Can AI Out-space Cryptocurrencies in Banking Service Provision?
The banking sector is one of the biggest industries in the world. For instance, in the second quarter of 2020, the global banking industry’s market cap was 5.3 trillion Euros. However, due to the regulation, scalability, and security issues, the sector cannot bank over 1.7 billion adults globally still. A big reason for this lag was the reluctance of the traditional banking landscape to update their systems.
Fortunately, the upsurge of fintech companies provided the competition that spurned technological advancement in the industry. Now new technologies are being implanted in the banking sector, aimed at improving service provision.
In all the new technologies, blockchain and AI have shown more enormous potentials of revolutionizing banking systems. Blockchain and crypto are transparent and immutable, features vastly needed in the banking sector. In comparison, AI speeds and other functionalities are also vital in the banking sector. Technological experts are still on a quest to identify the best between the two platforms. The question now is, can AI out-space crypto in banking?
AI Technology in Banking
Artificial intelligence(AI), also known as machine intelligence, refers to human-like intelligence displayed by machines. The goals of AI include learning, reasoning, and perceiving in machines to create more efficiency. These machines use algorithms that help in solving both simple and complex situations. The following are several ways that AI transforms the banking sector;
Every banking institution wants to provide customers with the best service. As such, they have been in the quest to find ways of bettering the services. AI can be used vastly in the banking sector to provide better service to customers. AI-based virtual assistants use predictive analytics to help customers ease time in the banks. Sometimes they may solve customers’ problems, thus saving the time customers may use in engaging the bank.
Additionally, it can detect customer trends based on the transactional history of the customer. Therefore, the banks using AI can provide customers with personalized offers based on their trends.
Credits and Loans Decisions
Until recently, banking institutions were using human emotions to determine individuals’ creditworthiness. However, this has often proven to lack accuracy and has led banks to lose millions because of the misjudgment of customers.
AI algorithms, however, put science and arithmetics to skills. They look at the customer’s creditworthiness in the past and even compare it with other past customers. Therefore, using AI is an advantage to banks since they provide accuracy without bias of human emotions.
The security of customers, transactions, and other data are vital for every banking institution. Due to masses of transactions being completed every day, it is impossible to determine fraud cases using only humans.
AI, however, can easily detect frauds from individual customers’ transactions and immediately inform the relevant bodies. It will also detect every individual customer interaction with the bank.
Furthermore, following the history of a customer’s transactions will help detect anomalies in the transactions’ uniformity.
So it’s clear that AI can bring changes in customer service, loan system, and fraud detection of every bank. AI is generally a good add up in the banking system. However, another technology is paralleling, actually almost surpassing the need for AI in banks.
Blockchain: The Crypto Hub
Blockchain technology is the power behind cryptocurrencies. Blockchain is a distributed ledger that maintains permanent transactional data. However, the blockchains have several applications in the fiat world, especially in banks.
Customer service in banking is made even better with blockchains. Since blockchains are decentralized, they allow peer to peer exchanges to occur. That means that customers can do exchanges without the involvement of intermediaries.
Transactions that use blockchain will also be faster as compared to the traditional and AI systems. Since blockchain operates 24/7, inculcating them in banks means 24/7 service to customers. The all-round service means customers get even better access to the bank’s resources.
Banks use the history of individuals’ transactions when offering loans. To get thorough information, the banks using AI need to contact several bodies, which is a time-consuming procedure.
Some of these bodies may also not have accurate information about specific individuals. Blockchain, however, is set to revolutionize these systems entirely. Blockchains are transparent and immutable platforms that have stored information on ledgers. Getting information about individuals’ transaction data is, therefore, easy and fast.
Fraud and Security Detection
Current banking systems, including AI-based, are built on centralized databases. The centralization makes them highly vulnerable to cyber-attacks because once attackers get to the source, they can control the whole system. Blockchain is a decentralized system. Because of that, even if attackers can get in, they won’t be able to control the whole system.
The accuracy of blockchain is also a thing worth envy. Blockchain will store every detail permanently. That way, fraudulent officials will not be able to delete or hide any transaction. Therefore, blockchain will curb fraud and enhance security in banking institutions. The accuracy of blockchain means a proper state of financial position.
AI and Blockchain: A Case of Perfect Match?
A thorough comparison of AI and blockchain makes the latter stronger than the former. Blockchain technology has better transparency, speed, and permanence of the two. Moreover, the fact that blockchain can also link crypto to fiat worlds makes it even more reliable to crypto enthusiasts.
AI, on the other hand, poses other benefits over blockchains. Take, for example, the fact that AI can do the work of experts, e.g., assisting clients. However, in doing so, it needs data that can either be input manually or linked to blockchain storage.
However, what if AI and blockchain worked together? Here are some of the advantages that customers and the bank would get from integrating the two:
- AI depends on the input of data, mostly manually. Blockchain, however, deals with the storage of data permanently. The merger is a perfect combination of data processors and data storage backups. AI will not need the input of more external data when linked with the blockchain. Therefore, it will be quick and easy for clients to obtain loans, audits to be done, and other things.
- The combination can also help host diverse sets of data. Since blockchain is a decentralized system, it creates a network that can be accessed by anyone. Making an artificial intelligence program that is decentralized will make work even easier for the banking institution. First, this would mean that the whole system won’t go off in case of any attacks. Second, assisting in answering customers’ inquiries without directly engaging with the bank will be quick. This is because AI will have all data regarding the customers.
- Their merger will make banks trust AI decision making even more. Since currently, AI depends on the data that is fed to it, some corrupt persons may feed wrong information. However, merging AI and blockchain will have AI depend on the reliable data of the blockchain. Stakeholders, customers, auditors, and the government will trust more the decisions made at a particular time by the AI.
The three items above show the benefits an AI and blockchain merger can bring to the financial world.
AI poses several benefits over blockchain, and the vice versa is also a fact. However, AI is more dependent on blockchain’s efficiency, accuracy, and permanence of transactions. Thus AI can use blockchain more as a partner than a competitor.
The world is already seeing revolutions in terms of banking, especially with AI included in the systems. However, more advancements should also be made to inculcate blockchains in banking. That will give customers better services, faster transactions, P2P loans, and better customer bank engagements. All said, AI is an excellent deal for banking. But, it will realize its full potential by including blockchains technology as well.