The United Arab Emirates recently announced the appointment of a Minister of State for Artificial Intelligence as part of her ambition to be at the forefront of the global technological revolution. The UAE Prime Minister, Sheikh Mohammed bin Rashid Al Maktoum, had earlier announced that Artificial Intelligence (AI) was a major part of the UAE Centennial 2070 objectives. The UAE aimed to improve government performance and create an innovative and highly productive environment by means of investing in AI.
Such is how AI has gained traction. Indeed, AI has been a popular topic not only among technology enthusiasts but also business drivers. 2017 has seen an acceleration of innovations in AI although it was considered to have only come of age the year before. In 2018, AI is predicted to be one of technology mega trends that will further change the world. It is amazing how the term AI that was first coined in 1950s has been changing computing paradigm in the last few years.
What is AI?
AI refers to technologies that are capable of performing tasks that normally require human intelligence. It is typically understood as machines that can simulate human cognitive processes i.e. the machines that learn, judge, predict, infer, reason and initiate actions. A few examples of AI applications that most people would probably have come across are Google Maps, Apple’s Siri, self-driving cars, etc.
Three applications domains of AI application in financial services industry are Cognitive Automation, Cognitive Engagement and Cognitive Insight. Cognitive Automation enables machines to replicate human actions and judgement with robotic and cognitive technologies (Robotic Process Automation or RPA). An example is natural language processing that can extract key information within documents using Optical Character Recognition (OCR) scan.
Cognitive Engagement refers to cognitive agents that use cognitive technology to interact with users, understand data that they receive and conduct actions on behalf of the users. An example are Chatbots that typically use text-based live chat to carry out tasks for customers such as fund transfers, bill payments etc. Cognitive Insights refer to AI algorithm that performs analysis out of huge data (structured and unstructured) to help identify what have happened, what are currently happening and predict what are likely to happen next. Cognitive insights allow to detect real time key patterns and relationships from huge amount of data across multiple sources to derive deep and actionable insights.
Five key applications of AI in banking industry are Anti Money Laundering (AML) Pattern Detection, Chatbots, Algorithmic Trading, Fraud Detection and Customer Recommendations. Going forward, it is predicted that there will be incredible rise of AI innovations especially because of massive increase in data and computing power. As the power of AI depends on data, the explosion of data in the last few years has allowed AI to advance rapidly. The huge step forward in AI enables computers to undertake more and more human tasks. AI enables facial recognition, analyzes social media messages, listen and speak (e.g. Apple’s Siri and Amazon’s Alexa) and gauge emotions (affective computing).
AI and Islamic Banking
To survive in the digital age, Islamic financial institutions (IFIs) must embrace latest technologies such as AI. AI innovations will enable IFIs to be as competitive as their more matured conventional counterparts.
Being relatively new, IFIs are generally inferior in terms of distribution network and human resources. Robotic Process Automation (RPA) will enable IFIs to operate more efficiently. RPA will not only be able to solve the issue of lack of human resources in IFIs but will also be able to perform at much faster speed. In addition, AI will facilitate IFIs to serve customers better. AI recommendation engines will enable IFIs to understand their customer profiles and therefore will be able to offer relevant products and services to their target customers.
In summary, the concept of AI that was first introduced more than 6 decades ago has made quite significant impacts to various industries. Not surprisingly, financial services sector is leading in adopting AI. The door is wide open for forward-thinking financial institutions to leverage on AI innovations. While the larger and more advanced financial institutions can benefit from cutting edge artificial intelligence techniques for risk assessment, financial analysis, portfolio management etc., the smaller financial institutions can start with using AI for improved operational efficiencies and customer interactions. IFIs stand to gain significant benefits from AI innovations.
(Edited version of this article was published in my ShariahTech column at The Malaysian Reserve on December 18th 2017)