Artificial Intelligence (AI) has commenced a transformational journey for the financial services industry. AI is emerging as a crucial contributor to fraud detection and customer support, enhancing efficiency and driving innovation. However, as technology matures, a new evolution is reshaping the way Financial Institutions (FIs) leverage AI – Vertical AI.

Vertical AI provides both automation and strategic value to U.S. FIs that assists them in navigating rising customer expectations, tackling regulatory pressure, and tightening operating margins. Unlike general-purpose AI tools, Vertical AI is directed to streamline industry operations.

Vertical AI comprises those AI systems that are designed to integrate deep domain expertise, key data insights, and unique workflows into financial operations. It is introduced to streamline process and resolve problems belonging to different niches like banking, insurance, or asset management, replacing generic AI tools that demand extensive customization.

1. Domain-Specific Intelligence
The U.S. financial landscape is ever evolving. From complex regulations to large-volume transactional data, general AI tools fail to understand the depth of key areas. However, Vertical AI models are built with domain logic embedded into their core that can utilize the customer data, resolve complexities, adhere to compliance reports, ensure verification of KYC documents, and much more. This will enhance the implementation strategy effectively to align the financial process with operational goals.

2. Enhanced Operational Efficiency
Vertical AI is on the verge of bringing automation to its best. It can easily handle high-volume tasks that include transaction monitoring, fraud alert triaging, and complex compliance checks. These operational processes drive the functionality of FIs and majorly contribute to customer trust and retention. However, handling such processes with generic automation tools is both time- and resource-consuming. Here comes the role of Vertical AI, which understands the nuances of financial services operations and leverages transactional data. It enables FIs to detect real-time anomalies and prevent fraud based on risk and disputes arising from chargebacks through the documents by intelligent extraction of relevant evidence.

3. Improved Customer Experience
Today’s customers anticipate quick, personalized, and precise service. Vertical AI facilitates smart customer engagement by bots and virtual assistants that have been specifically trained in banking products, lingo, and rules. Consider a customer contacting a bank to report a suspicious transaction. A Vertical AI assistant can instantly look up pertinent records, run fraud-detection algorithms, and answer in real time, escalating only when required. This cuts resolution time and raises customer satisfaction while liberating human agents for more high-value work.

4. Regulatory Compliance and Risk Management
Managing a large customer base often becomes challenging for FIs and presents huge risk exposure to non-compliant issues. Vertical AI assists FIs through its excellent automation that streamlines document analysis, flags anomalies, and tracks regulatory requirements. Vertical AI helps by automating document analysis, flagging anomalies, and tracking regulatory changes in real time. When incorporated into processes such as AML (Anti-Money Laundering), sanctions checking, and audit trails, Vertical AI keeps FIs compliant without the weight of human monitoring.

U.S. FIs that implement Vertical AI can look forward to enhancements across a number of critical metrics:

• Cost Savings: Automating time-consuming tasks decreases operational costs.
• Reduced Turnaround Times: Decision-making using AI accelerates processes.
• Improved Accuracy: Purpose-built models eliminate human error.
• Scalability: FIs can accommodate volume spikes without hiring more staff.
• Improved Compliance: Real-time reporting and monitoring mitigate risk.

Vertical AI is tailored to address issues in a particular industry or domain using a deep, contextual understanding of the industry. In banking, for instance, Vertical AI could drive transaction monitoring, credit risk assessment, or dispute resolution systems—designed to that industry’s regulations, workflows, and data. It’s narrow, very specialized, and tuned for performance in a clearly defined environment.

Agentic AI, on the other hand, does not confine itself to one area. Agentic AI implies AI systems that function independently, pursuing objectives by reasoning, planning, and executing activities in numerous systems and instruments. Such AI agents can deconstruct goals, decide, respond to feedback, and function with little human input. While Vertical AI delivers rich expertise at a specific task, Agentic AI delivers initiative and autonomy to employ that expertise in a dynamic goal-oriented manner.

The transition from generic AI to Vertical AI is a strategic inflection point for U.S. FIs. As operational complexity increases, FIs require tools that speak their language, follow their workflows, and integrate seamlessly with their compliance environment.

Read about how your FI can leverage Advanced AI and ML to enhance operational efficiency.

1) How is Vertical AI different from first-generation AI?
First-generation AI has a general purpose, while Vertical AI solves industry-specific challenges with domain-specific models.

2) Can Vertical AI improve customer service in financial institutions?
Indeed, Vertical AI supports improved customer care through the offer of intelligent chatbots and virtual assistants that have been specifically trained in financial products, regulation, and terminology. This enables more prompt, more precise answers to customers’ queries and problems.

3) How does it support regulatory compliance?
Vertical AI automates tasks like anti-money laundering checks and sanctions screening while ensuring compliance with regulatory requirements.

– by Paresh Ashara
Vice President, Data Analytics