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A thoughtful approach to generative AI

Ravi Nemalikanti
September 11, 2023
Read Time: 0 min

Strategies for adopting AI at your financial institution

Abrigo CTO Ravi Nemalikanti offers insights on how banks and credit unions can begin to utilize generative AI.

You might also like this webinar, "Banking as a service: Objectives, opportunities, and obstacles."

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Takeaway 1

With generative AI technology improving by the day, the question is not if the banking industry will utilize it, but when.

Takeaway 2

AI can lead to more accurate and consistent outputs or predictions, better risk management, and improved customer experiences.

Takeaway 3

Financial institutions should resist the hype to apply the technology to their most complex problems and be strategic as AI improves.

It is hard these days to keep up with the noise and hype around technologies that are coming to disrupt existing business models. While leaders must learn and stay informed about innovations, it’s helpful to remember in the process that they often result in life-changing improvements for our businesses and our consumers.  

 Take the financial services industry as an example. It is humbling to look back and evaluate where and when the most significant changes to financial services technology happened. Let us step back in time and look at the last 50 years. From a consumer standpoint, we’ve experienced three giant leaps in the fintech industry.  

Impact of AI

Improved access to financial services

One was when ATMs became available, and you didn't have to plan your activities around when banks were open. Growing up in India, I remember times when we had to change plans because we couldn't get to the bank before it closed.   

The next big advance came with digital access to your account. Being able to see how much you have in your account from anywhere was a significant moment in time. But the real lifestyle upgrade came when you had fintechs like Xoom and PayPal that made payments happen in near real-time. This marked the advent of the platform economies with excellent digital experiences through fintech providers.  

 After digital access and transactions came major boosts to automation for financial services. This greatly benefited consumers, a subset of whom have only ever known automated bill payments and have never had to look for the bill in the mailbox and then take the time to set up payments. Automation also helped financial institutions better serve their communities by, for example, reducing the time it takes to process a loan application.  

 Fintechs have developed a strong competency around these advances. In the 10 years that followed the Great Recession, mortgages initiated through fintech channels on average grew 30% year over year, reducing the time to originate by 10 days without increasing the default rate.  

Improving technologies

Generative AI: Opportunities and risks

As we push farther on that efficiency frontier, we can't not talk about generative AI and the potential this new technology has for both financial institutions and consumers. So, what is generative AI? How can it impact our banks, credit unions, and customers or members?  

 In the simplest sense, generative AI refers to artificial intelligence models that generate new data similar to the data that “trained” the model. In the context of how this advance can help financial institutions and consumers, generative AI can be used to create new documents, whether they are loan closing documents or suspicious activity reports, saving time and resources.  

 This innovation can lead to more accurate and consistent outputs or predictions, better risk management, and improved customer experiences. However, it's crucial to ensure that generative AI is used transparently and ethically to maintain trust and fairness for all parties involved. 

Learn how technology helped a financial institution during uncertain times. Unity Bank: Partnering to Provide Community Solutions in Critical Times

Best practices

A strategy for exploring generative AI

As is often true with new and disruptive technology, financial institutions and technology providers should resist the hype to apply the technology to their most complex problems to avoid the risk of learning it doesn't work as expected. This approach results in disappointment, unfortunate conclusions around the technology’s potential, and, most importantly, the opportunity cost.   

Instead, start by inventorying all the use cases and initiate use with the most straightforward ones. This exercise accomplishes two critical objectives:  

  1. Teams increase their familiarity with the technology and  
  2. Teams will crawl-walk before attempting to run with the most complex use cases.  

 Lastly, proceed with caution in how you embrace this new technology. Trust is at the foundation of financial institutions and the broader ecosystem. The utilization of generative AI has sparked legitimate concerns about data security. As technology advances, the possibility of data leakage into publicly available models or nefarious individuals exploiting the same also increases.  

 Organizations must implement stringent security measures to safeguard their data and prevent unauthorized access. Moreover, regulatory and ethical guidelines must be established to ensure that generative AI is utilized responsibly.  

Conclusion

Paving the way for banking AI

Generative AI, like breakthrough technologies before it, could dramatically affect our financial institutions and how we serve our customers or members. JPMorgan Chase will deliver more than $1.5 billion in business value from artificial intelligence and machine learning efforts in 2023 as it leverages its 500 petabytes of data across 300 use cases in production. Needless to say, ignoring this disruptive technology is not an option. Understanding and taking measured steps when adopting generative AI can pave the way for modern and accessible financial services. 

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About the Author

Ravi Nemalikanti

Chief Technology Officer
Ravi Nemalikanti is Abrigo’s Chief Technology Officer and is responsible for leading technology strategy and determining product and development priorities to drive innovation and increase the company’s competitive advantage. Before joining Abrigo in 2022, Ravi was the CTO of Digital Banking at NCR Corp., leading the organization’s digital-first banking technology

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.