In the technology era we are living in, it is hard to follow all the innovations and discoveries. New tools, technologies, and devices appear every day. Today, an average human cannot do without a smartphone, smartwatch, smart car or even an intelligent coffee maker. The cutting-edge technologies are irreplaceable in our lives. They impact every single industry and every person. In this article, we will pay special attention to artificial intelligence and discuss the role of AI in finance particularly.
Why is this topic so important? Well, the development of artificial intelligence is one of the greatest steps humanity has ever made. This technology can be used for various purposes and is powerful enough to change the world we live in completely.
What do we know about AI? Most people know the basic facts about this technology and are familiar with the most common real life cases. For instance, AlphaGo, an AI developed by Google defeated a world chess champion. Self-driving Tesla car uses artificial intelligence and amazes old-school car drivers. Not so long ago, science fiction was the only source of what self-driving cars could be like. Now we can see them on the streets of our cities. One of the well-known AI applications is Siri, your iPhone assistant. Apart from these examples, AI finds its application in every industry. It shakes the business world and makes significant changes. Artificial intelligence in finance is a topic that deserves to be reviewed in details, so let’s move on to it.
The Introduction to AI in Financial Services
Artificial intelligence technologies bring huge changes to our society. Mainly, they affect the following 5 industries:
In turn, banking, retail, and healthcare sectors make the highest investments in the AI technologies development.
A market analysis by new IDC spending guide forecasts that adoption of AI will drive worldwide revenues to $47 billion in 2020. According to this number, the Compound Annual Growth Rate will reach 55.1% over the period from 2016 to 2020.
In 2017, the AI technologies were primarily aimed at:
Customer service automation;
Of course, this is not an exhaustive list of real use cases of AI in 2018. The conversation about how to use artificial intelligence in finance has to start with the general information on what artificial intelligence is.
The aim of artificial intelligence technologies is to develop smart software solutions, technologies, and machines that are able to perform actions and make decisions like humans. Artificial intelligence can learn, analyze, plan and conclude. It can carry out human functions. Furthermore, AI can improve itself without human help or developers’ efforts. It builds the model of behaviour on the basis of input data and its own experience.
Development of AI means incredible changes for humanity. One of the most important reasons is that AI analyzes information, solves tasks and carries out operations more quickly than a human could.
AI Technological Sides
Artificial intelligence includes four main technological aspects. A few of them are sometimes considered to be synonyms for artificial intelligence.
Machine Learning. This modern technology is responsible for analytical model building. It uses algorithms and allows the computer to study and find mistakes without being pre-programmed for that.
Deep Learning. This type of machine learning is able to recognize objects in images or videos. One of the famous examples of deep learning technologies is DeepFace developed by Facebook. As you can see by yourself, this technology recognizes you in the photos you are not tagged in.
Language Processing. The AI-based software has the ability to understand natural language. Siri, the application that was mentioned above, can hold a conversation with you, thanks to high-quality language processing features.
Internet of Things. IoT technologies claim that the components of our lives can be connected via information technologies. Have you ever dreamed of a cup of fresh coffee waiting for you when you have just got out of bed? Well, with IoT technologies, your alarm clock may be connected to the coffee machine, so you can get a cup of your favorite drink after the alarm clock rings.
Application of AI in financial services needs a more comprehensive study to be made. The point is that this innovative technology, together with its components, can be of great use in one of the most important modern industries.
Artificial Intelligence Application in Finance & Banking
The giants of financial industry improve their competitiveness using AI for improving and automating their processes. In a nutshell, the use of artificial intelligence for banking can minimize the number of potential risks, help to optimize the processes, increase the capabilities, and multiply the profit. These results can be reached thanks to the AI algorithms.
Artificial intelligence handles the data-related processes. Without data processing, it loses its sense. The following types of data can be analyzed by AI with the highest accuracy:
In this case, the accurate analysis means that AI can process these types of data better and faster than even the most skilled financier can.
Software solutions based on AI technologies automate processes and replace human decision making. What does it mean for the financial sector? Let’s make a review.
- Fraud Prevention
Banks and financial organizations deal with huge volumes of personal data. Besides that, they deal with people’s money. Fraud is the most dangerous thing that can happen in this industry: one mistake can lead to unbelievable loses, troubles and criminal responsibility. This is why the key aim of AI technologies implementation in the financial services is detecting fraud. AI detects suspicious activities, provides additional level of security and prevents fraud. In short, AI improves bank security.
Banking services are enhanced by simulating a real conversation. Using the natural language processing technology, chatbots in financial services answer customers’ queries in time and precisely. For instance, HDFC Bank has launched Eva chatbot and thus, attracted a lot of attention, gained new clients and created better conditions for the current ones.
- Risk Management
Artificial intelligence makes a huge difference in investment management and risk analysis. AI can accurately estimate the client’s creditworthiness and answer the crucial question: is this person reliable? The AI-based system analyzes the risks by considering transaction and credit history, income growth, market conditions etc. Predictive analytics provides considerable details on the micro activities and behaviour to determine if the investments can occur. Note that all of these tasks cannot be performed and processed by humans.
- Regulations and Rules
The financial institution has to comply with different laws and rules that are sometimes even hard to keep track of. Reports take too much time, and one tiny detail missed by a bank specialist may lead to minor complications or even serious problems. AI takes into account all the regulations, detects deviations, analyzes data and follows the rules accurately. Thanks to the complete automation of the processes, it is possible to avoid issues with the help of AI.
- Customer Support
Complaints about customer support are immeasurably important. Having to wait for ages till a specialist answers is unbearable. AI makes a revolution in customer support service. AI-based customer support is able to provide relevant and fast answers to customers in a friendly manner.
Additionally, mobile banking enhanced with AI technologies is able to provide customers with advice, tips, and information immediately. Improving customer support service increases the customers’ level of trust and satisfaction and makes a contribution to the general institution improvement as well.
- Trading Algorithms
The comprehensive analysis of the different market aspects and factors allows reaching new heights in trading algorithms. Nowadays, a lot of well-known hedge funds use AI for their purposes.
The Bottom Line
There are tons of opportunities to use artificial intelligence technologies in financial services. All of them are aimed at process of automation and improvement, as well as the elimination of the necessity to involve human actions and efforts. The above-mentioned applications prove that AI has a strong potential to stabilize the whole industry and bring the world’s economy to a new level.
At the same time, AI is actively discussible nowadays. There are contrary opinions concerning its development and potential impact. Such worldwide-known geniuses as Stephen Hawking and Elon Musk have warned that those innovative technologies have a dark side as well. Despite that, AI keeps growing.
Our future will be bright and productive if the successful co-existence of AI technologies and the humanity is organized. Any possible negative consequences need to be considered in order to create software solutions that will make the world better instead of destroying it.
AI-based tools for financial institutions can make a great positive impact. The field is as profitable as it is complex, however. The decision to implement AI-based financial software calls for technically-rich process of working out many tech aspects. But don’t be frightened by the potential hardships just yet, it’s all about the staff! You can always cooperate with our skilled, competent development team - let’s make the best of your ideas come to life together!