AI Holds Potential To Revolutionise Key Banking Services

“While the government vision for AI adoption in the country is very strong, banks face 3 challenges in the overall tech eco-system that is still being built,” Karen Kim said.

She further added, “…banks may have the desire to leapfrog their digital transformation, but they need to work within the realms of the regulatory and compliance requirements.

In a recent interview with BusinessToday, Human Managed, CEO, Karen Kim revealed that Malaysian banks find themselves to be (i) unable to access to a wide range of technology services, (ii) have limitations in innovation capacity, particularly concerning research and development (R&D) initiatives and investment infrastructure, and (iii) the scarcity of human capital, specifically skilled tech professionals capable of advancing AI adoption.

There is also the issue of cybersecurity. As the digital economy in Malaysia is growing fast, it is also an attractive market for threat actors. Banks are susceptible to phishing attacks, social engineering attacks and also fraud.”

Leveraging Gen AI for Banking Efficiency and Customer Engagement

Karen believes that Gen AI can support banks in all three aspects, which are (i) identifying opportunity, (ii) understanding threat, and (iii) assessing the risks that banks need to manage.

According to Tech Target, Generative Ai or Gen Ai is a type of artificial intelligence technology that can produce various types of content, including text, imagery, audio and synthetic data.

“It can help banks scale multiple opportunities at a much faster rate than before. Additionally, it can aid in reducing threats and improving daily operations through data analysis,” she said.

With its capacity for automation, Karen said that Gen AI holds the potential to revolutionise key banking services such as deposits, payments, and clearance. By leveraging vast repositories of historical transaction data, Gen AI can train models to automate recommendations, driving efficiency and profitability for banks.

Moreover, she said that Gen AI enables banks to automate customer interactions, streamlining processes for tasks like deposits, payments, and credit loan applications. This automation not only enhances convenience for customers but also allows banks to scale their portfolio of services effectively.

Furthermore, Gen AI facilitates personalised and narrative-driven customer engagement, a strategy proven to increase customer retention. By digitising customer interactions and tailoring recommendations, banks can deliver bespoke services that resonate with individual preferences, ultimately fostering stronger customer relationships.

How Generative AI Can Help Banks Combat Financial Scams

However, Karen acknowledged the cons of using Gen Ai in this sector. “On the flip side, reducing threats is crucial, as digital transformation inevitably attracts cyber threats.”

Financial scams in Malaysia are on the rise, with phishing and the theft of sensitive information being the primary tactics used by scammers. A significant reason for the prevalence of phishing in Malaysia is the average consumer’s lack of awareness about various social engineering tactics. Here, Generative AI (Gen AI) offers a promising solution to this pressing issue.

“Generative AI can be trained on diverse learning materials and human-centric documentation to provide recommendations during customer interactions with banks.

This approach offers two key benefits: it enhances the service experience and boosts the economy by improving consumer literacy and security awareness,” Karen said.

Gen AI can educate consumers by providing real-time recommendations during customer interactions. By analysing customer inquiries, AI can offer personalised advice on recognising and avoiding scams, thereby increasing consumer awareness and reducing the risk of falling victim to fraud.

Additionally, she said that fraud detection and prevention are critical concerns for bank executives. Gen AI can analyse vast amounts of transaction data to identify unusual patterns and potential fraudulent activities. By continuously learning from new data, AI systems improve their accuracy in detecting fraud, allowing banks to take swift action to prevent further fraudulent transactions.

Addressing day-to-day operational challenges is crucial for maintaining banking services’ integrity. Karen further added that Gen AI can generate, improve, validate, and test code, helping modernise outdated banking systems. This reduces maintenance costs and enhances security, making it harder for scammers to exploit vulnerabilities.

Malaysia’s Readiness for Generative AI Adoption in Banking

Malaysia has made significant strides in building the capabilities and infrastructure necessary for AI adoption. “According to data from Oxford Insights, AI readiness has improved in Malaysia in the past two years, nudging it from a global ranking of 29th to 23rd. The report cites “large middle income economies such as Malaysia punching above their weight”, as compared to other similar-sized nations,” Karen said.

This progress reflects the country’s ongoing efforts to enhance its AI capabilities, driven by government support, technological advancements, and improved data infrastructure.

Malaysian banks are well-positioned to leverage Generative AI due to their extensive transactional and user behavior data. This rich data environment enables comprehensive training of AI models, facilitating valuable insights and efficient operations. The democratisation of large language models, according to Karen, has also made technology solutions more accessible, allowing banks to integrate AI without building new systems from scratch.

Additionally, the rapid and cost-effective nature of Gen AI experimentation allows banks to quickly move from ideation to prototype, enabling simultaneous testing of various ideas. “So Malaysian banks are in the stage of actively building / acquiring the necessary capabilities and infrastructure for wider scale AI adoption,” Karen commented on the topic.

Challenges Faced by Banks in Adopting New Technologies While Ensuring Compliance

As Malaysian banks integrate advanced technologies like Generative AI, they face significant challenges in ensuring compliance with evolving regulations.

Karen said that the National Artificial Intelligence Roadmap 2021-2025 outlines seven principles of Responsible AI—fairness, reliability and control, privacy and security, inclusiveness, pursuit of human benefit and happiness, accountability, and transparency. However, regulatory frameworks for AI in Malaysia are still in the process of being formalised, with the AI governance and ethics code (Aige) framework nearing completion.

Karen said one of the primary challenges banks encounter is the regulatory uncertainty surrounding AI technologies. With regulations still being developed, banks and technology service providers must closely monitor emerging guidelines to ensure compliance. This involves staying updated on the latest regulatory changes and proactively aligning their operations with anticipated standards.

She added that banks must strike a delicate balance between innovation and compliance. They need to identify areas with the largest volumes of data and significant potential for technological gains while ensuring that these innovations do not violate regulatory requirements. This balance is crucial as they scale new technologies like Gen AI.

Integrating Gen AI into existing systems is not a straightforward process. Banks cannot simply overlay AI on their current operations and expect compliance guardrails to be automatically established. Instead, Karen said that they must build a robust understanding of the data relationships and regulatory requirements, ensuring that AI applications align with both.

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