Due to the availability of data and the affordability of computing power, artificial intelligence (AI) systems have seen a significant increase in adoption in finance. This trend is expected not to change. Some estimates predict that global spending on AI will double between 2020-24. It will grow from USD 50.1 billion by 2020 to USD 110 billion by 2024. (IDC, 2020) So the world of Artificial intelligence is growing rapidly and seems to have affected every sector and industry. Banking and finance are among the many sectors that have found ways to harness this revolutionary technology.
Importance of AI’s role in the Financial Industry
Financial AI can be used to increase efficiency by reducing friction costs, such as commissions and fees associated with transaction execution can be reduced and productivity levels improved, which leads to greater profitability. Automation and technology-enabled cost reduction allow for spending efficiency, capacity reallocation, and transparency in decision-making. Artificial intelligence (AI) applications in financial services providers can improve the quality and variety of financial products and services offered to consumers, enhance the tailoring and personalization of these products, and diversify the product range. AI can be used to unlock insights from data and inform investment strategies.
Benefits of AI in Finance
Below are a few benefits of how AI is revolutionizing the finance systems in corporate life.
- Enhanced data analysis and decision making
AI in finance has the ability to increase productivity at all levels. This is one of its most important benefits. AI features allow for faster data analysis and less time to produce statutory reports. AI technology merging into the finance sector increases employee productivity. Different processes won’t require hard work and can be completed using AI.
- Increased Annual Revenues
The use of AI in the enterprise is proving to be a huge financial win for companies. More than 30% of respondents claimed that AI has increased annual revenues by more than 10%, and that AI has reduced annual costs by more than 10%.
- Increased efficiency and productivity
Efficiency in AI in finance refers to optimizing operations through precise forecasting, predictive maintenance, and quality control. It also involves identifying inefficiencies and rectifying them. It improves productivity and preserves profit margins despite rising costs. It saves money.
- Risk assessment
Is artificial intelligence possible to determine if someone is eligible for a loan? Definitely. According to Towards Data Science, banks and mobile apps use machine learning algorithms to determine loan eligibility and provide personalized options. What’s the advantage? AI isn’t biased and can quickly determine loan eligibility more accurately and quickly.
- Fraud detection, management and prevention
Have you ever received a phone call from your credit card company after you’ve made several purchases? Thanks to artificial intelligence, fraud detection systems analyze a person’s buying behavior and trigger an alert if something seems out of the ordinary or contradicts your traditional spending patterns.
- Looking to keep up with the latest financial trends and advice
Are you interested in a portfolio assessment? An artificial intelligence algorithm can analyze your portfolio and provide you with the most current trends and financial information.
- Personal banking/financial management
Chatbots, personal assistants, and virtual assistants have reduced (and sometimes eliminated) the need to wait on hold to speak with a customer service agent. Clients can now check their balance, make payments, review account activity, or ask questions to a virtual assistant. They also have the ability to get personalized banking advice when it’s most convenient.
- Making smart underwriting decisions
Built In claims that AI technology is helping banks and lenders make “smarter underwriting judgments” during the credit card and loan acceptance processes. It is possible to create a more accurate picture of people who might be underserved by using a variety of characteristics.
- Reducing false positives and human mistakes
Operator error is a common mistake that people make. 94% of IT professionals in the financial sector were unsure if their advisers, employees, or partners are capable of handling consumer data. Artificial intelligence is a great tool to reduce false positives and human errors.
- Increase your ability to predict and appraise loan risk
Artificial intelligence uses customer spending patterns and other factors to predict loan borrowing behavior. This is particularly important in areas where people have access to the internet and mobile phones, but not traditional credit.
Forbes offers the following example: A borrower may download an app that the lender can use to assess the person’s digital footprint. This includes social media usage, bookmarks, and other information.
The Future of AI in Finance
Because AI is becoming increasingly prevalent across many industries, it’s no wonder that it’s taking off in the field of banking, especially now that COVID-19 transformed human contact. AI has made a huge impact by simplifying and combining tasks and processing information faster than humans.