ChatGPT, an intelligent conversational AI platform was launched on Nov 30, 2022 by Microsoft and has gained immense popularity and media coverage. It attracts 96 million users per month, who ask it questions, get assisted with tasks like composing emails, essays, and writing computer code.
Banks have often been the first in adopting new technology to get the first mover advantage. With the rise of AI, banks can now leverage generative language tools like ChatGPT to improve productivity, streamline operations, and enhance their services. Artificial intelligence (AI) has transformed the financial services industry, with applications in investment banking, insurance, wealth management, and more. One of the most promising AI for banks is ChatGPT, a generative pre-trained transformer language model that can be used to provide virtual assistants for customer service and support, handle complex financial goals and investment decisions, and improve real-time responses to customer inquiries.
The question is, how can conversational AI impact banking as we know it, from an operational and customer experience perspective? What is the scope of this change and what are the challenges? Is there an advantage or a risk in its adoption?
What is ChatGPT
Chat GPT is a large language model created by OpenAI. It uses advanced machine learning algorithms to generate human-like responses to user queries and inputs. As a language model, Chat GPT is capable of performing a variety of language-related tasks, such as language translation, question answering, and content generation. It has been trained on a vast amount of textual data, enabling it to provide accurate and contextually relevant responses to a wide range of queries. Chat GPT is used in a variety of applications, including chatbots, virtual assistants, and content creation tools. ChatGPT can assist banks in identifying and managing potential risks by analysing vast amounts of data and identifying potential risk factors. Banks can also use ChatGPT to monitor transaction activities, flag suspicious transactions, and identify potential fraud.
As the financial services industry becomes increasingly dependent on AI, the potential for ChatGPT to revolutionize the banking industry is significant. With its ability to process vast amounts of data, AI in banking can provide personalized financial advice and support, enabling banks and financial institutions to better serve their clients.
Some experts predict that by 2025, AI will have a market size of more than $20 billion in the banking industry alone. Chatbots and virtual assistants, powered by AI technologies like ChatGPT, are expected to play a significant role in this growth, offering customers a more seamless and personalized experience while reducing costs for financial institutions. Here are some popular use cases being experimented by the industry as the market matures.
Customer Service: Banks can use ChatGPT to transform their customer service by providing real-time support via chatbot. With ChatGPT's natural language processing (NLP) capabilities, it can respond to customer queries, complaints, and requests for information quickly and efficiently.
Fraud Detection: ChatGPT can assist banks with detecting and preventing fraud by analysing vast amounts of transaction data and identifying suspicious patterns. This can help banks protect customers' financial assets and reduce losses from fraud. Bank personnel can even set up alerts, so security professionals get notified of suspicious activity.
Wealth Management: ChatGPT can assist banks in providing personalized wealth management services to their customers by analysing customer data and providing customized investment recommendations based on their individual financial goals and risk tolerance.
Compliance: ChatGPT can help banks comply with regulatory requirements by monitoring bank transactions and identifying potential compliance violations. This can help banks avoid costly fines and penalties and protect their reputation.
Risk Management: ChatGPT can assist banks in identifying and managing potential risks by analyzing vast amounts of data and identifying potential risk factors.
While ChatGPT has many potential benefits, there are challenges to using the technology.
One major concern is the potential for bias in the data and algorithms used by ChatGPT, which could lead to discriminatory or inaccurate outcomes.
Another potential limitation of ChatGPT is the risk of data breaches or other security threats. Because ChatGPT relies on large amounts of data to provide personalized recommendations and advice, it is important to ensure that this data is stored and transmitted securely to protect against cyber threats and attacks.
Traceability: Like with any AI tool, as the system continues to learn and adopt, it becomes extremely complex to retrace any decision which is required from a compliance and regulatory perspective.
Third Party Software usage: Several banking groups have joined US banking giant JP Morgan in barring their employees from using ChatGPT. Financial News reported that Citigroup, and Goldman Sachs Group had barred ChatGPT, while Bloomberg’s report included Bank of America, Deutsche Bank, and Wells Fargo to this list. As part of its controls around third-party software, banks are “imposing usage limits” on ChatGPT and is considering “safe and effective ways” to use chatbots.
The overall AI market in BFSI is projected to grow to over $ 100 Billion by 2032 with a growth rate exceeding 20%. While there are initial teething troubles with the adoption of ChatGPT it is safe to say that banks will need to leverage this technology to stay ahead of competition
ChatGPT is transforming the fintech and banking industry by enabling banks and financial institutions to offer personalized and efficient customer service, streamlining operations, and reducing costs.
ChatGPT can be used to analyze customer data to identify patterns and trends, such as changes in spending behavior or investment preferences. This data can then be used to develop personalized financial products and services that meet the unique needs of each customer.
ChatGPT can also be used to improve the speed and accuracy of customer service, by automating routine tasks such as account inquiries or password resets. This helps financial institutions reduce costs while improving the overall customer experience.
In addition to these benefits, ChatGPT can also be used to improve risk management and compliance in the financial services industry. By monitoring and detecting fraudulent activity and suspicious transactions, ChatGPT can help financial institutions identify potential risks and take appropriate action to mitigate them.
ChatGPT is a powerful tool that has the potential to transform the fintech and banking industry. One of the key advantages of ChatGPT is its ability to personalize responses based on a user’s behaviour and preferences. This means that financial institutions can offer more targeted and relevant services to their customers, which can help to improve customer satisfaction and loyalty. With the rise of voice assistants and smart speakers, customers may be shifting their behaviour and interacting with financial institutions via new automated systems.
However, it is important to consider the challenges associated with using ChatGPT and other AI technologies in the financial services industry, including the risk of bias, traceability and the importance of data security. As the financial services industry matures and continues to leverage new AI technologies it will be essential for banks and financial institutions to carefully consider the role of ChatGPT in their operations and service offerings.