As per the Economist Intelligence Unit, AI investments by banks and insurance firms are projected to rise by 86% by 2025. If businesses use it with proper attention, diligence, and care, it has a huge potential for positive results.
Financial Organizations that have embraced AI will accelerate technological advancements, improve customers experience and shifting regulatory frameworks. Banks using AI will optimize tedious processes and improve customer experience by offering 24/7 access to their accounts and financial advisory services.
The Growing Impact of AI in Financial Services
Large banks, for example, are unable to meet the growing demand of customer service requests, so they are gradually implementing chatbots to automate customer service. AI is being used by the hedge funds to track the principal amount of new data sources. Insurance companies are also using AI to improve their risk models.
However, several financial institutions in developed countries are still struggling to set up data infrastructure that supports them to use AI.
The major aspects in which AI has changed the financial industry are mentioned below.
The services industry’s routine involves record-keeping and paperwork. Now, let’s look at credit cards as an example. Credit scores are now used to decide who is eligible for a credit card/ loan and who is not.
Al simplifies the process of sifting through thousands of personal bank accounts and analyzing the creditworthiness of an account by giving a credit score that helps bankers make an informed decision. Over time AI has been able to adapt and take more factors into consideration to minimize the risk.
Advisory Services in Finance:
Robo-advisors are digital platforms that offer automated and algorithm-driven financial guidance with hardly any human involvement. A typical robo-advisor conducts an online survey to gather data from customers about their financial position and future aspirations.
The gathered data and information will be used to guide autonomous client investment funds. As pressure mounts on financial firms to lower commission rates on individual investments, technology may do what individuals cannot.
Another emerging field is bionic advisory, which incorporates human intuition and system calculations to provide far more effective options than their individual elements.
The future of financial decision-making will require a good balance. The consideration of AI as a factor in decision making is just as critical as the human perspective.
Fraud Detection and Management:
When it comes to security and fraud detection, AI is unrivalled. It would use past spending patterns on various transaction tools to flag suspicious activity, like using a card from another country only a few hours after being used somewhere or attempting to withdraw a large amount of money from the account in question.
Another great aspect of AI-based fraud detection is the system’s ability to learn. If it issues a red flag for a normal transaction and a human corrects it, the machine will learn from the situation and make much more advanced decisions on what is fraud and what is not.
To sum it up, without a question, AI is the future of the financial industry. The rapid pace at which AI is taking shape is making financial operations more user-friendly. This also helps in providing solutions that are both faster and more efficient. It supports financial organizations in saving time and minimizing human errors in the entire process.