New customer expectations, regulations, and geopolitical uncertainty: could Generative AI be the game changer for the BFS sector?

Modernization and digitization have changed the way we bank today. For some years now, we’ve been experiencing the impact of artificial intelligence in the way we bank and transact: through interactions with intelligent chatbots, the alerts on suspicious activity, the personalized investment advice that ‘personal bankers’ offer, and more. From online payments to online trading, it’s a whole new world of possibilities for customers. On the other hand, the recent pandemic, various geopolitical factors, new regulatory and compliance mandates, a global economic slowdown, and climate change are shaking the very foundational architecture of the industry. The time is ripe for change, and generative AI will be the key that unlocks a new era for the industry, injecting much needed efficiency, resilience, and security into this complex ecosystem.

In this blog, we examine some of the factors that are reshaping the industry and the role that generative AI will play in this transformation.

Change is in the air and on the ground globally

The banking and financial services industry (BFSI) has had to navigate a few challenging years, be it the recent pandemic, which didn’t just change how we lived, worked, and banked but also sparked a new wave of fraud and cybercrime, changing customer expectations with the adoption of digital technologies; or the global macroeconomics that are being shaped by varied natural and man-made factors. As a result, banks and financial institutions have had to reimagine customer journeys. Rewrite business models to drive customer satisfaction and meet shareholder expectations — reevaluate measures to prevent fraud and cybercrime and meet regulatory mandates. And create new ways to generate a better topline and bottom line.

For over a decade, technologies such as machine learning (ML) and artificial intelligence (AI) have been integral to technologies driving the banking and financial services industry, which one may describe as a productivity-focused model. Use cases for AI applications in the industry range from using chatbots to replace humans as a first level of customer service to address routine queries to automating and improving labor-intensive tasks such as document underwriting and making predictions or classifications based on existing data for fraud management. The only hitch? Current AI systems are primarily based on structured data and are rules-driven. They do not have the ability to manage unstructured data, derive insights from it, understand human language, and act accordingly. So, while they are great for automation that perhaps increases productivity and optimizes costs, that is where the buck stops. 

Which begs the question, how is generative AI different?

Generative AI on the other hand, can learn from different sets of data, recognize patterns and trends, and make informed decisions based on the results of its analyses. Its ability to generate synthetic data that closely resembles real-world data to train machine learning models can boost pattern identification and predictive capabilities. Its applications for the banking and financial services industry are, therefore, more expansive than previous AI models, encompassing not just automation and improved productivity but sophisticated fraud and risk management, portfolio management, and the generation of new revenue streams.

Here are four reasons why generative AI is significant for the banking and financial services industry.

• Robust risk management – Financial institutions are constantly navigating credit, fraud, and market risks at any given point in time. Generative AI’s ability to create data sets that simulate various market conditions will enable banking and financial institutions to develop robust risk management strategies. Its ability to identify patterns and anomalies from vast amounts of data will help these institutions prevent financial crimes and mitigate risks around loans and investments.
• Enhanced customer experiences – Today’s customers want experiences that are tailored to their specific needs: greater accessibility, faster processing time, and bespoke products and solutions. Imagine having access to a virtual assistant that not only efficiently answers every customer query in real time but can also make real-time product recommendations based on the customer’s data. Generative AI can analyze customer data to generate personalized financial solutions, enhance operations, and enable hyper-personalized experiences that boost customer satisfaction and foster long-term loyalty. On a broad scale, generative AI is changing the way banks interact with people across generations and geographies.
• Streamlined operations and regulatory compliance – Cyberattacks are a constant threat in the banking and financial services landscape. Regulatory mandates are constantly evolving. And manually analyzing the vast amounts of disparate data that these institutions contend with daily is both time-consuming and error prone. Generative AI can automate repetitive tasks such as ‘Know Your Customer’ drives, loan application processing, and report generation, freeing up human resources for more strategic tasks. It can also be used to monitor regulatory changes and keep track of compliance mandates that can be addressed predictably, thus saving time and money for banking and financial institutions.
• Data-powered decision-making – The banking and financial services industry generates massive amounts of data. Hidden in this data are patterns and trends that can inform decisions regarding lending, investments, and overall strategy while facilitating effective cross-selling, up-selling, and generation of new revenue streams. Deeper insights and predictive analytics, powered by generative AI, can empower banks to make data-driven decisions that optimize their business operations, performance, and customer satisfaction. 

An Engineering First approach to generative AI

At Virtusa, we believe that technology – any technology – will be most effective when woven into the fabric of an organization’s operations. We’ve been forerunners in solving complex problems, engineering from within, and delivering tailored solutions that solve their most pressing business challenges. Our clients have benefited from our expertise in conventional artificial intelligence, deployed to automate, improve productivity, and reduce human effort and error.

From our perspective, generative AI is here to stay and we’re excited to take this journey alongside our clients. That’s why we have set up a center of excellence dedicated to all things generative AI, including following and studying the latest developments in the field. The center also focuses on broader AI adoption, combining generative AI and traditional AI to build compound AI systems. We have also established a generative AI guild that is open to any employee who wants to learn and experiment with this exciting new technology.

Stay tuned to learn more about how Virtusa is gearing up to tap into generative AI’s potential for our clients in banking and financial services.