AI in FinTech is constantly changing the landscape of the whole industry. How is it used, what are its benefits and trends for the future?
Artificial Intelligence in financial institutions: an overview
A recent report on Artificial Intelligence in financial sector prepared by Business Insider states that as much as 80% of banks are highly aware of the potential benefits presented by AI and machine learning. What are they? Faster and more accurate data processing, better risk analysis, fraud detection, improved customer service and investment management, to name just a few. Generally speaking, AI applications are enabling financial institutions to automate complex tasks, improve their customer experience and increase efficiency, making them more adapt to the ever growing needs of our society.
Examples of AI in financial services industry
Here are some examples of how AI is being used within financial services industry:
AI and customer service
Artificial Intelligence helps enhancing customer service thanks to AI-powered chatbots which provide assistance 24/7. Chatbots can answer simple questions, provide account balance and help with some basic transactions.
AI and risk management
AI has significantly improved risk management by enabling financial institutions to analyse and process large amounts of data in real-time, identify potential risks and proactively respond to them . Some of the most important areas where AI algorithms are being used in risk management include:
- fraud detection, where large amounts of data are being used to detect patterns indicating fraudulent activities,
- credit risk assessment, where AI-powered credit scoring algorithms analyse credit data to predict creditworthiness with greater accuracy,
- operational risk management, where AI is used to identify and mitigate operational risks such as system failures, cybersecurity threats and employee errors,
- compliance monitoring, where AI is used to monitor regulatory compliance and detect potential violations.
AI in investment management
In investment management AI is being used to analyse financial data and identify investment opportunities, manage portfolios and optimise trading strategies.
AI in personalised banking
AI algorithms are often used to analyse customer data and provide personalised products, service recommendations and financial advice. Some of the ways AI is being used to offer personalised financial advice include:
- robo-advisors that analyse customer data and preferences to provide personalised investment recommendations,
- behavioural finance, meaning AI analysing customers' behaviour and decision-making patterns to identify their financial goals, preferences and risk-tolerance,
- predictive analysis used to predict customers' future financial needs and provide proactive advice to help them achieve their goals.
AI in credit scoring
Artificial Intelligence is also used to analyse credit data and predict creditworthiness, much simplifying lending decisions and allowing institutions to make them quicker.
AI in compliance monitoring
AI algorithm are also used to monitor regulatory compliance and detect potential violations, allowing businesses to stay on top of those requirements, meaning avoiding risks and potential penalties.
What to Expect in The Future From AI in the Financial Industry
It is certain that in the nearest future the financial services industry is expected to experience significant changes as a result of advancements in artificial intelligence technology. Let's look at some potential developments we can expect:
1. Increased automation
AI will continue to automate routine tasks such as customer service, back-office operations and compliance monitoring. This will result in increased efficiency and cost savings for financial institutions and better customer satisfaction.
2. Improved fraud detection
AI-powered fraud detection algorithms will become even more sophisticated, allowing financial institution to detect and prevent fraudulent activity more effectively.
3. Enhanced risk management
AI will continue to be used to improve risk management by analysing large amounts of data and identifying patterns that may indicate potential risks.
4. Personalised financial advice
AI will enable financial institutions to provide personalised financial advice based on customer data and preferences. This will improve customer experience and help individuals make better and safer financial decisions.
5. Seamless integration with other technologies
AI will be integrated with other emerging technologies, such as blockchain and the Internet of Things (IoT), to provide even more advanced financial services.
6. Increased regulatory compliance:
AI will help financial institutions to comply with increasingly complex regulatory requirements by automating compliance monitoring and reporting.
7. Better trading strategies
AI technologies such as algorithmic trading that analyses market data and executes trades automatically, or machine leaning that analyses data and identifies patterns will be increasingly used to develop and implement trading strategies.
Benefits of AI in Financial Sector: Summary
The benefits of using AI and ML in financial institutions are immense. Some of the most important ones include:
- increased efficiency,
- improved accuracy,
- better risk management,
- cost savings
- improved customer experience
- enhanced security.
In the future AI is expected to play an even greater role in the financial industry, as new applications and technologies continue to be developed. What's important though is to ensure that these developments are balanced with privacy and security issues, which currently are one of the main concerns when it comes to AI in finance.
One things is sure – the time to embrace AI and ML in the financial world has just come. To speak about data-based opportunities and the future of the sector, or to get a sound advice on what you can do to make the most out of the AI revolution, do get in touch with our team.
