilled AI/ML developers who have successfully worked on 10+ AI/ML projects in different industries. 

Ready to build intelligent solutions for your Fintech business?  

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