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Artificial Intelligence in Financial Services: Applications of AI in finance

Mar-14-2023Blog by – Mr. Ashish AjmeraRead Time: 4 Min.Word Count: 884
40Artificial Intelligence in Financial Services: Applications of AI in finance

In its present situation, artificial intelligence surprises, astounds, and even frightens some people. It offers expansive views while concealing some important aspects of itself. Tons of fanatics are drawn to it, but they hardly understand how valuable AI can be in its entirety.


Regardless, it ranks among the best inventions ever made by humans. It is a masterpiece. The key is to understand how to successfully integrate and enhance it.


Artificial intelligence plays a specific function in financial services. AI revolutionizes the sector. It alters the long-standing methods used by financial organizations to do business. Additionally, it draws additional investment and attention to fintech.


Benefits of AI in Finance

The advantages of adopting AI in finance, such as task automation, fraud detection, and personalized suggestions, are enormous. Front and middle office AI use cases have the potential to disrupt the finance industry by:

  • Providing smooth, round-the-clock customer engagements

  • Reducing the requirement for repetitive work

  • Cutting down on false positives and human error

  • Cutting Costs

Global spending on AI is expected to double during the ten-year period from 2020 to 2030, going from $50 billion in 2020 to more than 110 billion in 2024. According to Business Insider, financial AI could save banks and other corporations $447 billion by 2023.


AI Use-Cases in Finance Sector


Fraud Avoidance

Banks and other financial companies manage a lot of private data in addition to processing people`s money. The greatest risk in this sector is a fraud, which can result in unimaginable losses, issues, and liabilities with just one error. When we speak of fraud, we refer to financial crimes such as credit card fraud and money laundering. 

The primary goal of AI in financial services is to detect fraud. AI aids in the detection of suspicious activities, adds another layer of security, and decreases fraud. Simply said, AI enhances security.


Management of Risk

Artificial Intelligence is having a big impact on risk analysis and investment management in financial services. AI can provide a detailed prediction of the client`s creditworthiness and answer the critical question, "Is this individual trustworthy?"


The AI-based approach analyses risk by considering transaction and credit history, income growth, market conditions, and other factors. Predictive analytics provides a lot of information on micro-activities and behaviour to help determine whether investments should be made. Keep in mind that humans are unable to do and process any of these jobs.


Strategy for Retaining Customers

Intelligence technology can be used by credit card firms to identify at-risk consumers and keep a certain subset of them. They can predict user behavior and create offers exclusively for these customers based on user demographic information and transaction activity.


The application in this case uses a recommender model to identify the best card offers that can help to keep these consumers after using a predictive, binary classification model to identify the customers at risk.


Chatbots

Consumers desire a constant line of communication with their bank (not a surprise). Moreover, chatbots powered by finance AI technologies can help with this.


Creating a conversational simulation will improve banking services. Customers` questions are promptly and accurately answered by chatbots in the financial sector using natural language processing technologies. This entails a lot more attention, more clients, and improved circumstances for current clients.


Robo Advisory

Fintech companies engage in AI solutions because of the high level of interest in passive investment. Robo-advisory works by making suggestions based on the personal objectives and risk tolerances of investors. Finance AI streamlines the investment process so that investors just need to make first deposits into accounts. The ability to generate investments for those who are unfamiliar with finance is the tool`s most important advantage. Financial analysis is not necessary to be successful at passive investing. Also, financial organizations may afford robo-advisory services at a lower cost than hiring human asset managers.


Enhanced Security and Compliance

Many laws and regulations that are sometimes extremely challenging to keep track of must be followed by a financial institution. The volume of consumer data that is gathered, which includes private and sensitive information like transaction history, account information, and loan details, is one of the key issues facing AI in financial services.

By adopting voice recognition, facial recognition, or other similar biometric data, artificial intelligence (AI) applications will advance security even further in the future.


Final Thoughts

In conclusion, the use of Artificial Intelligence (AI) in the Finance Industry has the potential to transform the sector by providing faster, more accurate, and more efficient services. AI can be used for a wide range of applications, including fraud detection, risk assessment, customer service, investment management, and more. By analyzing large amounts of data, and identifying patterns, AI can help financial institutions make better decisions and reduce risks. 


However, the adoption of AI in finance also raises some concerns, such as the potential for bias in algorithms, the need for data privacy and security, and the impact on employment in the sector. It is important for financial institutions to carefully consider these issues and adopt appropriate measures to address them. 


Overall, the use of AI in finance is a promising trend that has the potential to benefit both the industry and its customers. However, it is important to approach it with caution and ensure that the benefits are realized while minimizing any potential risks or negative impacts.

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