2 Oct 2022| ONPASSIVE
Top AI-Powered Solutions In The Financial Industry
Like many other technological advances, Artificial Intelligence emerged from the pages of fairy tales and fiction books. People fantasized about machines that could solve problems and alleviate some of the 21st century’s rapidly compounding pressure.
In less than 70 years since the term “Artificial Intelligence” was coined, it has become an essential component of the most demanding and fast-paced industries. To gain a competitive advantage in the market, forward-thinking executive managers and business owners actively investigate new AI applications in finance and other areas. We are unaware of how much Artificial Intelligence is involved in our daily lives most of the time.
For example, in the travel industry, artificial intelligence aids in the optimization of sales and pricing and prevents fraudulent transactions. When browsing airline or hotel booking sites, AI-powered solutions enable personalized suggestions for desired dates, routes, and costs to plan our next summer vacation.
Artificial intelligence is actively used in the transportation industry to develop self-parking and advanced cruise control features intended to make driving easier and safer. Experts believe that the most significant breakthrough is just around the corner; autonomous vehicles, or self-driving cars, are already on the road.
Another promising AI-powered solution is in education, where massive open online courses (MOOCs) like Coursera and Lynda are becoming increasingly popular. With the rise of Artificial Intelligence in education, these have become a reality. Automatic grading made self-paced online courses available to anyone with Internet access — a watershed moment in many lives and careers.
Artificial intelligence saves lives, and this is not hyperbole. Doctors use AI to provide the best care for their patients, from robotic surgeries to virtual nursing assistants and patient monitoring. Image analysis and other administrative tasks, such as filing and charting, help to reduce the cost of expensive human labour, allowing medical personnel to spend more time with patients.
The rise of AI-powered solutions in the financial industry demonstrates how quickly it is changing the business landscape, even in traditionally conservative areas. Here are just a few of the most well-known artificial intelligence applications in finance.
Artificial intelligence allows for a faster, more accurate assessment of a potential borrower at a lower cost. It accounts for a broader range of factors, resulting in a more informed, data-backed decision. AI-based credit scoring is based on more complex and sophisticated rules than traditional credit scoring systems. It assists lenders in distinguishing between applicants who are at high risk of default and those who are creditworthy but lack a lengthy credit history.
Another advantage of AI-powered solutions is objectivity. A machine, unlike a human, is unlikely to be biased. Digital banks use machine learning algorithms and loan-issuing apps to evaluate loan eligibility and provide personalized options using alternative data (e.g., smartphone data). Automobile lending companies in the United States have also reported success with AI for their needs. According to this report, implementing AI reduced losses by 23% annually.
When it comes to risk management, it’s difficult to overestimate the impact of AI in financial services. Massive processing power allows vast amounts of data to be handled in a short period, and cognitive computing aids in the management of both structured and unstructured data, a task that would take far too long for a human to complete. Algorithms examine the history of risk cases to detect early warning signs of potential future problems.
Artificial intelligence in finance is a powerful ally for analyzing real-time activities in any given market or environment; the accurate predictions and detailed forecasts it provides are based on multiple variables and are critical to business planning.
Crest Financial, a US leasing company, used artificial intelligence on the Amazon Web Services platform and immediately saw a significant improvement in risk analysis without the deployment delays associated with traditional data science methods.
For several years now, artificial intelligence has been highly influential in combating financial fraud — and the future is looking brighter by the year as machine learning catches up with the criminals.
AI-powered solutions are particularly effective at preventing credit card fraud, which has grown exponentially in recent years as e-commerce and online transactions have increased. Client behaviour, location, and purchasing habits are analyzed by fraud detection systems, which trigger a security mechanism when something appears out of order and contradicts the established spending pattern.
Banks also use artificial intelligence to detect and prevent another heinous financial crime: money laundering. Machines see suspicious activity and help to reduce the costs of investigating alleged money-laundering schemes. One case study reported a 20% reduction in investigative workload.
Data-driven investments have steadily increased over the last five years, approaching a trillion dollars in 2018. It is also known as algorithmic trading, quantitative trading, or high-frequency trading.
This type of trading is rapidly expanding across the world’s stock markets, and for a good reason: artificial intelligence provides numerous significant benefits.
Intelligent Trading Systems monitor both structured and unstructured data in a fraction of the time it takes humans to process it. And nowhere is the adage “time is money” more true than in trading: faster processing means faster decisions, which leads to more secured transactions.
Because algorithms can test trading systems based on past data and bring the validation process to a whole new level before pushing it live, stock performance predictions are more accurate.
AI-powered solutions recommend the best portfolios based on an investor’s short- and long-term goals; multiple financial institutions also rely on AI to manage their entire portfolios.
Artificial intelligence truly shines when discovering new ways to provide additional benefits and comfort to individual users.
In the banking industry, AI powers intelligent chatbots that provide clients with comprehensive self-help solutions while reducing the workload of call centres. Voice-controlled virtual assistants powered by intelligent technology, such as Amazon’s Alexa, are also gaining traction quickly, which is unsurprising. They get smarter every day with a self-education feature, so expect tremendous advancements in this area. Both tools can check balances, schedule payments, look up account activity, and do various other things.
A variety of apps provide personalized financial advice and assist individuals in achieving their financial objectives. These intelligent systems monitor income, essential recurring expenses, and spending habits to generate an optimized plan and financial advice.
As we can see, the advantages of AI in financial services are numerous and difficult to overlook. According to Forbes, 65 percent of senior financial management expects AI to impact financial services positively.
However, as of late 2018, only one-third of businesses had taken steps to incorporate artificial intelligence into their business processes. Many people are still on the fence about implementing AI in financial services because they are concerned about time and money.
However, one cannot avoid technological progress forever, and avoiding it now may cost more in the long run.
If you’d like to learn more about how to use AI in financial services, please contact the ONPASSIVE team for more info.
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