Studies in Indian Place Names ISSN: 2394-3114

UGC Care Listed Journal Vol-40-Issue 16-2020

BANKING INDUSTRY – THE VITAL COG IN THE WHEEL OF

ARTIFICIAL INTELLIGENCE

VINMALAR J1, DR. T. JOSEPH2

1
RESEARCH SCHOLAR, PG AND RESEARCH DEPARTMENT OF COMMERCE (SHIFT1),
UNIVERSITY OF MADRAS,
LOYOLA COLLEGE, CHENNAI - 34
vinmalarj@gmail.com
2
ASSOCIATE PROFESSOR AND HEAD, PG AND RESEARCH DEPARTMENT OF COMMERCE
(SHIFT1), UNIVERSITY OF MADRAS,
LOYOLA COLLEGE, CHENNAI –34
prof_joethomos@gmail.com

ABSTRACT
Artificial Intelligence (AI) is  an artless technology  that enables  machines  to copy  human tasks,
therefore, create life easier for everybody. AI built-in processes are repetitive and done manually,
analyzing the high volume  of imputed knowledge, or finding anomalies and trends,  computer
science will do all of them. The scope of this technology is large and may be used by all industries
globally. Now the question that pops up in our minds is; if machines can do our tasks, then what do
the humans do?. This study aims to grasp the advantages that this technology will accrue and weigh
it against the difficulties it’s going to propose in the banking sector. Every sector will apply AI to reap
some benefits and to raise their business relationship. Thus, to slender our scope of analysis, we
shall study the consequences that AI has already had on the banking industry and its future scope.
Both  private  and public sector banks  are  showing interest for this future technology and have
conjointly began victimization it. Whereas simplifying routine tasks by the bank, but there’s some
resistance to the present technology because it poses a threat to the numerous people employed in
this sector.
Key Words: Artificial Intelligence, Technology, Banking Sector, Benefits raised, Business relationship
and Future Scope.

INTRODUCTION
Artificial Intelligence (AI) emphasizes the development of  intelligent  machines inbuilt with
thinking and working like humans. This technology surrounds us, and it has become a part of our
normal lives. Upgradation of technology formulates ease in everything like usage of smart sensors
to take a spectacular photo for identification and in personal assistance. However, the human brain
differentiates from machines.

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In today’s world, banks are extremely competitive in terms of the merchandise it offers. The

sole distinction that stands between any two banks is the trust of its customers, and the convenience
it offers to them. These two constituents are factored in by the use of Artificial Intelligence. Today
the long run of the banking sector lies in the usage of AI technology. Bank employees must be trained
especially to use those AI machines. Popularly, banks are well-known for deposit centers and lending
centers. Hence, a large investment is created within the client service team to make sure that the
simplest sustainable service is imparted to the users. All banks are moving towards good business
practices that involve additional technology and fewer personnel which lead to vast value savings.
Most of the Indian Bankers, around 85% percent believe that AI can work beyond humans within
the  next  few years. As per PWC Fintech Trends Report 2017, the investment in Artificial
Intelligence  analysis  has gone up from 4$ billion  to 5.1$ and  is anticipated  to continue rising.
Around  one-year  giant-scale  corporations  have already invested within the futurist risk
of Artificial Intelliogence, whereas 70% of them are still planning to make an investment.
In this study, the researcher tried to achieve some clarity on this subject that has instigated curiosity
in  several  minds; still, its actual potential is, however,  to be unleashed. By far, all  we can  say is
that Artificial Intelligence and Machine Learning is unquestionably a milestone within the banking
industry’s journey, and it’ll undeniably modify its future course of operation. Artificial Intelligence
brings the power of advanced data analytics to combat fraudulent transactions and improve
compliance in the banking sector. It resolves the anti-money laundering activity, which usually
takes hours and days into a few seconds by launching an algorithm technology.

LITERATURE REVIEW
Artificial Intelligence has raised  heaps  of curiosity among researchers who  are  keen  to search
out Artificial Intelligence›s impact on the long-term in the banking sector. Since this concept is still
in its emerging stage, where only a few researchers have studied and prepared papers on Artificial
Intelligence. Dirican (2015) estimated that human workforce cost was lowering due to bulk
population management, and depreciation allowance on machines in production lines brought out
the new definition for the cost of capital. On other side, the researcher analyzed that Robotics and
Artificial Intelligence will create a space in the economy and in business by escorting new style and
sociological side effects. Roubini (201) and Stiglitz (2014) revealed the possible results and impacts
of these effects in their articles, together with them many other conversitions had held in the last
World Economic Forum 2015 (WEF, 2015). One of the clear impacts is that, enlargement of jobless
ratio within the economy. Regarding this first effect on the business side will be hiring or buying
new robots, which most probably have artificial intelligence.
Ravi Kumar and Ravi (2008) discussed the application of Artificial Intelligence techniques to
predict bankruptcy in the banking sector. Sharma et.al., (2013) found that in the banking industry,
Data envelopment Analysis (DEA) was widely applied to measure the efficiency and productivity of a
bank. Manju Kunwar wrote about Artificial Intelligence in Finance (2019), to know how automation
and machine learning  are  remodeling  the finance  industry on the whole. The researcher
introduces  the varied  applications of Artificial Intelligence  within the financial  sector,  and  to

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know  its scope in the banking sector.  Even if the adoption of Artificial Intelligence seems to be
difficult, Dan Latimore’s (2018) formulated that a strategy has to be adopted by the banking sector
to deal with the opportunities and to meet the customers also in overcoming the competitors. 
In the study of Vijai’s (2019), the researcher debates how Indian Banks are victimizing Artificial
Intelligence in their numerous functioning. Deloitte organized a study on ‘Vision 2020 – Banking in
Future’ has given in-depth information on the future uses of Artificial Intelligence with BlockChain
technology. Accenture had investigated the concept, ‘Redefine Banking with Artificial Intelligence’
explored how the banking sector had transformed with the implementation of AI

RESEARCH GAP
Although there are much analysis works exhausted in the area of Artificial Intelligence, in recent
times  relating to  the history of its implementation, the after-effects  and how  it  is useful  for
various  sectors of the economy, was not concentred much. Therefore, this study analyses the
application of Artificial Intelligence within the banking system, the sort of issues they are facing,
and the way they tackle because of the continuous updation of technology.

RESEARCH METHODOLOGY
Research Methodology is presented as under:
OBJECTIVES
●● To analyze the idea of Artificial Intelligence and its role as a disruptor within the Indian
banking sector.
●● To study the penetration of Artificial Intelligence-driven technologies in leading Indian
banks.
●● To review and analyze the result of Artificial Intelligence within the Indian banking sector.

SAMPLING DESIGN
Universe of the study: Indian Banks of both public and private sector was the universe for the study.
Sampling unit: The study concentrated on leading banking sectors such as SBI, HDFC, ICICI, PNB
and AXIS.
Sample Technique: Descriptive and Exploratory analysis was used.
Methods of Data Collection: The data were collected from bank websites, previous studies, thesis,
articles, and books published as a secondary source.
Research Tools: No statistical  tools  were applied for this study. And the study is formulated
in qualitative nature.

DISCUSSION AND ANALYSIS

The banking industry has undergone multiple changes  from the beginning as along with the
growth of technology until  now.  Artificial Intelligence  is taken into account  by  several  banking
employees as a disruptor in the initial stage until they learn to use the technology. Generally, a

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disruptor is that that brings an unexpected modification or break within the continuity of a method

followed. The fact is that the adoption of new technology creates difficulties among the customers
in understanding and how to use the machine. For example, people took more time to get adapt to
the usage of ATM to withdraw cash, and still, we could find some customers approaching the bank
to withdraw cash as there may be many reasons behind it like not aware of using it, age factor,
etc., Henceforth Artificial Intelligence is considered a disruptor technology in the banking sector.
Most Indian banks have enforced Artificial Intelligence within the machine powered as ChatBots
or VoiceBots. These machines  are  capable  of getting  a full-fledged  spoken communication  with
customers and  act  with them  to resolve  their  problems. Robotics were introduced within  the
software where all the manual, bulk, and repetitive tasks  needed  to be processed by the bank’s
backend team, for better performance by the machine. 
Client knowledge is the most helpful resource that any bank possesses. Artificial Intelligence
has been designed  to use this  knowledge  in any  approach  that  the bank  requires. Customer’s
transactional pattern is contemplated, and trends are drawn to impart additional customized
involvement.
The fact in the banking sector is, huge number of employers are found employed in banks
within the country. This fact would change by the implementation of Artificial Intelligence. That is
the replacement of humans will take place with machines, when machines take over the work to
be processed in banks also in other sectors as well. Artificial Intelligence has disrupted the banking
procedures. However,  not all disruptions  are measured as  negative.  The adoption of Artificial
Intelligence in the work process simplifies the work to be completed in a fraction of second, and
the count of mistakes will reduce. Therefore introducing Artificial Intelligent technology would be
overall useful for the complete business network as well as for the country.

IMPLEMENTATION OF ARTIFICIAL INTELLIGENCE IN LEADING BANKS

Indian banks are looking forward to adapt the upcoming technology of computer science to extend
their business operation for speedy work. Along with the banking product offerings, additions of
more or less technology, boils down to better client service and relationship handling. In this study,
the researcher concentrates on finding which new technology of Artificial Intelligence are being
adapted and offered by the banks.
STATE BANK OF INDIA:
SBI is India’s largest public sector bank and leading as first. There are customers within and
outside the nation, concerning 420 million customers in aboard alone. State Bank of India is that
the most generally trusted bank because of its nature possessing as a government bank. However,
the bank faces several challenges like identity fraud, signature validation, and lack of multi-
form authentication. To resolve these issues, since 2017, SBI had conducted  an occasion  called
‘Hackathon’ annually for start-ups and developers who can showcase their cutting edge solutions
for four themes via: 1. Facial Recognition, 2. Signature Recognition, 3. Voice Based Authentication,
and 4. Cheque Truncation Value Enhancers. By presenting it as competition, the bank created a

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healthy  environment for idealists  to come  up with the leading edge  and  distinctive  solutions of
leveraging automation processes, improve efficiency and to help in fraud detection. SBI also launched
SBI Intelligent Assistant (SIA), which is an Artificial Intelligent technology powered with the voice
assistant that has the flexibility to handle client queries immediately. Payjo, a start-up from  Silicon
Valley and Bangalore, joined with SBI and launched SIA. Payjo stated that “SIA is a set-up to handle
nearly 10,000 enquiries per second or 864 million in a day, which is nearly 25% of the queries being
processed by Google daily,”
HDFC BANK:
HDFC bank has its own  automatic  voice  supportive system  that speaks with  the customers and
solves their problem within 0.4 seconds. It leads to incredible servicing and saves huge amount of
time and resources spent in maintainance of the team. HDFC’s ChatBot is named ‘EVA’ (Electronic
Virtual Assistant) has been developed by Senseforth Artificial Intelligence  analysis in Bangalore.
From the source of LiveMint it was analysed that, EVA had addressed over 2.7 million client queries,
interacted with over 5,30,000 distinctive users and held 1.2 million conversations. Other than this,
HDFC bank  had shown interest to invest in the research and development of software which is
used to intimate human – like actions and automated banking procedures take place in the backend
process.
ICICI Bank:
The third largest  personal  sector bank of India is ICICI bank. ICICI has  sizable amount  of assets
underneath  its management and  possess a good  client  base. This bank has  perpetually  shown
its digital and technological presence within the  banking world.  ICICI introduced its Artificial
Intelligence as  high-powered ChatBot’ iPal’ in 2017,  which accomplished  half dozen  million
responses and interacted with them and one million customers were given support in mere eight
months. The bank is additionally gazing a tie-up of iPal with existing voice assistants like Cortana,
Google Assistant or Siri thuson give higher convenience to its customers.
ICICI has recently established a replacement department referred to as ‘Technology and Digital
Group’ to undertake intensive and focussed analysis on varied comes. Software package of robots
have reduced the response time by 60% to their customers.
PUNJAB NATIONAL BANK:
Punjab National Bank (PNB) is another the public sector bank which stands next to State Bank of
India in all ways, like performance, profit, management, customer service and implementation of
Artificial Intelligence, etc. During 2018, PNB adopted Artificial Intelligence to improve their audit
system and to foil the repeat of frauds inside the bank concerning on reconciliation of accounts.
The bank has already undertaken measures to strengthen the internal audit control mechanism,
but still the bank is looking forward at the technology interventions to enhance customer service
and responsiveness. After the implementation PNB stated that it has a zero tolerance to unethical
practices inside the system and there were no additional fraud by the Geetanjali Group but they
had to recall their credit limits.

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AXIS BANK:

Axis Bank doesn’t stand far behind regarding the implementation of Artificial Intelligence-powered
technology. Axis bank also established a hub for innovation and creativity called ‘Thought Factory’.
This initiative became a well-thought project that works with start-ups comprised of young talent.
The banks work with these start-ups for about three months. After that, those showing additional
potential in the models are identified so that the bank will work further closely with those projects.
Axis bank has fashioned a credit-risk model that indicates 80% of suspicious transactions are
borne out of the transactional activities among the 5% customers, which are categorised as risky
people from the credit perspective. Axis bank also used Robotic Process Automation (RPA) where
machines perform in bulk and repetitive tasks are performed in lesser time. This mechanism has
reduced the turnaround time by 90% - 92%.

IMPACT OF ARTIFICIAL INTELLIGENCE IN THE BANKING INDUSTRY

Robotic  Process  Automation (RPA) is the method that banks adopt to simplify their backend
operations by using Artificial Intelligence software package. Banks have several repetitive tasks
that are rule-based and don’t need human judgement or appraisal. Once the method is fed within
the software package, the robots are more qualified to complete the process within 100% accuracy.
In some processes human judgement is required followed by for interpretation of data and decision
making analysis.
However in the begnning, leading banks  have mistreated the Artificial Intelligence in their
work process but after regular practise the banks got convient on usage with regatrd to handling
of account details, benefited with customer service, and less fraduladent activities were observed.
Every bank had been invested  in their research and development to have track on their growth and
work on the areas that need to be given more imporatnce. Some have involved technology within
the work process as just begginners, like State Bank of India and Axis bank, whereas some have
established their own Research and Devlopment team that works on developing new  software
package and technology. With the convenience brought in by Artificial Intelligence for banks, there
has been an increase in investment by $1.1 billion in mere a year.
Another effect that Artificial Intelligence has imparted is, the convenient functioning among the
banks is through the utilization of automatic technology. The banks carry various ways to automate
the procedure in advanced level without the mistreatment of Artificial Intelligence. The future of
Artificial Intelligence enhances customer experience, data analytics to predict future outcomes and
trends, improved operations, efficient cost management, intelligent character recognition system
and risk management and fraud detection.

CONCLUSION
After  finding out  the various  effects of Artificial Intelligence,  it is  perceived  that  in which areas
banking industry requires to  modify majorly. Employment is one amongst the most important

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consideration, when it comes to replacement of human efforts with technology. Some companies
are finding difficult to bring in a transformational change within their internal process due to the
opposition among the employees who are found rigid with their thoughts and does not look forward
to see the scope of the change in future. Whenever robots are introduced, workers worry  about
lay-off. Therefore, to achieve the success in integration of technology into banking system, banks
have to carefully frame a strategy to introduce the change, and to ensure that the process goes
smoothly. Those banks who are able to integrate the old procedure with the new ones can prosper,
and continue smoothly for future.
While there are some elementary issues with introduction of Artificial Intelligence, still there are
more advantages in using the technology.  The modification that is brought into the banking industry,
will be the result of the Artificial Intelligence technologies that banks are developing  currently.
There are still some technology that might cause excitement in the field of banks and in any other
industry.   Several  banking industry are just at their testing stages  which will reach the phase of
implementation soon. Blockchain and Distributed Ledger Technology (DLT) is the new technology
that each business unit try to prosper with it.
Globally, there has been a substantial surge of investment in developing this explicit technology
and there  are  quite  2500 patents issued  relating to  a innovation of technology. The idea to
innovate new technology for each industry is to reduce the workload for humans. Thus, one
has to  be upto date and not far away from the new discoveries and keep  investing  in the
Research and Development projects to find out the  ways to attain profitable and overcome
the competitiors in the market. The study concludes that, there is no particular way to ensure
success, but to accept the change and transform the changes within the business ,will ensure the
business to sustain among the competitiors.  Next generation will be surrounded with security
and guaranteed technology support as Artificial intelligence provides high level security to the
serviceses lended by banks and enables a safer and quicker transaction related with banking
industry.

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[5] W
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BOOKS
Artificial Intelligence in Banking & Finance- How AI is Impacting the Dynamics of Financial Services
(Author: Raj Singh)

WEBSITES

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https://decondia.com/banking-industry-ai-progress/
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Indian-banking-Challenges-and-op. html
https://www.entrepreneur.com/article/327660
https://www.goodworklabs.com/artificial-
intelligence-in-banking-industry/
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