How Artificial Intelligence is Disrupting the Financial Services Industry

Samrat Pradhan | Sunday, 06 June 2021, 08:45 IST

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In the last few years, financial services industry has witnessed tremendous change from development of online banking services, chatbots becoming financial advisors to adoption of big data intelligence instead of keeping heavy logbook records. Today, this industry is going through a big revolution due to the advancements in next-generation technologies, wherein, Artificial Intelligence is the most significant one. It has been enabling banking and the financial services industry to perfectly meet the demands of customers who want smarter, safer, convenient ways to save, spend, and invest money. Right from credit decisions to quantitative trading and financial risk management, the financial services industry with the help of AI has been seamlessly streamlining and optimizing processes. Therefore, AI has been bringing numerous benefits for the financial sector which spans across every operation related to financial services. Encompassing technologies such as machine learning and RPA, Artificial intelligence is the mother technology that has been bringing the needed innovation in the finance industry today.  

Utilizing a variety of factors that more accurately assess traditionally underserved borrowers, like millennials, in the credit decision making process, Artificial intelligence solutions are helping banks and credit lenders make smarter underwriting decisions. AI has been offering improved functionality and efficiency across operations by bringing the needed innovation in procedures and improving the foundational processes. Today, AI combined with big data analysis has allowed players in the finance industry to make better-informed and data-backed decisions. AI driven systems collect user data from additional sources so as to offer more personalized credit evaluations. Furthermore, based on structured and unstructured data to produce accurate predictions on potential investment opportunities in the financial markets, these systems also come with the capability of regulating real-time data analysis on the  market trends. Also, it mitigates the looming risks due to the changing market dynamics.   

As cyber-security threats are increasing rapidly with the digital revolution, cybersecurity is the primary challenge that has created the need to adopt artificial intelligence in the banking and financial sector. Though the internet and elevated platforms are expanding the horizon for online banking globally, it has been increasing the possible channels for fraud. AI/ML has proven to be useful in overcoming the challenge faced due to human’s inaccuracies which are involved during analyzing vast volumes of data that may cost millions. This is done by establishing automation to the areas which require intelligent analytical and clear-thinking. For instance, Financial Services Chatbots ensure utmost customer satisfaction by delivering unmatched resources for the enterprises.  

Here are some of the ways in which AI has been transforming the finance industry today:

Fraud Detection  

Today, all the businesses are aiming towards reducing the risk conditions by detecting any kind of looming fraud. The same goes for a financial institution as well. And, when it comes to security and fraud identification, AI has been on the forefront to proactively mitigate it by analyzing every past spending behavior on different transaction instruments to point out any misbehavior. Another excellent feature of fraud detection using AI is that the system has no qualms about learning, as it continuously learns from its past experience. For example, if a human being corrects a disapproval by AI for a regular transaction, the system learns from its experience and makes even more sophisticated decisions so as to perfectly consider what is fraud and what is not.

Advisory Services

To reduce their rates of commission on individual investments, the pressure is constantly mounting on financial institutions. Therefore, they are increasingly focusing more towards robo-advisors; Bionic advisory is another evolving field which combines machine calculations and human insight to offer options that are significantly more efficient than what an individual component can deliver. Here, collaboration is the key, wherein, a perfect balance and a way of looking at AI as a component in decision-making with respect to a human viewpoint will be the future of financial decision-making.

Data Automation

A nation’s economy depends on the finance sector. Hence, having a record of financial data of all governments and every individual who uses these services on a global basis is a colossal task. This is where the development of AI has been helping in storing data by automation. It has simplified the process and has enhanced the industry’s capability of serving more customers with precise results.

Finance Management

A nation’s economy depends on the finance sector. Hence, having a record of financial data of all governments and every individual who uses these services on a global basis is a colossal task. This is where the development of AI has been helping in storing data by automation. It has simplified the process and has enhanced the industry’s capability of serving more customers with precise results. This AI-driven wallet accumulates all the data from one’s web footprint so as to develop a robust spending graph. Thus, Preferred Personal Financial Management will be critical in saving time from creating lengthy spreadsheets or writing on a piece of paper.

Detecting Loop Holes

Machine learning and Deep learning has been helping in analyzing any change in behavioral patterns. Its models and neural networks help in enhancing their scanning abilities to detect any changes in the pattern of information. The system is made to perfectly distinguish between loopholes or fraud in case of a discrepancy. Hence, to detect vulnerabilities in the transactions or trading process, an overall investigation of all data is carried out. Along with fraud alerts, timely detection is ensured, so as to mitigate the situation where banking services are often disrupted by money laundering cases. This is due to the insecure payment and deposit actions of a customer. Hence, AI helps in notifying the authority for further procedure by scrutinizing any such behaviors and detecting them at the very beginning.

Investment Assistant

There were days when only economics and experts at the stock market made the investment. Today, with the real time virtual assistants and chatbots, anyone can be guided efficiently across every financial service. With the advancements in technologies, these chatbots and robo advisors are developed with innovative algorithms that can effectively track withdrawals, investments, and even suggest savings plans as per one’s history to ensure a robust financial management.

Predictive Analysis

With the help of neural networks, Artificial Intelligence imitates human’s demeanor perfectly to assist investors, banks, and individuals in mapping their investments in the future. From recommending stock market fluctuations, to mutual funds variability, and changes in the valuation of cryptocurrency, Predictive algorithms have been aiding humans in the never-imaginable way.  

With these trends reshaping the insurance technology marketplace, it would be interesting to see how the players in this domain respond to them and embrace them for their transformation. Technology solution providers will play a key role in enabling this change.

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