AI (Artificial Intelligence), often referred to as machine intelligence
occasionally, is the simulation of human intellect in machines. It is the
intelligence that machines display, as opposed to the inherent knowledge that
people exhibit. AI is developing rapidly, from Siri to self-driving cars.
Generally speaking, there are just two core concepts in artificial intelligence.
It begins with researching human brains, such as how their mental processes
operate, is also beneficial. By using machine learning, those processes are
represented. The use of artificial intelligence, there is more to finance than
chatbots. The banking industry is only one of the many industries that
artificial intelligence has dominated. This investigation's main goal was to
understand the effects of AI on contemporary banking.
Every day, artificial intelligence improves and becomes smarter. The application
of artificial intelligence in the Indian banking industry, as well as its
advantages and difficulties, will be covered in this essay. FinTech advancements
made possible by AI, as well as the various ways it might help Indian banks
operate more efficiently.
AI is a simulation of human intelligence that aids in the development of better
computers that can carry out human tasks in an intelligent manner. Similar to a
human brain, AI can think and decide more accurately based on the information
provided to it. In the current economy, artificial intelligence is currently
becoming more prevalent.
It is employed in many different industries, the banking sector being one of
them. AI is being used in the banking sector in a highly creative way that saves
both time and money. In order to get reliable results, banks use algorithms.
These algorithms then aid in improving customer service and driving up sales
performance to increase revenues.
For instance, Amelia, a humanoid (robot) assistant, was created by IPsoft, the
global leader in enterprise AI. It is the most human-like digital AI partner in
the sector. When one first meets her, it will create an impression that she
suggests business. She is wearing a white oxford shirt under a blazer, has light
hair, and is appropriately attired.
Amelia is the only AI on the market, according to the business, who claims that
this is due to her capacity to learn, interact, and advance over time. More than
100 dialects' words and phrases can be taught to Amelia to understand. She
provides real business support, such as reduced operating expenses, enhanced
customer satisfaction, and improved employee competency.
The history of AI extends back to the 1950s, when Alan Turing released a paper
on the potential for machines with real intelligence, even if we have only
lately witnessed its implementation. The term "artificial intelligence" had just
been coined; yet, until the late 1990s, no actual applications of the theory or
technique had been made.
The pace of artificial intelligence only increased after 2011, when big tech
companies like Facebook, IBM, Microsoft, and Google began using AI and machine
learning for commercial purposes.
Artificial Intelligence Industry In India - The Current Status
The Economic Times reported in October that "Startups witness 108% rise in
investment in India in 2018." The news report also noted that among industry
sectors, artificial intelligence was one of the domains that had the quickest
There are currently roughly 400 startups working in the fields of AI and machine
learning. Private investors alone have made about $150 million dollars in
India's AI industry, and this sum has been increasing since 2016. India has
experienced progress, but in terms of investment, it lags far behind nations
like the US and China. India will rely on AI for its economic growth and the
betterment of its citizenry's quality of life due to its abundant STEM talent
and expanding youth population.
In order to better service customers, a number of start-ups with headquarters in
places like Bengaluru, New Delhi, Mumbai, and Hyderabad use artificial
intelligence. Their product line includes everything from multilingual chat bots
to automated consumer data research and online shopping support. The businesses
have been engaged in projects related to e-commerce, healthcare, edtech,
finance, and other fields. Although still young, these companies' success has
AI in financial services
Additionally, there have been a number of advancements made in the financial
sector's asset management, hiring, and customer service processes. For instance,
stock investing and finance nowadays rely heavily on technical expertise and
good fortune. But in the future, we will be able to manage money in a very
different way thanks to algorithms, crowdsourced data, and sentiment analysis.
The AI revolution has not just affected the banking and finance industries; it
has also had an impact on a number of other industries. The robotic (automated)
administration of anaesthesia for common procedures, which helps reduce costs,
increased patient support, and the launch of self-driving cars are some of the
highlights of the sector. All of these would enable the businesses to replace
arduous and dull tasks like back-end testing and form filling.
Why AI in Banking Industry?
- Enormous challenges in the banking sector.
- Thrust for a process-driven operation.
- Initiate self-service in the branches.
- Customer desire to deliver different personalized solutions.
- Build functional efficiencies.
- Escalating the productivity of employees.
- To support focus on productivity and efficiency.
- Visualization to extend human function with the use of robotics tools.
- To minimize the chances of fraud and scam.
- Manage an immense volume of data at record speed and gain valuable
- To carry out effective decision-making.
Indian Banks And The Technology
Another important aspect in the adoption of new technologies in the Indian
banking sector is the Reserve Bank of India's pragmatic stance. The RBI has
recently adopted a cautious but practical approach to embracing new
technologies, frequently forcing banks to adopt new technologies through
regulation, wherever it has seen potential to improve customer experience and
efficiency using a particular technology.
This is especially true during the governorships of Raghuram Rajan and his
successor Urjit Patel. The aggressive promotion of new technology use by RBI
goes beyond simply developing regulatory frameworks. To make things simpler and
more efficient, it has utilised a combination of legislation, evangelism, and
even collaboration with the industry.
One example is the establishment of the National Payment Corporation of India (NPCI),
which has greatly reduced the cost of electronic transactions. The regulator
also has an academic/research division called the Institute of Development and
Research in Banking Technology (IDRBT), which is always researching the
advantages and disadvantages of emerging technological fields. The fact that
both of these organisations have been actively involved in blockchain proof of
concept testing is no accident.
The situation with India is pretty unusual. India is undoubtedly a centre for
technology. India is a significant location for technology outsourcing and the
home of companies with a sizable global market share in core banking. Infosys
and TCS, two of the top three providers of core banking solutions, have their
corporate offices in India. Recently, there has been a lot of activity in the
fintech sector in India as well.
The nation has developed into one of the world's fintech hubs. While banks and
fintechs have had a tense relationship in many developed markets, India's most
forward-thinking banks, including ICICI Bank, Axis Bank, and HDFC Bank, have
actively reached out to fintechs. These banks have organised contests and
hackathons to find the best innovations, and occasionally they have even shared
their APIs with these fintechs.
The largest bank in India, SBI, announced BankChain on February 8. The National
Payments Corporation of India (NPCI), an organisation founded by Indian banks to
assist retail payments, is one of the consortium's 30+ members. SBI, the
nation's largest lender, is its leader. Simply put, BankChain is a group of
banks interested in developing and utilising blockchain technology. In order to
develop these solutions, BankChain is assisted by startup Primechain
Technologies from Pune. It currently has 8 active projects and 37 members.
Review of literature
In their study "Machine Intelligence vs. Human Judgment in New Venture Finance,"
Christian Catalini, Chris Foster, and Ramana Nanda (2018) found that machine
learning models that were trained to imitate human assessors outperformed models
that were only designed to optimise financial success. When choosing from a
common out-of-sample applicant pool, they discovered that:
- Models trained to mimic human picks performed well out-of-sample,
suggesting that humans had a predictable pattern of early-stage investing
that could be identified and replicated, and
- Models trained to maximise success outperformed "mimic human models"
when choosing from the same applicant pool.
- comparing the focus of the two models suggests that the differences
arose in part due to human heuristics systematically under-emphasizing more
‗cognitively demanding 'elements of the applications. Their findings have
important implications for the selection and financing of high potential
ideas, and more broadly for how Artificial Intelligence can help humans
screen and evaluate information in an era of increasing information
Jewandah S. (2018, July) examines the areas in which machine intelligence is
being introduced in banks and applications of AI in significant commercial banks
in India in her research paper, "How Artificial Intelligence is altering the
banking sector - A case study of top four Commercial Indian Banks."
Traditional banking is improving, and banks are increasingly implementing
cutting-edge technologies like blockchain, cloud computing, and AI. However,
banks have not yet reached the stage of the AI revolution, and the human touch
is still crucial. The Indian banking industry is learning how to employ AI in a
way that will soon improve customer service and the way that banks operate.
The effects of AI on business are covered by Andrew Ng (2016) in his research
paper, "What artificial intelligence can do and can't do right now." He talks
about the age of automation and how machine learning and robotics are changing
the way businesses operate. A and B must be carefully chosen for AI work, and
the AI must be given the necessary data to determine the A�B link. Creatively
choosing A and B has already transformed many different sectors. It is prepared
to transform many more.
In their study article Optimizing portfolio creation using artificial
intelligence, Chan Kok Thim and Eric Seah (2011) aim to increase the usefulness
of Artificial Intelligence by applying Neural Network (NN) in the real market.
In order to replicate and enhance portfolio development, this paper summarised
the standard Markowitz Theory's Efficient Frontier. It also built up a neural
system heuristic to help readers better understand how Artificial Intelligence
can develop ideal portfolio capacity and provide yields to all levels of
According to Ryoji Kashiwagi's 2005 study "Utilization of Artificial
Intelligence in Finance," man-made artificial intelligence is currently entering
its third boom stage in history as a result of a scientific development called
profound learning. Artificial intelligence is employed in a variety of
structures, including the financial sector. Financial institutions should employ
human consciousness more efficiently by using techniques like open innovation.
Artificial Intelligence Technology In Banking And Finance
Personalized Financial Services
As automated financial counsellors and planners offer their knowledge in making
financial decisions, personalised connect will reach new heights. They provide
recommendations on equities and bonds after analysing market sentiment in
relation to the user's financial objectives and personal portfolio.
With major businesses like Google, Apple, Paypal, and others jumping on the
bandwagon and creating their own payment gateways, digital wallets are being
heralded as the wave of the future for conventional payment methods. This
lessens reliance on actual money, extending the use of money to higher levels.
The insurance industry is likewise experiencing a storm as they transition to
consistent automation. The businesses are given more detailed information to
support their decisions by using AI tools that automate the underwriting
Voice Assisted Banking
As technology enables users to access banking services with voice commands and
touch screens, physical presence is gradually vanishing. Natural language
processing technology can process queries to provide information, respond to
inquiries, and link consumers to different financial services. As a result,
efficiency is systematised, reducing human error.
We are getting closer to the time when computers might handle the majority of
customer support inquiries as speech processing and natural language processing
technology advance. Customers would be happier as a result of the end of line
Digitalization instead of branch lines
The lengthy process of banking has historically been hampered by long lines and
slow service. Even opening a bank account was seen negatively because frantic
customers would run from one piece of paperwork to the next. Documentation
digitization reduces this discomfort and builds a robust platform for connecting
customers and service providers.
Blockchain hastening payments
The digital revolution, particularly social media and mobile, is driving a
significant shift in the buying habits and preferences of the consumer base that
banks service. There is a rising need for more choice and control in how people
interact with banks. Slow payment processes will be a thing of the past thanks
to Blockchain, which is slated to introduce the benefit of real-time payment
processing, accelerating the payment process and boosting support and
Artificial Intelligence Banking in India
The global investment in AI applications reached USD 5.1 billion (EUR 4.3
billion) in 2016, according to the PwC FinTech Trends Report (India) 2017. Not
only PNB, but also other Indian banks including SBI, HDFC, ICICI, HSBC, and Axis
banks have embraced AI.
State Bank of India (SBI)
For developers, startups, and students to develop creative concepts and
solutions for the banking industry that focus on technologies like predictive
analytics, fintech/blockchain, digital payments, IoT, AI, machine learning,
BOTS, and robotic process automation, SBI launched a national hackathon called
"Code For Bank." The bank presently employs an AI-based solution created by
Chapdex, the winning team from its first hackathon, which records consumer
facial expressions and aids in analysing customer behaviour.
Eva (Electronic Virtual Assistance), an AI-based chatbot developed by Bengaluru-based
Senseforth, has answered over 2.7 million customer questions, engaged with over
530,000 different users, and carried over 1.2 million conversations. In the
first few days after its launch, the device, which can respond to queries in
less than 0.4 seconds, has already answered more than 100,000 inquiries from
hundreds of users in 17 different countries. Additionally, the bank is testing
with an in-store robot programme called IRA (Intelligent Robotic Assistant).
Over 200 business operations across a number of ICICI Bank functions now use
software robotics. The bank refers to this technology as "robotic software," and
it claims to be the first in the nation and one of the few in the world to use
it to automate and carry out time-consuming, repetitive, and high-volume
Recently, Axis Bank released a conversational banking app with AI and NLP
(Natural Language Processing) capabilities to assist customers with financial
and non-financial activities, respond to frequently asked questions, and contact
the bank for loans.
The Challenges Facing India's AI Development:
Artificial Intelligence In Modern Day Banking
- Up until now, consumer goods have been the main focus of AI-based
applications, which have been predominantly driven by the private sector.
Government policymakers must pay attention because of the technology's
expanding scope and repercussions.
- India should take into account the public and commercial funding
strategies for AI research that have been proven successful in the United
States, China, South Korea, and other countries.
- The sequential structure of education and employment is no longer
relevant in the current economic climate since jobs are changing quickly and
skills are becoming less and less valued over the course of a few years.
In order to compete in a future replete with cutting edge technology, banks must
wait to embark on their artificial intelligence adventure.
Drive thru Banking:
Allows you to conduct banking transactions while still in the automobile. The
customer can transact through a window in one of the lanes. For drive-through
banking, a voice AI system is being developed to take the position of people. In
July 2018, Clinc, an Ann Arbor-based business that has created voice-powered
artificial intelligence platforms for banking in 2015. Its conversational AI
innovation can identify orders even from people with strong accents or language
hurdles and can rectify the conversation as needed.
Artificial intelligence is a tool that banks can use in their front, middle, and
back offices. The bank stations are a network of self-service terminals that
offer customers a variety of value-based online services, such as online bill
payment and online government services. The use of big data in banks is
revolutionising the sector and has become the industry norm. The banking
industry is using the data to enhance client connections, and AI is assisting in
structuring and sorting the data. The future of banking will use artificial
intelligence to cater to millennial customers.
Passbook updation Kaisok:
Over the past few years, the Indian banking sector has changed from being driven
by people to being managed by machines. The automatic kiosk for printing
passbooks allows users to print their passbooks. Large-scale installations of
this facility have been made by Indian banks including SBI and Bank of Baroda.
They have set up self-service passbook kiosks so that users can print their own
passbooks. For instance, Swayam, a passbook printing kiosk from Indian Bank SBI,
uses barcode technology to make it simple for users to update their passbooks.
Banks have been hiring, but as the front-end talent is highlighted, the skill
sets that are needed are shifting.
Chatbot-The Intelligent Banking Assistant:
Virtual assistants, often known as chatbots, are innovative tools created to
make it easier for people to engage with computers. The front-desk environments
at banks are being replaced with chatbots, an example of AI in banking. These
AI-driven robots provide customers highly advanced digitalized and interactive
experiences. SBI, an Indian bank, has introduced SIA (SBI Intelligent
Assistant), a chatbot that assists customers with routine financial transactions
in a manner similar to that of bank employees. Additionally, it answers NRI
customers' queries in a timely manner in the SBI gateway chat box.
Cash Deposit Machine:
Cash can be deposited at any time using the self-service cash deposit machines.
The inconvenience of waiting in line to deposit cash at banks is resolved by
this option. The quickest and most dependable way to make a cash deposit is
through a bank. This service, where the account balance is immediately credited,
is provided by both state-owned and commercial banks. For each successful
transaction, the customer will obtain a transaction receipt. Using this device,
payments can also be made to other accounts.
ATM Machine Helpline:
In case of an emergency, these helplines are available in ATMs to assist clients
in getting in touch with their respective banks. Even ATMs now feature
artificial intelligence. ATMs now feature the following segment types: Face
recognition for security and bettering the user experience, machine learning for
ATM cybersecurity, automated ATM cameras, preventative maintenance of ATMs, and
anticipating ATM cash demand are some examples of further applications for
Globally, mobile devices are getting smarter. Since mobile banking is heavily
reliant on millions of people, AI-powered banking mobile apps are highly
appealing to them. Customers transitioned to mobile banking with ease. Having a
personal virtual assistant, whether it be Alexa from Amazon or Siri from Apple,
is quite appealing.
It has received widespread approval and acclaim from users all over the world.
The client's needs can be easily satisfied by mobile apps. Intelligent apps can
monitor a user's actions and provide them with personalised advice on how to
save costs and save money.
These days, every bank provides these text and mobile banking services. The
usage of mobile banking has made routine tasks, such as payments and money
transfers, more convenient. Customers can do better financial planning, can get
smart financial advisory, can do efficient and quicker transactions with the
advent of artificial intelligence in mobile banking.
Blockchain Technology and Banking:
Blockchain is distributed, decentralized and digital ledger. It is digital
information (block) stored on public database (chain). Blockchain is used to
store encrypted data and Artificial Intelligence is the brain or engine to
enable decision making and assists in analysis of data collected.
Most often it is argued that blockchain technology is only beneficial for
cryptocurrency industry but that is not true. Blockchain technology visions to
solve multiple issues related to digital transactions such as data security,
fraud prevention etc. Blockchain is the future of inter-bank transactions, cross
border remittances, crypto banking, record storing, KYC, loan syndication,
increased transparency to name a few.
Analysis and Findings
Based on information gathered from 112 respondents, this analysis. The majority
of respondents, who are in their mid-20s, 30s, and 40s, are those who are most
affected by artificial intelligence in the banking sector. They also feel that
AI is beneficial and friendly, and they periodically watch for the introduction
of new developments in the field. 80 out of 112 people, or 71.4%, believe that
using artificial intelligence in banking is advantageous.
27 out of the 112 respondents, or 24.1%, are unsure whether using artificial
intelligence in banking is advantageous. 5.5%, or 5 out of 112 respondents, do
not believe it to be at all beneficial. 99 out of 112 people, or 58.9%, use
automated financial advisors to make investments in the market. 64.3% i.e. 72
people out of 112 agree that after implementing artificial intelligence in
banking system has improved speed of services. 13.4% i.e. 15 people out of 112
are not sure that it has improved or not. 22.3% i.e. 25 people don't agree that
it has any impact on fast services.
Most of the respondents prefer smart wallets over cash transaction which means
people are taking benefits of artificial intelligence. As online fraud is a
major issue now days people can easily hack into your account, 81.4% respondents
believe that artificial intelligence can double the security system in banks.
18.6% people do not fully trust the machines, they need a little bit of human
touch and prefer visiting the banks in traditional ways.
Artificial intelligence (AI) is driving a sea change in the financial industry
and the world of banking is changing quicker than ever. In the banking industry,
many AI technologies have been used in areas like core banking, operational
performance, customer service, and analytics.
For AI, banking now encompasses a whole new universe of contemporary banks
rather than simply physical locations. Modern banks' provision of new banking
services aids in their expansion and growth. Increased cost effectiveness,
increased banking system penetration, and the ability to conduct low-value
transactions are all made feasible by technology. The growth and development of
banks are multiplied when technology is used effectively.
Because of this, more customers are drawn to the use of artificial intelligence,
and it is helping the banks to grow more. Banks can apply AI to improve the
client experience by empowering frictionless, round the clock client association
- however AI in banking applications isn't simply restricted to retail banking
services. The back and middle office of investment banking and all other money
related supervisions are gaining by AI.
- C Catalini, C Foster, R Nanda (2018) - tuck.dartmouth.edu Machine
intelligence vs.human judgement in new venture finance
- Chakraborty, C., & Joseph, A. (2017). Machine learning at central banks.
Available at: https://www.bankofengland.co.uk/working-paper/2017/machine-learning-at-centralbanks
- H. Chen, "Business and Market Intelligence 2.0, Part 2," in IEEE
Intelligent Systems, vol. 25, no. 2, pp. 74-82, March-April 2010, doi:
- Kaur, N. and Sirohi, R. (2013). Effect of Rupee Depreciation on Common
Man. International Journal of Scientific and Research Publications, 3(10).
- Ng, A. (2016). Harvard Business Review. Retrieved from https://hbr.org/2016/11/whatartificial-
- Jewandah, S. (2018). How Artificial Intelligence is changing the banking
sector - A case study of top four Commercial Indian Banks. International
Journal of Management, Technology and Engineering. Retrieved from http://ijamtes.org/gallery/66.july%20ijmte%20-%20711.pdf
- Thim, C.K., & Seah, E. (2010). Optimizing portfolio construction using
artificialintelligence. 5th International Conference on Computer Sciences
and Convergence Information Technology, 338-343.
- Mukul Anand Pathak, Kshitij Kamlakar, Shwetant Mohapatra, Prof. Uma
Nagaraj, (2016) Development of Control Software for Stair Detection n A
Mobile Robot Using Artificial Intelligence and Image Processing,
International Journal of Computer Engineering and Technology, 7(3), pp.
- T. Dhanabalan, A. Sathish, (2018) Transforming Indian Industries Through
Artificial Intelligence and Robotics in Industry 4.0., International Journal
of Mechanical Engineering and Technology, 9(10), pp. 835�845.
- Sreekanth Reddy Kallem, (2013) Artificial Intelligence in the Movement
of Mobile Agent (Robotic), International Journal of Computer Engineering and
Technology, 4(6), pp. 394�402
- M. Bhuvana, P. G. Thirumagal and S .Vasantha, Big Data Analytics - A
Leveraging Technology for Indian Commercial Banks, Indian Journal of Science
and Technology, Vol 9 (32), August 2016
- Banking in the age of disruption, ‖ EY, February 2017.
- Shivkumar Goel and Nihaal Mehta A Survey on the Role of Artificial
Intelligence in FinTech, International Journal of Innovative Research in
Computer and Communication Engineering, Vol. 5, Issue 6, June 2017.
- Driving AI for Financial Services � Similarity Whitepaper