ARTIFICIAL INTELLIGENCE IN BANKING AND FINANCIAL SERVICE COMPANIES

Abstract

At its core, banking is a business of knowledge. It has always been about collecting information, analyzing patterns, and making decisions based on what you've learned. What sets artificial intelligence apart from all other technologies used in banking is that it offers a unique approach to the business of knowledge. AI isn't just faster processing or better algorithms in the traditional sense. It learns through the analysis of data it receives, it evolves through experience, and it sees connections where no one else can even hope to see any. It analyzes huge volumes of data that put all previous banking technologies to shame. The topic of this Major Research Project concerned this transformation within the worldwide banking and financial services industry. For this study, only secondary sources confirmed by reliable means were used, including peer-reviewed articles, research reports published by consulting companies, international organizations, and public institutional disclosures. This study reviewed six major applications for artificial intelligence, which included fraud detection, credit assessment, customer relationship management using automation, algorithmic trading, enterprise risk management, and regulatory technology. In terms of market dynamics, the data revealed a definite trend. In 2023, the banking AI sector was valued at 19.9 billion US dollars, before growing to 26.2 billion in 2024, thus seeing growth of about 32 percent over one year. Projections made by Uptech Research in 2024 set the value at 315.50 billion dollars by 2033. Meanwhile, analysts from McKinsey and Company suggested in 2023 that the use of AI would help unlock value in the range of 200 billion to 340 billion dollars annually for the worldwide banking industry, or between nine and fifteen percent of its total operating earnings. Three banking institutions, namely JPMorgan Chase, Bank of America, and HDFC Bank, were the subject of this investigation. The difference between the early adopters of artificial intelligence solutions and their rivals lay not only in the investments but v also in their mindset towards the technology. Thus, JPMorgan Chase invested as much as 17 billion dollars into technology development in 2024 and utilized more than 450 artificial intelligence programs, which provided the company with the added value of about 1.5 billion dollars each year. Erica, the virtual assistant of Bank of America, received a million inquiries each day, which would have required 3,000 people to process, for over 42 million digital users of the company. It is worth noting that the case of HDFC Bank proves that such innovation does not belong only to Western banking institutions. However, not everything could be considered rosy. Only about 29% of financial organizations indicated that AI technology provided cost reductions in practice. Less than 40% of AI initiatives generated the expected return on investment. Implementation challenges that typically took up to fourteen months resulted mostly from an insufficient number of experts combining both solid knowledge in artificial intelligence and profound experience in the financial industry. The report concludes with seven key recommendations for those who take AI seriously.