Artificial intelligence (AI) is not just a buzzword in the financial sector; it's a game-changer. As the financial industry continues to evolve, AI is becoming an indispensable tool for banks and credit unions. This technology is not only transforming how these institutions operate but also how they serve their customers. 

In this blog, we'll explore three key ways AI is driving innovation in the financial industry. From enhancing fraud detection and risk management to revolutionizing contract lifecycle management and improving customer service, AI is paving the way for a more secure, efficient, and customer-centric future in banking.

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1. Enhancing Fraud Detection, Risk Management, and Data Security

In an era where cyber threats are increasingly sophisticated, banks and credit unions are turning to AI to bolster their fraud detection, risk management, and data security strategies. AI's ability to analyze vast amounts of data quickly and accurately makes it an invaluable tool for identifying suspicious activities and mitigating risks.

Real-World Example: JPMorgan Chase

JPMorgan Chase has implemented AI to enhance its fraud detection capabilities. By using machine learning algorithms, the bank can analyze transaction patterns in real-time, flagging anomalies that may indicate fraudulent activity. This proactive approach not only protects the bank's assets but also provides peace of mind to its customers. According to PYMNTS, a news and media company that focuses on payments and commerce, “JPMorgan sees AI as critical to its future success, using it to develop new products, enhance customer engagement, improve productivity, and manage risk more effectively. The firm has advertised for thousands of AI-related roles and has more than 300 AI use cases already in production.”

According to a study by McKinsey, AI can potentially save the banking industry up to $1 trillion annually by improving fraud detection, risk management, and data security. The ability to detect and prevent fraud in real-time significantly reduces losses and enhances the overall security of financial institutions.

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2. Revolutionizing Contract Lifecycle Management (CLM) and Contracting

Contract management is a critical function in banking, often burdened by manual processes and inefficiencies. AI is revolutionizing this area by automating and streamlining various aspects of contract lifecycle management (CLM).

Real-World Example: BNY Mellon

BNY Mellon, a global investments company, has significantly reduced onboarding times and ensured compliance with regulatory standards through innovative contract management solutions. By focusing on efficiency and accuracy in their custodial agreements, BNY Mellon has streamlined their processes and improved client experiences.

They achieved this by leveraging Evisort to automate the generation and review of custodial agreements. Evisort’s AI-native Contract Intelligence Platform enables organizations to manage, analyze, and optimize their contracts efficiently. With advanced natural language processing (NLP) and machine learning (ML) capabilities, Evisort’s AI can automatically extract key data from contracts, such as renewal dates, payment terms, and compliance requirements, reducing the risk of human error and saving valuable time​​​​ .

AI-powered contracting intelligence platforms also provide deeper insights into contract data, enabling legal and contracting professionals to make informed decisions quickly. This is particularly valuable in the financial sector, where compliance and risk management are paramount.

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3. Enhancing Customer Service with AI-Powered Chatbots and Virtual Assistants

Customer service is a critical aspect of banking that significantly impacts customer satisfaction and loyalty. AI-powered chatbots and virtual assistants are revolutionizing how banks and credit unions interact with their customers, providing 24/7 support and personalized services.

Real-World Example: Bank of America

Bank of America introduced Erica, an AI-driven virtual assistant, to enhance customer service. Erica helps customers with a wide range of tasks, from checking account balances to providing financial advice. The virtual assistant leverages AI to understand and respond to customer queries accurately and efficiently.

Since its launch, Erica has handled over 2 billion interactions from more than 42 million clients, averaging 2 million interactions per day. This AI initiative has not only improved customer satisfaction but also freed up human agents to handle more complex inquiries.

AI chatbots and virtual assistants are becoming essential tools in banking, offering quick resolutions to customer issues and ensuring a seamless banking experience. By handling routine queries, these AI tools allow bank staff to focus on higher-value tasks, ultimately enhancing overall operational efficiency.

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The Future of AI in Banking

As we look ahead, the potential for AI in banking continues to grow, with emerging trends like predictive analytics set to revolutionize the industry. By leveraging AI, banks can anticipate market changes, manage risks more effectively, and provide even more personalized services to their customers. AI-driven predictive analytics empowers banks to forecast market trends, customer behaviors, and potential risks, enabling more strategic decision-making and proactive management of financial portfolios.

As the technology landscape evolves, banks that integrate these AI capabilities will be better positioned to navigate the shifting geopolitical priorities, regulatory requirements, and macroeconomic landscapes. This integration supports cohesive compliance, enhanced risk management, and effective execution of strategic initiatives, ultimately transforming contracting challenges into business opportunities. With AI at the helm, the future of banking looks more efficient, secure, and customer-centric.

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Conclusion

Artificial intelligence is driving significant innovations in the banking and credit union sectors, particularly in fraud detection, contract lifecycle management, and customer service. By embracing AI, legal and contracting professionals in financial institutions can enhance their operational efficiency, ensure compliance, and provide superior service to their customers.

See why Bank of New York Mellon uses Evisort to create, tailor, update, and track contracts "in a fraction of the time." To learn more about how AI is transforming banking, read our success story: BNY Mellon: Artificial Intelligence in Banking.