Artificial intelligence (AI) simulates human intelligence via machines programmed to think and act like humans. It also describes any device that exhibits human-like traits like learning and problem-solving.
Since its inception, Artificial Intelligence has impacted various industries, including health care, education, and tourism. For example, in the tourism industry, artificial intelligence has enabled the personalization of data for potential travelers, such as routes, dates, and costs, and the optimization of sales, price, and prevention of fraudulent transactions.
Banking and finance are not left out, and AI is already being leveraged across various financial services with a positive impact. Financial organizations have implemented AI-focused solutions to customize the user experience, automate processes, and mitigate financial risk, setting AI on a path to becoming part of mainstream financial services.
FinTech firms are the primary proponents of AI in the financial sector. While some companies use AI to develop new products and services, others focus on improving existing ones. Many of these companies are taking a product-oriented approach by offering AI-enabled services.
Various modes of operation by more traditional financial institutions are changing due to artificial intelligence implementation, including generating and using data insights, creating new forms of innovation, introducing new risk dynamics, and presenting unique challenges to firms and policymakers.
The ability of AI to personalize products and services, accelerate internal processes, and improve cyber security, among other things, cannot be overstated. Finance automation, for example, has become much easier thanks to AI-based software. This software automates labor-intensive tasks like journal entries, credit control, and financial reporting.
According to Gartner, 80 percent of finance leaders have implemented or plan to implement the Robotic Process Automation (RPA) system, which is critical in finance automation and increases efficiency, productivity, and compliance.
Credit is one area where AI is having an impact. AI’s ability to provide accurate, cheaper, and faster assessments of potential borrowers lead to data-driven decisions by financial institutions.
Unlike financial institutions’ traditional credit scoring system, the AI credit scoring system is based on more complex and sophisticated rules. Lenders can use its algorithms to distinguish between applicants who have a high risk of default and those who do not have a long credit history but are creditworthy.
The Finance industry has also applied AI to solve its most significant challenge, Fraud. In 2021 the half-year fraud update showed that criminals stole £753.9 million through Fraud. Compared to the first half (H1) of 2020, it showed an increase of over a quarter. Financial institutions applied new AI technologies to detect and prevent these frauds as early as possible.
Artificial intelligence and other tech have given financial institutions new ways to provide benefits and comforts to their customers. Such as chatbots that provide comprehensive self-help solutions, social media integration, and even the development of virtual assistants to assist customers while conducting financial transactions.
Some apps offer personalized financial services to assist people in achieving their financial goals. They usually keep track of income, spending habits, and recurring expenses while devising a budget and providing financial advice. The three largest US banks, Wells Fargo, Chase, and Bank of America, have launched mobile apps that provide customers with efficient banking.
According to Forbes research, AI and other technological advancements will continue to impact financial services for the foreseeable future, which found that 65 percent of senior financial management expect AI to have a positive impact on finance.
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