The Accelerated Rise of Artificial Intelligence in the Banking Sector of the Republic of Serbia in Conditions of Global Instability

Abstract

Abstract: Artificial intelligence (AI) is rapidly moving from the experimental stage to the operational application stage and is becoming a key tool for transforming the banking industry, as a standard that changes the lending process, risk management, customer relations, user experience, fraud detection, customer churn prevention and decision-making process. Banks that use AI wisely can position themselves as industry leaders, providing faster, smarter and more personalized services to customers, while automating internal processes. The aim of the paper is to comprehensively explore and highlight the application possibilities that generative AI brings to the banking sector, how banks scale AI solutions with technological, investment and regulatory implications, and to make a significant contribution to understanding the role that AI plays in the banking industry, where the transition to more digitally focused banking models has become a feature of the modern banking era in which the application of AI changes the business model, but also carries with it major risks and limitations in practice. Therefore, the implementation of clear strategies, faster adaptation, constant education of management and development of talents, as well as the creation of additional value in the market are necessary. The subject of research in this paper is the accelerated development of AI in the banking sector in conditions of global instability, market volatility where the introduction of AI imposes the need for resilience, smart adaptation and responsible innovations. The paper highlights the importance of preparation and activities that the banking sector should implement in order to make its operations more resilient to upcoming changes, in which AI plays a key role. Key questions in the paper relate to the purpose of AI implementation, key decisions of top management when implementing AI, to what extent AI is being applied in the banking sector of the Republic of Serbia and where the banking sector currently stands in terms of adopting responsible AI, with a presentation of banks that are leaders in AI implementation and how they are actively adapting their people, policies and processes, what lessons they have learned, and what best practices they have adopted in order to accelerate innovation, while ensuring that they responsibly apply AI, which is not an obstacle to faster innovation, but a key so-called "grail" of digital transformation. The research methodology applied in this paper includes a combination of scientific and professional literature research, methods of content analysis of financial and business reports of banks and regulators, analysis of the AI ??index, as well as interviews with top managers and IT managers in our banks. The research results indicate that the key to the implementation of AI lies in the smart use of technologies, compliance with regulatory requirements and ethical principles in data management, and provide a practical example of how AI is used to increase efficiency, productivity and stimulate innovation in the banking sector. The paper provides theoretical and practical implications for the understanding and application of AI in the banking sector, where from a theoretical point of view it contributes to the expansion of knowledge about the role of AI and the understanding of the relationship between the application of AI and the key performance of the bank. The paper highlights the need to develop models and business frameworks for responsible AI and the integration of AI with blockchain and decentralized finance. From a practical point of view, the paper provides significant guidance to top managers and bank owners for the implementation of AI in the selected business model, where the assessment of the maturity of AI implementation compared to market leaders provides guidance and the possibility of proper implementation of AI, as well as the protection of data privacy, where the key role of regulators is to focus on resolving risks and ethical issues associated with the use of AI, but also on promoting fair competition between fintech companies and banks. The proposal for future research primarily concerns stability and security, which is reflected in exposure to various types of non-financial risks, and ultimately in the area of ??cybersecurity threats, where the bank of the future will represent a combination of technology, responsible regulation and lasting trust in times of rapid change, uncertainty and the need for resilience. Ethics, data quality and transparency are key to trust, and banks that implement AI in accordance with these principles will be the ones that advance fastest.