Enterprises are now looking at AI as the next big thing that will revolutionize finance as a whole.
With the ongoing COVID-19 pandemic being tagged as “the new normal,” people all over the world are becoming more dependent on technology. For example, more individuals are welcoming financial technology (FinTech) in their everyday lives. On the other hand, businesses manage wider arrays of financial data and require more sophisticated and efficient processes. As a result, Artificial Intelligence (AI) has increased in both demand and usage.
What is AI and why is it beneficial for businesses
Artificial intelligence generally refers to systems that are able to perform tasks that previously required human intelligence. Early examples include chatbots, speech recognition, forecasting, or language translation.
In the context of business and finance, AI has changed how the banking and financial industry as a whole can provide their clients with smarter, more secure, more efficient, and more convenient ways of interacting with their wealth. AI is also already offering alternative solutions for streamlining financial processes such as credit decisions, loan assessments, and even trading.
Here are some of the many benefits that artificial intelligence brings to enterprises:
- It enhances efficiency. AI has simplified a lot of banking and financial operations using developed algorithms. Additionally, the predictive analysis provides data-driven forecasts so that customers are guided in making the best decisions. Without AI, these tedious processes would take a lot of hours to accomplish.
- It helps cut down losses. Kristy Hill says that statistics show that having AI-based systems can help bring down losses by 23 percent annually. Automated processes leave very little room for error, thus guiding companies to make decisions backed up by data.
- It improves customer experience. AI is able to speed up a lot of processes without sacrificing the quality of output. For example, chatbots can answer simple queries right away and remove the customers’ idle time. Algorithms also help provide tailored recommendations to clients at a shorter turnaround time, resulting in their overall satisfaction.
How is AI revolutionizing today’s finances?
There’s nowhere else to go but up as AI continues to be in demand. Here’s a quick look at some of the major changes that illustrate how artificial intelligence is being used in the financial industry.
1.Smarter underwriting process and credit decisions. Here’s the truth: According to Built-In.com, 77 percent of consumers prefer paying with a credit or debit card over using cash. Plus, having good credit helps individuals get better deals and financing options for real estate or cars. AI solutions help banks make faster and smarter underwriting decisions. Aside from the immediate assessment of credit risk, AI can also design the best arrangement depending on the available data like income, tax payments, and transaction history. This AI system is also perfect for insurance firms and lenders.
Manulife in Canada was the first to use AI for underwriting services. As a result, Canadians are able to purchase basic insurance faster than ever. Meanwhile, a Singapore-based FinTech startup named Lenddo makes use of machine learning to pinpoint how likely an applicant will repay loans.
2. Improved the financial forecasting process. Financial forecasting and planning processes are tedious and require a lot of manual effort. Plus, human bias is a downside of manual forecasting.
However, AI can analyze complicated data sets faster than humans who have to manually study industry trends. Aside from saving time, this also assures decisions driven by data. Some of the predictive financial analytics that AI helps with are cash-flow forecasting, cost and expense planning, and revenue forecasting.
Aside from forecasting financial outcomes, the predictive aspect of AI also helps investors make better trading decisions. AI can analyze patterns, trends, and data faster and guide traders in their craft. There are even some systems that suggest portfolios to meet individual risk preferences.
Put simply, AI can produce both predictive and prescriptive data faster, more accurately, and more efficiently. AlphaSense in New York is able to analyze keyword searches to discover changes and trends in markets.
3. Better Fraud Detection Global digital transactions keep growing, and so do threats of online fraud and cybersecurity. With the huge quantities of payments, check deposits, and trades conducted on a daily basis, fraud detection is a must for all financial institutions.
According to McAffee, online fraud is estimated to cost $600 billion a year. Thanks to artificial intelligence, there is better analysis and discernment between regular transactions, fraudulent activities, and even false-positive alerts. Another very useful feature of AI fraud detection systems is their ability to learn continuously. If the system mistakenly alerts for fraud for a regular transaction, and a human manually corrects it, the AI will learn from this and evolve its algorithm.
MasterCard has made use of its machine learning-based fraud detection system. It is able to assess transactions based on real-time conditions. As a result, says Forbes, MasterCard has reduced false declines by half!
Darktrace, a machine-learning platform analyzes network data and pulls in calculations based on probabilities. It is able to detect suspicious activity before damage can be inflicted on some of the largest financial firms in the world.
The future of finance
No one saw COVID-19 coming, but the pandemic has caused enterprises to reevaluate how they manage their finances and run their businesses.
It’s not a secret that a recession might be on its way. With AI-led FinTech efforts, you’ll definitely have a stronger hold on your wealth and your company.
The future of finance is being shaped by AI. If you want your business to be part of the picture of the future of finance, it’s time to put the utmost importance on investing in AI.