Integrating Generative AI for Personalized Banking: Opportunities, Risks, and Future Directions.

Abstract

Amidst the deluge of digital transformation, generative artificial intelligence (GenAI) represents a game changer for banking, providing an attractive route to provide highly personalised services, maximise operational efficiencies and enhance risk monitoring. This paper examines the diverse roles GenAI will play in banking, including transforming customer-facing engagements via personalized financial planning, dynamic product suggestions and conversational interactions that are context aware. At the same time, the technology has appeared to automate internal processes—like onboarding employees, processing documentation, safeguarding against fraud and keeping an eye out for compliance violations—that have been hampered in past years by incumbently archaic systems.Yet, prospects are balanced by sizeable risks. The principal challenges include privacy and security of the data, bias and fairness in the models, lack of explainability, regulatory liability risk and concentration risk related to relying on common AI providers or infrastructure. New work is cautioning that if there are not proactive interventions to mitigate these concerns, the benefits of GenAI itself could be drowned out through operational mishaps and/or ethical pushback. Recent literature and industry examples are reviewed to unpack these domains of risk in the domain of banking.