Artificial intelligence is being used in many areas of financial services to improve efficiency, cut costs, and provide a more pleasant experience for the end user. Far from being a futuristic concept exclusive to sci-fi novels, AI is now fully embedded across the financial services sector. Read on to discover exactly how AI has influenced the world of finance.
- Making Credit Decisions
AI enables lenders to assess potential borrowers more efficiently, more quickly and more cheaply. In contrast to traditional credit scoring methods, AI employs highly sophisticated ways of determining the credit-worthiness of applicants. A huge benefit of this is that it makes it easier to separate those with genuinely bad credit history from those with no credit history.
- Managing Risk
Owing to the superior processing power of computers in comparison to the human brain, AI can handle huge amounts of data that would completely overwhelm a person. This lends itself to far more robust risk management systems which are able to analyze historical cases and use this data to flag future issues in the initial stages, before they’ve had the chance to cause disaster.
- Preventing Fraud
AI can make use of complex algorithms to detect credit card fraud and money laundering far more effectively than a person could. “By examining spending habits, the pattern-spotting abilities of computers make AI the perfect partner when trying to stamp out financial crime,” explains Gerald Sudduth, tech writer at Write my X and 1 Day 2 write.
Next time your bank thwarts a fraudulent attempt to gain entry to your account, perhaps you’ll have AI to thank.
High-frequency trading, sometimes known as quantitative trading, is assisted greatly by AI. Quantitative trading relies on the analysis of large, complex data sets which could take a human a long time to dissect. AI, however, can handle massive amounts of data without a problem, saving precious time.
As well as being a key tool in quantitative trading, AI can be used to construct risk- and objective-appropriate portfolios, with some firms having so much faith in AI that they’ve passed over the management of all of their portfolios to artificial intelligence.
So far, the examples of AI’s uses in financial services have focused on its quantitative and data-processing abilities. However, it can also be used to provide a more personal touch to clients. Many banks use AI assistants to function as chatbots and provide instant advice, taking some of the burden away from customer service centers.
- Automating Processes
Time-consuming but tedious tasks can be passed over to AI, saving time and money and removing the risk of human error. This means that resources can be diverted to other tasks that require significant human input to be done correctly.
Consider the amount of transactions that take place within the banking and wider financial services system every day. Now consider the amount of man-hours, and consequently the amount of money, it would take for these to be monitored manually. Luckily, AI can be used to automate the detection of threats, identify any data breaches, and speed up any investigations.
AI can be employed to use blockchain technology to create shared databases that provide businesses throughout the financial services sector with the tools they need to improve their processes. This can lead to improved efficiency, higher security, and reduced costs.
“With the recent surge in popularity of cryptocurrency, it’s not surprising that the power of AI has been harnessed to create digital cryptocurrency marketplaces and wallets”, says Anita Knight, journalist writer at Origin Writings and Brit Student. This makes cryptocurrency more accessible to any potential investors.
Underwriting can be complicated, with a high volume of messy mathematical equations needed to accurately assess the risk a customer poses. To take some of the strain off actuaries’ shoulders, AI can be used to assist with the underwriting process by examining huge amounts of data with ease.
AI is becoming prevalent across the financial services sector and has shown itself to be an indispensable tool for a vast variety of tasks. In the future, expect to see the influence of AI spread even further – who knows what it will be used for next.
George J. Newton works at Write my thesis and Dissertation writing service as a business development expert. He is also a regular contributor to Next Coursework. He has been married for ten years, giving him ample opportunity to perfect the art of the apology.