Almost every industry today is utilizing AI or artificial intelligence to provide efficient services at lower costs and in less time. Artificial intelligence entails the automation of processes, whereby devices are taught to utilize their cognitive functions to identify and solve problems akin to humans. This reduces human effort and errors, making it highly popular among companies across various sectors.
The finance industry is no exception. In fact, according to experts and researchers, it consistently ranks first in the list of AI users. It leverages AI in various ways, such as cognitive computing, chatbots, and personal assistants. Therefore, today we will delve into understanding how artificial intelligence has become a pivotal turning point for the finance industry. Let’s begin.
How AI is Transforming the Finance Industry
So, below we will discuss some of the ways in which Artificial Intelligence (AI) is transforming the Finance Industry. Let’s see:
1. Risk Management
The finance industry deals with matters such as businesses, banks, loans, and credit cards, among others. These are areas that companies must manage carefully. When attempting to address these issues solely through human effort with a basic level of technology, there is a high likelihood of errors. Bookkeeping and record management are necessary to ensure smooth service in the finance sector.
Machines equipped with artificial intelligence not only learn from previous data but also keep that data secure for future use. This is why the finance sector relies so heavily on artificial intelligence. To illustrate the importance of AI in this sector, let’s consider an example.
Let’s assume a customer has applied to the bank for a credit card. The bank must calculate the credit score to determine eligibility. They need to collect a significant amount of data for this calculation, including loan payment habits, the number of outstanding loans, existing credit cards, and the individual’s income, among other factors.
The collection, storage, and processing of such vast amounts of data are impossible with human effort alone. In a bank, where at least 100-150 customers are applying for credit cards, continuing this process without artificial intelligence would be impractical. Machines with artificial intelligence are three times faster than human analysts.
2. Customer Interaction and Advisory Services
As we are living in the age of technology, everything has gone online. Customers also prefer interacting with financial institutions online, especially when they have minor queries about finance or wish to lodge complaints. Therefore, institutions such as banks and financial advisory organizations must enhance their online services to attract more customers.
However, recruiting employees at such a scale to meet customer demands is not feasible. Hence, the use of Chatbots becomes indispensable. They have proven themselves as powerful tools for enhancing customer satisfaction while also reducing costs. Financial advisory institutions can lower their service charges by leveraging artificial intelligence and machine learning to address customer issues.
AI can seamlessly integrate efficient calculations with human insight without requiring human supervision. This combination works remarkably well in the finance sector. Advisory companies also employ AI in non-commercial activities such as scheduling client meetings and sending emails. AI is also proficient in analyzing business data, aiding owners in making effective decisions.
3. Fraud Detection and Management
This is the most critical part of the finance sector. Here, every company, including banks and other financial institutions, deals with money. The loan a bank offers represents someone else’s money. This is why banks pay interest when you deposit your money into your bank account.
The bank earns interest from those to whom they have lent money and then pays you a portion as interest. This underscores why banks take fraud very seriously, as they should. AI emerges as the best choice for fraud detection.
AI analyzes past spending behaviors across different transaction instruments to identify unusual activities. It promptly flags instances such as credit card usage from a different country, unclear or misleading user details, or attempts to withdraw an unusual sum of money from an account. Furthermore, a significant advantage of AI is its ability to learn continuously.
If AI raises a red flag during a transaction and humans rectify it, AI learns from that experience. It stores such data and makes more sophisticated decisions in the future.
4. Trading
You’re likely familiar with investment companies, which are integral to the finance sector. These companies extensively utilize artificial intelligence for various purposes.
Trading and investment rely heavily on the ability to predict the future. Machines equipped with artificial intelligence excel in this regard. Predicting the future entails analyzing past data and current market trends.
An analyst must also study market trends across all developed and developing countries. This involves accumulating vast amounts of data, which is practically impossible for a small team of market analysts. To mitigate high service costs, investment companies leverage artificial intelligence.
Machines can swiftly process vast amounts of data, learn from past financial crises, and accurately predict future trends. Additionally, AI can suggest investment opportunities based on individual risk appetites.
5. Managing Finance
It is one of the most challenging tasks for many of us. However, in the future, we can seek assistance from AI to manage our finances. PFM, or personal financial management, is an AI-based wallet that excels in finance management.
The process is straightforward. Developers of this wallet build algorithms using AI. This wallet helps consumers make smart decisions about their spending.
It gathers data from your online activities to create your spending graph. According to finance experts, this concept represents the future of financial management, where people will use AI to monitor their expenses.
Conclusion
We can conclude from the above discussion that AI is the future of the finance industry and AI is transforming it. Machines equipped with artificial intelligence not only analyze vast amounts of data but also make decisions with human insight. This combination renders machines superior to humans as finance analysts. Additionally, AI is capable of fraud detection, a critical aspect of finance.
