The convergence of artificial intelligence and blockchain are creating numerous opportunities for the banking sector. Agencies are quickly discovering that these concepts are moving into reality from the world of science-fiction.
It is transforming the way customers think about money every day.
A few boundaries are theoretically problematic when looking at AI and blockchain, but there are a few obstacles still in the way of our complete use of these approaches. Even so, there are some common applications already in use by financial institutions all over the world.
How Are Banks Using AI and Blockchain?
The primary use of artificial intelligence and blockchain in the banking sector is fraud protection. Institutions use these technologies to determine if there is unusual activity present on individual accounts.
Most banks, credit unions, and financial institutions see a high volume of transactions. That means there is rarely enough human power to make a determination if criminal conduct is present. These systems can automatically work to prevent fraud through blockchain because of its design.
AI then helps to identify issues that involve traditional money transfers, including individualized purchasing activity.
There might be higher transactions than normal, an unusual retailer, or a transfer into a different account that has never happened before.
These anomalies will then flag the account to either contact the customer or initiate an internal review of the data.
Additional Uses of AI and Blockchain
90% of finance industry executives say that their bank is currently exploring the use of blockchain.
It offers a real-time, open-source, and trusted platform that securely transmits data, value, or both. This process helps to reduce the costs of business in multiple sectors.
There are several practical ways that banks could incorporate blockchain into their daily consumer interactions that go beyond fraud detection.
- It can reduce the costs of knowing customers and following industry regulations.
- Smart contracts can store any type of digital data, including computer codes that could execute financial transactions after specific criteria are met.
- This tech can enable higher security and lower costs for payment processing needs while eliminating the need for multiple intermediaries.
Some banks are using chatbots and digital personal assistants to help with the costs of customer service and communication too. This technology can help individual users perform daily tasks without giving up the personalized experiences that people want today.
There is also AI integration in the mobile apps that banks offer to their customers. 32% of firms in the financial industry are using this technology for predictive analysis and voice recognition to enhance the user experience.
It is easier for these applications to show specific offers, insights, or services that can enhance the results of an account. That means providing wealth management services by integrating these technologies into the average consumer process becomes possible.
As AI and blockchain continue to converge in the financial sector, even more, benefits may become possible. Although there are privacy laws and other regulatory obstacles that must be met, this combination of forces will become the best way to manage the massive data sets that firms will handle in the future.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.