Almost every industry is using AI or artificial intelligence today to provide efficient service with lower cost and time. Artificial intelligence involves the automation of the process. Devices are taught to use their cognitive functions to identify and solve problems like humans. It reduces human effort and errors and has become highly popular among all the companies today.
The finance industry is not an exception. In fact, according to experts and researchers, the finance industry always comes first in the list of AI users. It is using AI in all possible ways like cognitive computing, chatbots, personal assistant. So, today we will help you to understand how artificial intelligence has become a turning point for the finance industry. Let’s start.
How AI is Transforming the Finance Industry
So, below we will discuss some of the ways how Artificial Intelligence is transforming the Finance Industry. Let’s see:
1. Risk Management
The finance industry deals with things like businesses, banks, loans, and credit cards, etc. These are matters that companies should manage carefully. When they try to solve these with human efforts with a basic level of technology, there are high chances of error. Bookkeeping and record management are necessary to provide smooth service in the finance sector.
Machines with artificial intelligence not only learn from previous data but also keeps that data secure for future use. That is the reason why the finance sector depends so much on artificial intelligence. We are giving you an example so that you can understand the importance of AI in this sector.
Let’s assume a customer has applied to the bank for a credit card. Bank has to calculate the credit score to see the eligibility. They have to collect so much data to calculate. Loan payment habits, the number of due loans, number of existing credit cards, the income of that individual etc. are the factors to measure credit score.
Now it is clear that the collection, storage, and processing of these huge data is impossible with human effort. In a bank, at least 100-150 customers are applying for credit cards. So, it’s impossible to continue this process without artificial intelligence. Machines with artificial intelligence are three times faster them human analysts.
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2. Customer Interaction and Advisory Services
As we are living in the age of technology, everything has come online. Customers also love to interact with financial institutions online. Especially when they have some small doubts regarding finance, or they want to complain, they prefer online. So the instructions like bank and financial advisory organisations have to strengthen their online services to get more customers.
But it is not possible to recruit employees at that level to satisfy customers. So, the use of Chatbots is mandatory here. They have proven themselves as a powerful tool for customer satisfaction as well as saving money. Financial advisory institutions can drop their service charge if they use artificial intelligence and machine learning to solve the issues of the customers.
AI can combine efficient calculations with human insight without human supervision. This combination works amazingly in the sector of finance. Advisory companies also use AI in non-commercial activities. The category includes fixing a meeting with clients, sending emails etc. AI is also efficient to analyse the business data, which helps the owners to make effective decisions.
3. Fraud Detection and Management
This is the most critical part of the finance sector. Here every company, i.e., banks and other financial companies, are dealing with money. The loan a bank is offering is someone else’s money. This is the reason banks pay interest when you deposit your money in your bank account.
The bank is taking interest from whom they have given loan, and paying you a portion as interest. This is the reason banks take the fraud very seriously, and it should be. AI is the best choice when it comes to fraud detection.
It uses past spending behaviours on different transaction instruments to detect odd behaviours. It will instantly highlight the use of credit cards from a different country, any unclear or misleading details of the user, or attempt to withdraw a sum of money that is unusual for that account. Also, a positive approach to AI is that it can learn even while working.
If it raised a red flag during a transaction and human beings correct that, it learns from that experience. It will store that data and will make more sophisticated decisions in the future.
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You all know about investing companies. They are also a part of the finance sector. These companies use artificial intelligence severely for multiple purposes.
Trading and investment depend on the ability of future prediction. Machines with artificial intelligence perform better in this. To predict the future, someone has to go through past data and current market trends.
An analyst should also study market trends of all developed and developing countries. This accumulates a huge data to study, which is practically impossible for a small team of market analysts. To avoid high service costs, investment companies use artificial intelligence.
Machines can easily crunch huge data in a short time, learns from the past financial crisis, and can predict future trends accurately. Also, AI can suggest investment areas according to the individual’s risk appetite.
5. Managing Finance
It is one of the most challenging tasks for many of us. But in the future, we can take help from AI to manage our finance. PFM or personal financial management is an AI-based wallet, which is performing well in finance management.
The process of work is very simple. Developers of this wallet build algorithms using AI. This wallet helps consumers to make smart decisions about their spending.
It accumulates data from your web footprints to create your spending graph. According to finance experts, this idea is going to be the future of financial management, where people will use AI to monitor their expenses.
We can conclude from the above discussion that, AI is the future of the finance industry. Machines with artificial intelligence not only study a huge amount of data but also decide with human insight. This combination makes machines superior to humans as a finance analyst. AI is also capable of fraud detection, which is very much important in finance.