The financial sector has always been home to a mix of tradition and innovation. Technology has clearly resulted in significant transformation in the financial sector in recent decades, and this trend will only continue in the years ahead. For a clear example of this, look no further than the rise of cryptocurrencies. Our recent article on bitcoin explains this sometimes confusing topic, click here to read it.
Not everything that is introduced will become a game changer, and sometimes it’s hard to tell what will have a lasting impact and what will turn out to be a passing fad. However, one thing we can say with confidence is that artificial intelligence (AI) will shape the world of finance in the years to come. In fact, it is already happening.
Artificial intelligence, real disruption:
Disruption in the financial sector at the hands of AI is not a new phenomenon, but the prevalence and sophistication of how AI is used is growing rapidly. Here are a few examples of the impact it is having already.
The financial sector’s use of AI to detect fraud is old news, but it remains an important and evolving field. One example of this is the use of AI to analyze customer transactions in order to identify patterns and – more importantly – anomalies in those patterns. The speed and sophistication of this type of machine learning is increasing, but then again the fraudsters are also working hard to remain a step ahead. To read more about fraud detection click here.
The past few years have seen rapid growth in the prevalence of robo-advisors, with both start-ups and big banks hopping on this trend. A robo-advisor is essentially an AI-powered algorithm that uses data provided by a customer to allocate investments in a way that is aligned with the customer’s stated goals and risk tolerance. As these factors change or market events occur, the algorithm adjusts the investment allocation to keep the customer on track.
Banks and insurance companies use AI for ongoing analysis of huge data sets related to loans and insurance. Identifying trends and correlations helps them understand where a prospective customer falls on the risk spectrum, which then helps them decide whom to lend to and insure. To read more about robo-advisors and underwriting click here.
A more intelligent future
Given the exponential growth of computing power and AI capabilities, it’s difficult to gaze too far forward and state with confidence what lies ahead. However, here are a couple of AI developments likely to shake up the financial sector sooner rather than later.
AI personal assistants.
US firm Clinc is developing an AI platform called Finie that allows customers to “converse with their bank account using natural language without pre-defined templates or hierarchical voice menus.” Their aim is to help people make sense of their money in ways that make sense to them. Today, you can already ask Apple’s Siri via voice commands to carry out tasks for you. Soon, you may be able to ask Clinc’s Finie, “Can I afford to buy concert tickets this month?” To read more about Clinc’s Finie, click here.
Savvy investors know that financial markets are influenced not only by corporate results and economic indicators, but also human sentiment and social trends. In future, hedge funds and other investment firms will likely develop tools that harness the power of AI to analyse news sources, social media activity and other indications of human sentiment to more accurately understand and predict market movements.
Forward with open eyes
AI is without question shaping the future of the financial sector. As changes emerge, you don’t need to be an early adopter. However, you do need to be aware of the emerging technologies and developing storylines to help you understand the big picture.
Forward thinking is key to business success, and if you wait until the winds of change are howling past you before starting to make plans, you’ll likely be left sitting in the dust.