AI Is Transforming How We Bank: What This Means For Your Money

Artifical intelligence (AI) is likely to reshape our lives in as big a way as the internet did in the 1990s and smartphones did in the 2000s (scary or exciting as that may be). That means changes to your regular life and your banking life, too. You’re likely encountering AI in your financial life already, with or without knowing it.

Banks sometimes use AI to help prevent fraud, for example, and while some people may be nervous about using AI, others are largely on board. In fact, 62 percent of bank customers said they’d immediately try AI-driven alerts to help avoid service charges and fees, according to a 2024 J.D. Power report.

Here are a few ways AI is already transforming how we bank, including helping you manage your money and keep it safe, and some potential downsides to watch out for.

AI is changing how you bank

1. Fraud detection

Fraud is a pervasive issue right now. More than half (60 percent) of financial institutions and fintechs reported seeing an increase in fraud in 2024, according to a recent State of Fraud report from Alloy, an identity and fraud prevention platform provider.

AI-powered fraud-prevention software can help detect when fraudsters attempt to open fake accounts or take over a consumer’s existing account, and thwart them in real time. It can also identify patterns to help prevent future attacks, says Sara Seguin, director of advisory at Alloy.

Seguin provides some examples of how AI can aid in preventing bank fraud:

• Flagging when a known customer’s behavior is out of the ordinary, such as a large funds transfer
• Analyzing customer requests to change their information, such as whether a new email address has been associated with fraud in the past
• Identifying and reporting anomalies such as a large increase in the number of accounts opened in a single day at a given bank

Barclays, a multinational financial-services firm, is using generative AI (which learns patterns in data and creates something new) to manage fraud and money-laundering risks. Barclays’ AI system generates a warning when behavior takes place that’s not typical for a given customer. “Generative AI means that risk assessments for the customer are being brought to an individual and safer level,” the Barclays website reads.

2. Enhanced customer service

In addition to helping banks keep you safe from fraud, AI is being used to enhance customer service offerings in various ways.

24/7 actually helpful chatbots

Chatbots are a common bank offering powered by AI, and the use of natural language processing is helping these 24/7 customer service bots to better interpret human language and provide a more personalized experience.

An example of a chatbot that uses AI is Bank of America’s virtual assistant Erica. Erica can be used for purposes that include monitoring recurring charges, staying on top of upcoming bills and tracking your spending.

Fewer fields on application forms

In addition to incorporating AI into chatbots and customer service channels, some companies are also utilizing AI to make it easier for people to fill out forms online, such as for loan applications, says Sal Rehmetullah, CEO of Worth AI. Worth AI’s business clients use the company’s software to provide their customers with application forms on which only a few fields need to be entered manually — while AI takes care of the remainder of the data collection.

More tailored financial advice from your financial advisor

While the human touch remains vital to a financial advisor’s role, some providers are utilizing AI to augment their services, says Michelle Bonat, Chief AI Officer at Squared. Examples she provides include using AI-powered tools for:

• How to best approach a client or prospect
• Identifying cross-sell or up-sell opportunities
• Researching portfolio recommendations

JPMorgan Chase is an example of a bank whose private client advisors are using AI tools to conduct research to inform client conversations, according to a recent Reuters article.

Personalized recommendations

Banks can use AI for predictive personalization, which harnesses machine learning and data-driven insights to predict what features or products a given customer wants to see, and then tailors the customer’s experience accordingly.

Bonat compares this type of opportunity for banks to the way companies like Amazon and Spotify recommend products or songs based on what people similar to you have chosen. “It’s like Spotify for your money,” she says. “It sees what you’ve been doing and makes recommendations to you based on that.”

For instance, a bank may give a customer with a rewards credit card an offer to open a rewards checking account.

The majority of consumers and business leaders see some benefits to such personalized offer suggestions, according to data from Zendesk. It states that 62 percent of consumers agree that personalized recommendations are better than general ones, while 77 percent of business leaders believe that deeper personalization leads to customer retention.

But if you feel wary of having AI give you money advice or generally be “in” your money business because you don’t understand how or why it’s making its recommendations, you’re not alone. “I think we have to do more work as an industry on making AI more trustworthy,” says AI Squared’s Bonat.

Lack of transparency in how AI works can foster mistrust

Often, there can be a lack of transparency in how an AI system is producing its content or making its decisions. This problem has commonly been referred to as “black box AI.” Examples include Open AI’s ChatGPT and Meta’s Llama, both of which can answer a user’s questions but don’t show how the answers were generated.

What’s next for AI in financial services?

We asked a few experts about what they saw as the future of AI in financial services:

If you use AI program ChatGPT to create a budget right now, you’re likely to get a “very static, very one-time” result, often through the generation of a spreadsheet, says Bonat. The real promise of AI in banking and financial planning is to have it be predictive and hyper-personalized, she says.

“Consumers will have AI bots,” says Ronit Ghose, Head of Future of Finance at Citi Global Insights, who likens these bots to J.A.R.V.I.S., the AI assistant to the character Tony Stark in Marvel’s Iron Man films.

Such autonomous agents could be used by everyday people to help manage their lives, Ghose says. The bots could handle tasks such as data gathering and comparison shopping, which ultimately could save you time and effort when making decisions.

“AI could basically become your own personal financial butler or personal financial advisor, ” Ghose says.

Bottom line

Whether you’re looking to budget your money or manage investments, AI may start to play a bigger role in helping you make decisions. Banks are increasingly using AI-powered technology to provide customer service and match their customers with personalized features and offers.

However, there’s room for improvement when it comes to increasing transparency so that users of this technology can understand and trust it more.