International Journal of Research in Engineering, Science and Management 83

Volume 7, Issue 3, March 2024

https://www.ijresm.com | ISSN (Online): 2581-5792

Generative Artificial Intelligence: Prospects for

Banking Industry
Bahadur Singh*
Chief Manager Research, State Bank of India, Hyderabad, India

Abstract: Banking, as an indispensable service, operates (CBDC) i.e. Digital Rupee in present era were adopted and
around-the-clock, catering to diverse clientele ranging from made available to the customers by banks.
common individuals to professionals. GenAI emerges as a potent
It is evident in this whole journey that banking industry was
tool reshaping the banking landscape, offering immense potential
for innovation and efficiency. Its strategic adoption is imperative open to adept and embrace new instruments and processes
for banks to stay competitive and cater to the evolving preferences supported by latest technological changes to provide its
of tech-savvy customers. Reskilling initiatives are crucial to equip customer a new experience and make the processes user
banking professionals with the requisite knowledge and skills to friendly. Digitalization is instrumental in changing the
harness GenAI effectively. As GenAI continues to evolve, its expectation of the people and their manner of interaction and
integration into banking operations promises transformative
doing business. Entire banking system has been transformed in
outcomes, ensuring a customer-centric approach and sustainable
growth in the digital era. The advent of Generative Artificial its operations and experience due to increasing demand from
Intelligence (GenAI) marks a significant milestone in banking Millennials and Gen Z for digital banking. When it comes to
evolution. GenAI, a subset of AI, leverages neural networks to day-to-day banking, Millennials and Gen Z can sort something
generate original content based on provided input, thereby out without having to speak someone, that’s what they will opt
transforming banking operations and customer experience. to do and tech makes that possible. Their burgeoning
OpenAI, a prominent player in AI research and development, has
enthusiasm to access financial services through digital channels
pioneered GenAI through models like ChatGPT, enabling natural
language interactions akin to human conversation. GenAI offers has further the surge in new banking technologies which are
multifaceted benefits with challenges and limitations to the reconceptualizing the industry.
banking sector. It enhances customer experience by providing
round-the-clock support through chatbots, offers personalized 2. Artificial Intelligence
product recommendations, and assists in loan eligibility
assessments. Moreover, it aids in risk management, fraud Artificial Intelligence (AI) has been in existence for more
detection, and personalized marketing campaigns, thereby than a decade, but it surged in popularity and gained significant
optimizing operational efficiency and bolstering customer momentum when Large Language Models (LLMs) were
engagement. Despite its capabilities, GenAI necessitates human developed to process large data sets, covering the entire web
oversight, especially in critical decision-making processes. world. Earnst & Youngs surveyed 50 Indian CEOs across
sectors in September-October 2023 to know their positivity
Keywords: Generative Artificial Intelligence, GenAI, ChatGPT,
towards adopting GenAI solutions and most of them showed
Banking, Open AI, Fraud Detection, Customer Service.
urgency to integrate GenAI into their businesses and felt that
1. Introduction impact of GenAI will be felt as early as within five years.
Generative AI, supported by machine learning models, is
Banking is an essential service and required to be available radically transforming financial and banking services. The
24x7 throughout the year. It is of essence for from a common prospects of AI coupled with automation for banking has huge
man to the business and service class professionals. Banking potential and offers a unique approach in automating banking
institutions have invested billions in developing and harnessing tasks which were earlier completed with the aid of human
technology for making processes simpler and accessible. From resources.
a ledger book to online platform, banks have completed a
transition journey using the technological advancement. Since A. What is Generative Artificial Intelligence (GenAI)?
the introduction of formal banking in British era, many Generative AI, also referred to GenAI, is an advance form of
instruments such as Cheque Payment & Electronic Funds artificial intelligence which can be accessed by even a layman,
Transfers in 1980s, Credit and Debit Cards in late 1990s, Online in simple language inputs. GenAI is able to generate texts,
Banking and Mobile Payments in early 2000s along with e images, videos, sounds, 3D designs, codes and other media
payment gateways for e-commerce and other digital services, responses in response to the given text input into AI system for
Unified Interface Payments (UPI) in 2016 and Digital Wallets specific desired outcome.
and WhatsApp Banking, Central Bank Digital Currency GenAI models use neural networks to identify the patterns

*Corresponding author: bahadur.singh2@sbi.co.in

Singh et al. International Journal of Research in Engineering, Science and Management, VOL. 7, NO. 3, MARCH 2024 84

and structures within existing data to generate new and original Feedback (RLHF) for better alignment with human
content. Generative AI models are a subset of Deep Learning expectations.
models which produce new content based on descriptive input
D. Generative AI in Banking
provided in AI system. It relies on AI models and algorithms
trained on extensive data sets, demanding intricate GenAI is about natural language, the way all of us speak.
mathematical calculations and significant computing resources Since GenAI is a technology, it is an opportunity for those who
for their development. These data sets train the AI to predict the embrace and find ways to use it and those who does not
outcomes in the same ways humans might act or create on their incorporate these technologies in their business model will be
own. The rise of generative AI is largely due to the fact that at disadvantage compared to their competitors in the long run.
people can use natural language as input. Some examples of Everybody will use it as it will change the way work will get
foundation models include as Large Language Models (LLMs), done. GenAI is indispensable, like excel spreadsheets, for
Generative Adversarial Networks (GANs), Variational businesses.
Autoencoders (VAEs). GenAI based platform will help clients define their business
cases, make decisions, navigate AI journeys, choose
architectures and understand algorithms and models to derive
value responsibly. Its implementation will enhance operational
efficiency, streamline workflows and augment decision making
processes. It will not only give thrust in creating opportunities
for new business models but also show path for innovation for
a sustainable long term growth.
It will pave way for doing the simpler things through GenAI
and will free the human manpower to do more complex works
for their organizations which require deeper insights and
knowhow. The cost of getting simpler regular tasks for
companies will be almost zero and TAT for completion of the
tasks will be lesser in comparison to earlier. Generative AI
(GenAI) can be utilized in performing following tasks:
Fig. 1. 1) Boost the Customer Experience & Customer Satisfaction
B. What is OpenAI? GenAI chatbots can be utilized in providing human-like
customer support 24/7 for answering customer inquiries,
OpenAI is a U.S. based company incorporated in 2015, who
customer complaint allocation to branches and suitable reply, if
is engaged and focused in research and development of safe and
it is schematic query. It could also be helpful in updating
beneficial artificial intelligence. Being one of the leading entity
account balances, service request related to KYC updating
in AI spring, it has developed number of LLM, open source
through Adhaar, Mobile no change if existing mobile is
models, for GenAI. The OpenAI models are a stack of
available with customer through OTP authentication, Cheque
generative AI models that provide images, codes or languages
book issuance and address updating for Cheque book delivery.
as output. Microsoft has partnered with OpenAI to utilize Azure
This will provide a better connect and delightful experience to
infrastructure, including security, compliance, and regional
customers.
availability, to help users build enterprise-grade AI applications
2) Product Suggestions and Recommendations
and to use Azure to power all OpenAI workloads. Azure’s new As per the study by Forrester, 72% of customers think
cognitive service that gives REST API access to language products are more valuable when they are tailored to their
models of OpenAI is known as Azure OpenAI. ChatGPT (Chat personal needs. GenAI can recommends a product to a
Generative Pre-Trained Transformer) is the starting artificial customer based on the analysis of his financial data and credit
intelligence spring of OpenAI. score.
C. Exemplification of GenAI For example, it can be helpful in assisting simple tasks like
Today, one of the most well-known exemplification of SB account opening or can perform and recommend more
Generative AI is ChatGPT which is an artificial intelligence complex products like credit card, based on a customer’s
(AI) chatbot developed and released by OpenAI in November earnings, financial goals, spending habits and lifestyle. This
2022. It is erected on top of OpenAI’s GPT-3 and GPT-4 will make customers felt more informed and convenient in
foundational large language models (LLMs) and has been fine- choosing the right card as per their preferences and features
tuned using both supervised and underpinning learning ways. suitable to their needs. Generative AI can also be used to garner
ChatGPT is a member of the generative pre-trained transformer cross-sell business and upsell products.
(GPT) family of language models and is also a conversation- 3) Loan Eligibility and Available Options
style model, which means that it performs most aptly when a GenAI could be used not only in calculating loan eligibility
communication is established with it as we do with a human. for a particular need like Home or Car or Education but also can
It’s built on the same transformer base model as GPT-3, but be used in suggesting our partners like approved projects for
fine-tuned using Reinforcement Learning with Human housing loan and their products, mapped car dealers and
Singh et al. International Journal of Research in Engineering, Science and Management, VOL. 7, NO. 3, MARCH 2024 85

features of cars, tie-up universities and their curriculum etc. 8) Detection and Prevention of Fraud
Generative Artificial Intelligence can assist in educating GenAI models are very useful in detection and prevention of
customers on other financial tasks and literacy topics by frauds. RBI report shows that banking sector reported 13530
resolving queries about schemes of loans and credit scores. frauds amounting Rs. 30252 Crores in 2022-23. Data security
For example, if a customer need help in understanding about and fraud prevention is one of the key areas of banking industry
a home loan which he can afford, AI models having information which necessitates huge human and capital infrastructure and
related to latest interest rate, down payment amount, and credit despite that its effectiveness is not at par.
score, product features; can provide accurate home purchasing By utilizing Generative AI for fraud detection, banks can
budget by conversationalizing complex math questions and can track transactions and patterns of customers like location,
also recommend our builder tie-up projects. device and operating system and flag any anomalies or behavior
4) Maximizing Reach and Customer Connect that doesn’t fit expected patterns. Such flags could be reviewed
Conversational AI which is subset of AI, can enhance user and addressed by bank personnel for such a suspicious behavior
accessibility as it could simplify the multilingual support in and further investigation be conducted, if required. GenAI
form of virtual assistance and can support through text and could be used for continuous mining the synthetic data and
voice navigation options to Divyang customers too. This update the detection algorithms with the latest tactics used by
technology is a boost for major banking and financial fraudsters. This proactive approach can help in detection of
institutions due to its ability of improving customer experience fraudulent behavior before occurrence of any fraud.
by delivering personalized interaction and quick response.
E. Summarize Large Documents
5) Manage Risk and Ameliorate Credit Decisions
GenAI is an important tool in Credit risk assessment for It is a known fact that banks deal in massive quantum of
banks and it aids in managing credit risk to avoid any financial paperwork and it is not only a Hercules’s task to manually
disasters and conduct of smooth operations. Historical credit sorting and analyzing such large volume of documents and
data used in GenAI assists in detecting and identifying potential applications but also ask for lot of time and money. GenAI
financial risks and raise early warning signals which provides having its expertise in dealing with large data, can address and
banks time to adapt, prevent and/or mitigate expected losses. assist in sorting and analyzing by going through such large
Since banks are in business of evaluating borrowers who volume of documents and identifying important data for
apply for loans, banks could use AI and ML algorithms for summarizing them future use.
analyzing vast quantum of data from multitudinous available
sources to create an overall inclusive financial picture of the 3. Challenges and Limitations
applicants before sanctioning the credit proposals. This will Though this perspicacious narrative accentuates the impact
improve the efficiency of credit decisions. of generative AI in enhancing customer engagement, prompt
6) Personalized Marketing Efforts delivery and functional effectiveness in operations in the
Targeted marketing campaigns require deep customer banking and financial services industry but working with
analysis and creative work which is time-consuming and costly. Generative AI in the banking sector has its own reservations
GenAI can aid in designing more personalized marketing offers and challenges. It’s not a magic bullet that can do everything
for customers by analyzing their preferences and online but a bare tool.
behavior for different groups based on current trends and For example, while dealing with sensitive customer data,
market conditions and could be helpful in penetrating new GenAI need to be cautiously used in compliance with different
customer base and attracting and onboarding them. government regulations, like the General Data Protection
Generative AI could be used in creating special focused Regulation (CCPA) and/ or the General Data Protection
marketing materials for specific segments and track conversion, Regulation (GDPR).
retention and churning rates for making suitable amendments in LLM-powered bots have become the most formidable tool
marketing campaigns accordingly. for spreading misinformation or fake news and propaganda in
7) Generate Financial Advice for Customers Based on present time which also led to discussion about ethical AI.
Proprietary Data Deepfakes are already making headlines in India. It warrants
GenAI is beneficial in providing tailor-made investment laws and regulations to get it used ethically for the good of the
solutions and financial advices to bank’s premier and wealth people.
segment clientele based on client’s financial goals, income Another limitation of Generative AI is that feeding of poor
levels, spending habits and risk profiles. Human expertise or incomplete data will produce incorrect results which will
combined with power of AI will result in customized and more lead to poor financial decision-making.
comprehensive plans for customers be it personalized As a rule of thumb, we can out rightly trust the outcome of
budgeting or saving recommendations or smarter investment & GenAI in loan approvals and other vital decisions that have
wealth management and trading decisions. impact on customers but engagement of banking and financial
Generative AI can help in portfolio optimization, risk professionals are still required to make the final decisions.
management, and trade executions by empowering asset
management teams to make data-driven informed decisions that 4. Conclusion
align with customer’s risk appetite and financial goals.
All that said, Generative AI is a powerful banking tool with
Singh et al. International Journal of Research in Engineering, Science and Management, VOL. 7, NO. 3, MARCH 2024 86

its cautious and purpose driven proper use. GenAI is the future get reskilled, because it will make them dearer for next world.
and banks must learn to embrace GenAI to survive in long run. Innovation is happening across globe by people who know how
Not adopting the GenAI tools will provide competitors an edge. to use it and who solve problems using them. E-learning
Banks must devise strategies for adoption and implementation company Coursera claimed that 35 odd courses offered by
of GenAI in their operational and marketing areas to fetch global universities and industry educators related to GenAI
desired results in years to come and make a deep connect with witnessed 196000 enrollments in the year 2023 in India.
Gen Z who prefer new technology in every sphere of their life. Undoubtedly GenAI is reshaping banking services with
Banks need to evolve with the pace of evolvement of prediction of financial trends, employing AI for detection of
technological changes in Generative AI and improve cyber frauds, enhancing customer service through AI-based Chatbots
security measure to arrest any possible data breach or cyber and tailoring banking services suitable to individual customer
threat. needs. It is helping with expansion in market reach, enhanced
Financial institutions and banks in India are presently using delivery efficiency, sales optimization and increased
ML for applications like voice assistants and fraud detection. productivity.
SBI Card, a subsidiary of State Bank of India, leverages
Generative AI and machine learning to enhance their customer References
experience. [1] Using the Power of Generative AI in Banking and Finance: Aisera.com
Reskilling of existing human capital assets about GenAI is a [2] Generative AI, OpenAI, and ChatGPT: What are they: Francesca Lazzeri,
Ph.D. (medium.com)
must for being relevant in the future. Everyone must learn and [3] What is AI: www.coursera.com