How Artificial Intelligence is Transforming the Finance Industry

In the last several years, there has been an exponential increase in news relating to artificial intelligence (AI). From DALL-E to ChatGPT, these tools have notably expanded, seemingly capable of assisting us with the most disparate daily tasks. Many news articles typically focus on the disconcerting nature of the proliferation of AI and the effect it will have on our lives. However, myriad aspects of our lives can be positively affected by adopting AI technology. Ultimately, AI as a tool is irrevocably shaping and reshaping our cultures, particularly conspicuous in the world of finance where many facets are challenging and thus welcome automated assistance. Ergo, this article provides an overview of how AI can help us with our financial matters positively and effectively. 

The benefits of AI in a sluggish sector

The tumultuous global financial situation of the last several years has affected almost every country worldwide. Admittedly, financial crises are not infrequent; however, the world has significantly developed technologically compared with previous periods of instability. Nonetheless, although the rise of AI is complex it can also be successfully utilized to assist us by navigating datasets through effective data analysis. For example, AI can organize and analyze vast amounts of data (responding to minor calibrations and specifications set by humans) and recommend tax debt settlement services tailored to our situation.  

The financial sector is considered by many to be lagging in terms of digital transformation, with every aspect requiring upgrading. AI can assist this customer-oriented industry to deliver better results to their clients and improve their relationship with banks. For example, as in-person banking locations scale down and centralize their physical presence, AI can assist institutions to personalize the consumer experience through automated chatbots and biometric profiles that circumvent potential debt spirals for customers through timely notifications and advice.

Personal finance improvements

More traditional financial institutions (such as banks) can improve the independence of their customers and stay up to date with fintech digital banks by embracing AI. As mentioned, this could take the form of chatbot services that provide personalized advice for myriad financial possibilities and outcomes – available any time of day or night. AI can analyze vast datasets with speed and accuracy, reviewing patterns in client income, expenses, savings, investments, and financial goals to provide trustworthy feedback in significantly less time than manual assessments. 

Averting financial disasters

AI can mitigate or circumvent potential financial crises across different scales. For example, financial institutions (previously the drivers of potential crises) can utilize AI to make more accurate and informed decisions relating to risk and capital allocation. In the past, analyzing data was too expensive and time-consuming to conduct manually; therefore institutions barely made effective use of their available data sets. AI can execute this process automatically and efficiently, utilizing all available data points to summarize appropriate actions for the institution to consider.  

Risk assessment and fraud detection

AI can provide risk assessments and fraud detection for institutions that struggle with data analysis. By identifying patterns and anomalies in financial data, AI can assist financial institutions to circumvent fraudulent activity, such as money laundering, by validating transactions, augmenting existing security, and taking appropriate action against potential threats. AI is already monitoring anomalies in credit card and e-payment transactions, analyzing unusual changes in payment behavior. Overall, the development of AI in this field can enhance the efficacy of fraud detection and protect clients. 

Improved efficiency of services 

Financial institutions have been slow to upgrade to digital services in many countries worldwide. As a result, many processes continue to be actioned manually, such as loan processing, customer registration or deposit checks. Reportedly, the sector could potentially save financial institutions $447 billion in 2023 as AI technology becomes more adopted and integrated. This sluggishness in the sector can be remedied by AI by significantly improving the speed of these services, performing checks and automatically verifying customers for mortgages, loans or insurance policies. Analyzing repetitive data is a task that requires significant manpower and thus wages; AI can reduce this and the time involved to allow human operators to focus more intently on providing advice and services elsewhere. 

AI in accounting services

AI undoubtedly impacts the accounting sector, fulfilling much of the work previously painstakingly conducted by humans, including transaction processing, auditing, reporting, and ensuring compliance. AI can perform time-consuming data entry tasks through optical character recognition (OCR) technology, which facilitates AI algorithms to extract specific information from invoices, receipts and other documents more accurately. Moreover, AI bookkeeping software can be integrated with multiple sources of data including bank feeds and payment gateways, resulting in real-time processing and analysis of financial data almost instantaneously. 

Concluding remarks

In conclusion, AI is undoubtedly impacting every facet of finance, despite a sluggish response throughout the industry to technological advances. It is anticipated that this will change, with many more elements of our lives becoming digital. Where this paradigm shift in AI technology will move next is an intriguing prospect.