The Transformative Role of Artificial Intelligence and Big Data in Banking

Abstract

This study examines the impact of artificial intelligence (AI) and big data on the banking sector, leveraging a comprehensive dataset of over 4.5 million loans issued by a major commercial bank in China between 2015 and 2023. Using a policy mandate to adopt AI and big data as an exogenous shock, our analysis reveals that the integration of these technologies significantly enhances credit rating accuracy and reduces loan default rates, particularly benefiting small and medium-sized enterprises. Specifically, the rate of undetermined credit ratings decreases by 2.4 percentage points (a 40.1% reduction), and loan default rates decline by 2.7 percentage points (nearly 30%). By analyzing the timeline of the bank's adoption of different technologies, we find that integrating big data with AI models and recognition technologies has a more profound impact than traditional FinTech models. Our findings highlight the informational advantages of AI and big data and their role in enhancing operational efficiency, improving risk management capabilities, and promoting financial inclusion for small businesses in financial institutions.

Keywords: JEL Classification: G20, G21, G32 artificial intelligence, big data, credit rating, default rate, interest payment