High-Value AI Tactics in Banking and Lending

75% of banks with over $100 billion in assets are using AI technologies in 2024 according to a report by Insider Intelligence. AI continues to emerge within the financial services space and holds a tremendous potential to alter how businesses function.

It’s important to understand the technologies that fall under the umbrella of Artificial Intelligence including Natural Language Processing, Facial Recognition, Predictive and Generative. As with all emerging technologies, different portions are at different levels of maturity and their relative efficacy is marketed as improving existing interactions. When we research ways AI can improve business capabilities or value chain, we unlock transformational value. Ultimately AI allows us to ask new questions and gain new insights into areas of business that weren’t feasibly visible before.

When we review AI’s transformational value potential in Banking, Credit Unions and Lending some high stakes areas to consider are:

Product Based Attrition Risk Questions

- What is the Attrition Risk due to Interest Rate Arbitrage at the Loan and Portfolio Level?
- What is the Risk of a Commercial Loan being Underwater due to failing cash flow and shrinking collateral value at the Property, Loan and Portfolio Level?

AI Tactics

- AI’s predictive capabilities can provide advanced statistical predictions to determine risk levels at the property or loan levels.
- Aggregate risk levels for enterprise reporting.
- Generative AI can be used for initial drafts of email or call scripting for remediation.
- Natural Language Processing can be used to allow management to determine efficacy of communications via transcription and Sentiment Analysis.

A quick aside on the Regulatory and Compliance impact. The Regulatory & Compliance environment will continue to lag technology development. Thus far, the EU is ahead of the US in this space. The bulk of AI regulations center on automating financial product pricing or access via Generative capabilities. The use case offered here isn’t currently regulated and is not likely to be in the future.

Getting started on an AI journey is different from a traditional technology project. Xede can assist with aligning AI tactics to business value, data assessment, ethical and regulatory concerns in addition to implementation and ongoing management.

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Mike Piehl