“AI is probably the most important thing humanity has ever worked on.” – Sundar Pichai, CEO, Google and Alphabet.

Artificial Intelligence (AI) seems to be everywhere nowadays – at home, on our phones – Alexa, Siri, etc. Before we know it, AI will be in just about every product and service we buy and use. Further, its application to business problem solving is growing by leaps and bounds.

Alan Turing, who broke the Nazi encryption machine “Enigma” and helped the Allied Forces win World War II, is considered the father of AI or Machine Learning. In its essence, AI is the endeavour to replicate or simulate human intelligence in machines.

Artificial intelligence and cognitive computing are redefining numerous areas of business, including banking. Processes and functions that involve large amounts of information, significant complexity and nuanced analysis are all prime candidates for an AI-enabled revolution. AI can help banks improve their processes, significantly reduce time delays, increase accuracy and reduce cost. And given the information-intensive nature of banking, multiple processes and functions are ripe for cognitive-enabled transformation.

Today’s customers increasingly expect faster, personal, and meaningful services and interactions with their banks and have little tolerance for generic unsolicited messages. Therefore, banks must leverage AI to balance the need for privacy and security with personalisation and engagement.

How are Indian Banks employing AI?

Most of the Indian banks are using AI to improve customer experience by adding chatbots as an additional interface for customers. SIA by State Bank of India (SBI), EVA by HDFC Bank and iPal by ICICI Bank can be cited as examples.

HDFC Bank’s Eva can assimilate knowledge from thousands of sources and provide simple answers in less than 0.4 seconds. Going forward, Eva would be able to handle real banking transactions as well. SBI’s SIA addresses customer enquiries instantly and helps them with everyday banking tasks just like a bank representative. ICICI’s iPal helps in answering queries, in financial transactions and discovering new features. It now supports an average of 1.5 million customer queries every month.

State-owned banks have been slow to leverage AI, largely because AI implementation requires banks to operate outside of the traditional privacy framework. Justice Srikrishna Committee has opined that the biggest challenge in regulating emerging technologies such as AI lies in the fact that they may operate outside the framework of traditional privacy principles. Reserve Bank of India (RBI) would need to frame regulations on emerging technologies and data privacy, thus ensuring the business interests of the banks.

While improving customer experience has been the primary focus of most of the Indian banks in using AI, it can also be used in other areas such as fraud prevention and detection, compliance, risk monitoring, to name a few.

Fraud detection and prevention and Risk Management

According to RBI’s Annual Report, 2019, losses due to banking frauds have risen by a whopping 73.8%. As per RBI data, it took an average of 22 months for the banks between the occurrence of fraud and its detection. AI can play an important role in fraud detection and prevention. Hence, banks must deploy context-sensitive AI solutions to enable advanced and adaptive real-time monitoring of their payment networks.

These AI solutions additionally leverage relevant data points to assess transaction risk, true identity-matching, and identification of complex typologies and patterns. For example, Axis Bank is using an AI algorithm to authenticate paper checks rather than relying on tellers to do so. The technology analyses check signatures to detect changes or signs of hesitation that indicate fraud, including blots or skips that could be invisible to the human eye.

Online fraud is another area of massive concern for banks as they digitise at scale. Risk management at internet scale cannot be managed manually or by using legacy information systems. AI would help banks develop predictive analytics to examine transactions on a real-time basis. This would include mitigating fraud by scanning transactions for suspicious patterns and enabling risk analysts with the right recommendations for curbing risks on a real time basis.

Compliance

Compliance is one of the most vital aspects of banking. This is especially true for Indian banking, where systems, procedures and regulations will always be going hand-in-hand with the businesses. Abiding by these is a necessity for the banks to stay and survive in the market and AI will be able to provide smarter solutions by way of using cognitive technologies.

Digitization of processes

Indian consumers are next only to China in the use of mobile devices and the internet. AI would be able to analyse the consumers’ spending patterns and would be able to offer them suitable recommendations on investment and risk profiles, based on these data. Already many private sector banks are digitizing the KYC process to eliminate the need for submission of physical documents and their verification. This process can be further simplified by leveraging AI-based computer vision technology to verify documents, Optical/Intelligent Character Recognition (OCR/ICR) technologies to digitise scanned documents, and Natural Language Processing (NLP) to make sense of them.

Decision making in respect of loan products

Given that processing loans involve judgemental decision making on the part of loan officers, verification of the antecedents of the borrowers etc., most of these processes have remained manual. Some of the banks have automated retail loan processing to a certain extent, but still, there is a long way to go. AI can be used in respect of decisions based on available structured and unstructured data. For example, it can help predict potential loan defaulters and offer loss mitigation strategies that will work for them. AI can also help collate data from multiple sources and arrive at inferences, which can be used to make decisions. AI can also improve straight-through processing using Intelligent Automation to automate repetitive processes that need decision making. In fact, many Fintech companies are already using consumer profiles based on social media like Facebook, Twitter etc. for arriving at loan decisions.

Way forward

While AI has immense scope in transforming Indian banking, given the magnitude of the challenge, banks would benefit from a consortium-based approach for knowledge sharing on AI. This would also aid the smaller regional private players, cooperative banks etc. benefit from a broader nationwide secure banking network. AI in Indian banking is only set to grow and the banks would reap rich dividends over time.

The current Covid-19 pandemic has opened up multiple opportunities for businesses to sustain and ensure they retain their existing customer base. One of the most important ways of doing it is to ensure the customer gets what he/she wants during this period.

While the retail chains opened up their stores in a limited way with all safety norms followed, they also looked at alternate opportunities how to serve the customers at their doorstep. This not only delighted the existing customers but opened up huge opportunities for the new customers to come into their fold. The most logical way of sustaining and improving the business. The Big Baskets, Amazons, even the local milkman, schools, colleges, our own Manipal Academy of BFSI switched over to an online mode of solution delivery!

In my earlier blog, I had highlighted how the banks can encash on this situation by migrating customers to ADCs (Alternate Delivery Channels) and still keep them happy. Unfortunately, the banks have missed the bus.

After the medical staff and the police personnel, it is the bankers who have been labelled the “Corona Warriors” serving the customers and the society. There are umpteen instances where the banking staff have tested positive while serving the customers and have even laid down their lives serving them. It is no mean gesture and they all need a big salute for their yeoman service.

While banks put their workforce to these kinds of risks, they should have ideally strengthened their alternate delivery channels, mainly the phone banking and the net banking channels. Let us not confuse online banking with these channels. Online banking is the one which a customer initiates the transaction himself/herself and the transaction is fulfilled at their end. There is no need for any phone banking or net banking support required for this.

Online banking is not just transactions. There are many queries which cannot get solved by customer logging into the system. There is some workforce required to attend to these queries. This is where the banks have actually failed.

If one writes a mail to the bank today seeking certain clarification or information, promptly he/she gets an automated reply which very politely says –“Thank you for writing, this is your reference number for the query. Due to the pandemic situation, we are working on minimum staff and the reply may take more than the normal time.“ And normal time is not defined under these circumstances. Customers have waited for weeks for the reply, which is yet to come. When the customer decides to escalate the matter, the escalated mail also meets with the same fate or reply.

Same is the situation when one tries to dial the “customer care” numbers available on the net or bank’s website. After the rigmarole of press 1 or 4 or 9 etc, one would tend to get lost in the maze and forget why he or she had called the customer care! At the end of it, the recorded IVR says, your wait time could be longer than the normal wait time as we are working on limited staff support and all officers are busy!!

The point I do not understand is why do banks risk the lives of the customer interface officers at branches, keep the branches open and do all banking transactions but not strengthen the online banking officers and provide more efficient and quick service. In fact, with the social distancing norms, the risks of community spread etc., being the most common points of discussion, banks would have been better off and the customers happier with these channels being robust and help their front office colleagues by lessening the burden of walk-in customers.

Covid-19 has brought two important points into the limelight for the entire human race:

All human beings irrespective of race, richness, nationality, civilisation and health status are equally exposed to the risk of untimely death – despite advancements in science and technology in medical front.

Prevention is always the only better available remedy for COVID-19 as no medicine is invented for its cure so far and still a vaccine is far away.

The only safest and proved measure of not getting Coronavirus is to have a mask completely covering the nose, mouth and eyes, to maintain safe distancing from others and to maintain personal hygiene. To curtail the spread of this virus across the globe is to identify the people with Corona positive and isolate them from healthy people.

Currently, we are witnessing the same followed in all societies across the globe. Unless you are proved that you were not affected by the Coronavirus you would not be ‘selected’ for joining the group which you wish to join! This is what currently we are witnessing in India and all other countries.

So, I feel there are so many similarities between COVID-19 regime and working of life insurance.

Life Insurance also works with the same principle of selection of good lives to give insurance policies as otherwise substandard or ‘bad’ lives may be selected that results in fake/fraud claims.

The selection process by the Life insurance companies involves preventing the ‘bad lives’ to join the group of existing policyholders to take away their (existing customers’) rightful share of benefits from the life insurance products.

The process of selection of ‘good lives’ works on the below parameters:
A person must be medically fit so that his/her life is not exposed to an untimely death.
A person must be financially fit to honour the policy contract for a long term of more than 15 years without making the policy lapse due to financial problems.
A person must be having financial value that can be replaced by the policy if untimely death occurs.
A person must pay the policy premiums from income sources legally validated by PML Act and within KYC guidelines.

If you are falling in the category of ‘Good Lives’, then COVID-19 regime is the best time than ever before for taking a life insurance policy.

Opportunities in COVID-19 Regime

One should take a life insurance policy before being infected by COVID-19, once affected, one ceases to be a ‘good life’ in the eyes of life insurers. Medical research so far reveals that Corona would have a lasting impact on the wellbeing of people of all the ages, affecting vital parts of the body like heart, lungs, kidneys etc. Its effect is more fatal for those who are already suffering from critical diseases.

Getting life insurance protection policy is relatively easier now than ever before as all life insurance companies are providing online facility to purchase the policies. Without stepping out of one’s drawing-room, the policy can be taken by online submission of proposal forms, uploading documents digitally, following the e-KYC formalities etc., and online payment of required premium. These customer-friendly measures with without violating the COVID-19 guidelines, make the process of getting a policy much easier and simpler.

As per latest IAMAI (The Internet and Mobile Association of India) Report, India has 504 million active internet users now and out of this, 55% of the users are from rural India. This indicates that even people from rural areas can also get life insurance through online mode as easily as their urban counterparts.

Life insurance companies are offering policies with competitive premiums to sustain in the business in the COVID times and this is an opportunity for people to get the policies at cheaper rates than earlier.

The basic characteristic of life insurance, that is -With minimal investment periodically, one can immediately create a huge estate and provide protection to one’s loved family against the untimely death-still holds good with COVID-19 pandemic. Here one should not get into the trap of comparing the returns under a life insurance policy with other financial instruments as life insurance falls in a separate category altogether.

When the threat to life of everyone including the young and healthy people is more now than ever due to COVID-19, it is ONLY the life insurance that guarantees the future financial stability and security of the dependent family.

Summarising the similarities between COVID-19 regime and buying life insurance:

“If you slain in battlefield, you will qualify for heaven, if you win you will enjoy the luxurious life of a King. Therefore, O Son of Kunti, rise and determine to fight.”