New Delhi, Aug. 24 -- Ask most people where artificial intelligence (AI) is showing up in banking, and they will point to chatbots and personalised financial recommendations. While these are easy to demonstrate and increasingly familiar, they are not where AI will have its biggest impact.

AI in banking should be thought of as operating at three layers. The first talks to the customer. The second makes decisions about transactions and customers through fraud detection and credit. The third helps run the institution itself, from liquidity and compliance to everyday operations. While public attention falls away as one moves inward, the importance of the layer does not.

The first layer is where AI has moved fastest. In major digital banks, ...