The rapidly evolving Generative AI (artificial intelligence) is set to transform businesses. Banking and financial services too are seen taking steps towards deploying gen AI in their processes. Over the last few years, digital transactions and the use of technology for banking have gained huge traction. But, with that, incidences of fraud have also gone up. While in its early days still, Gen AI could help in fraud detection and management, while also transforming banking in many other areas.
Kiran Minnasandram, vice president and CTO of Wipro FullStride Cloud, says Gen AI's full potential in banking is immense, but its realisation depends on overcoming significant challenges and ensuring the responsible use of this powerful technology.
The rise in digital transactions has also led to the rise in financial fraud, a challenge for banks and consumers. How can tech help solve this?
Digital transactions have overtaken conventional banking models, thus making financial transactions straightforward and accessible through digital platforms. However, this digital evolution has also opened many avenues to various forms of financial fraud, posing a significant challenge to banks and their clients. Tackling this issue effectively requires leveraging advanced technologies to safeguard assets and enhance security.
Modern banking systems should be enabled with sophisticated tools, continuously monitoring real-time transactions. These systems flag suspicious activities, such as unusual withdrawal patterns or transactions from unfamiliar locations, allowing banks to act immediately.
Risk-enabled algorithms analyse vast amounts of data to identify patterns and predict potential fraudulent behavior. By incorporating machine learning and artificial intelligence, these systems become more intelligent over time, improving their accuracy and effectiveness in fraud detection. They can assess the risk level of each transaction and automatically take preventive measures, such as requiring additional authentication or temporarily freezing the account until the activity is verified.
At the same time, banks must invest in comprehensive education programmes that inform customers about typical fraud schemes, phishing attacks, and the importance of strong, unique passwords. By empowering customers with knowledge, they become the first line of defense against fraud.
What role can Gen AI play in fraud detection and prevention?
Conventional banking systems, while foundational to the financial industry, face several limitations regarding fraud detection and management. These limitations often stem from the complexity and evolving nature of fraudulent activities and the inherent constraints of traditional technologies and processes.
Gen AI is handling sophisticated fraud schemes that traditional methods often miss by harnessing its advanced analytical and learning abilities. From real-time transaction monitoring to creating synthetic datasets for training models, Gen AI offers a multifaceted approach to enhancing security. As financial fraud continues to evolve, integrating Gen AI into existing systems boosts detection accuracy and ensures adaptive, proactive defenses against emerging threats.
For instance, Gen AI can quickly flag unusual activities that may indicate fraud by learning standard transaction patterns. This real-time monitoring ensures prompt identification and response to potential threats.
Gen AI can enhance the security of blockchain transactions by identifying and flagging suspicious activities within decentralised networks, adding an extra layer of protection to blockchain-based financial systems.
What are the emerging areas where there has been early success of using gen AI in banking?
While banks are beginning to incorporate Gen AI into their operations, extensive implementation is still in its infancy. By leveraging advanced machine learning algorithms and vast datasets, Gen AI is set to redefine how banks operate, from detecting and preventing fraud to personalizing customer experiences and automating routine tasks. This innovative technology will enable financial institutions to offer more tailored services, make better-informed decisions, and maintain robust compliance with regulatory requirements.
For instance, advanced chatbots and virtual assistants powered by Gen AI can handle complex queries, provide personalized financial advice, and improve overall customer satisfaction.
Gen AI can analyse diverse data points to predict potential risks and automate the generation of risk reports, thereby enhancing decision-making processes. By leveraging Gen AI, banks can offer highly personalised financial products and services based on individual customer data, improving customer engagement and loyalty.
Automating compliance tasks with Gen AI can also streamline the monitoring and reporting process, ensuring banks adhere to regulatory requirements more efficiently. Gen AI will also promote financial inclusion by assessing creditworthiness using alternative data sources and offering services to underserved populations.
As Gen AI continues to evolve, its integration into the banking sector will usher in a new era of intelligent, adaptive, and customer-centric financial services.
