Advancements in Fintech: AI and Robo-Advisors
There has been a paradigm shift in how people have banked traditionally because of the immense evolution of the fintech industry. There have also been numerous innovations that have powered the way for rapid technological advancements, such as artificial intelligence (AI) in finance. In this article, we will look at the way AI and robo-advisors are helping people with their investments, accounting, and all around, their banking.
Will NLP-infused Chatbots Replace the Bank Teller?
Natural language processing or NLP is AI technology that uses deep learning algorithms to generate natural responses based on its understanding of language. Banks have started collaborating with fintech companies to develop specialized NLP-infused chatbots to enhance the process of customer assistance. Clients feel understood and find the satisfaction that they’ve received real-time resolutions to their issues by interacting with the chatbots.
The more advanced version of these unique chatbots will have the functionality to engage in regular conversations with clients. As this technology continues to progress, eventually, clients who interact with these chatbots will be able to access transaction history, log in to profiles, review balances, analyze patterns in their spending, and initiate transactions in a way that feels like they are talking with a bank teller. According to a recent report by Autonomous, if the finance sector were to take advantage of this AI technology, it could cut operating costs by $1 trillion.
Financial institutions can use AI in the middle and back office to handle data processing, underwriting, or anti-money laundering. However, the front office can utilize chatbots as the visible face of AI technology. AI still has many years to go before it evolves to the point of being a total replacement of human customer service — with many people predicting the role of bank tellers to be the first to go.
The Impact of AI on Auditing and Accounting
It’s essential to understand the four categories of AI to understand how the roles of auditors and accountants could potentially change. We’ve mentioned one of them already — natural language processing. There is also machine learning, which is a computer’s capacity to acknowledge and apply patterns, develop algorithms of its own, and then change the algorithms based on the feedback it receives.
Another facet of AI is machine reasoning, which involves a computer using its knowledge to process implied data and then give an analysis or interpretation. Lastly, there’s deep learning AI. This AI is when a computer can acknowledge associations and relationships, and then apply them to similar situations.
AI tools within any of the four categories can be helpful in automating some accounting and auditing processes. Progressive machine learning could require auditors to be responsible for interpreting the computer’s results and monitoring the effectiveness of interpretations. Accountants may become less focused on collecting and analyzing data — which machine learning can handle — to instead offer improved decision support and AI-associated risk management.
Robo-Advisors Are Expected to Have Tremendous Increase
Robo-advisors are a disruption in the financial industry that many predict will become crucial platforms for wealth managers. They handle funds and suggest portfolios to prospective clients using data analytics while managing the investments. In the next five years and beyond, the forecast is that robo-advisors will reach over $2 trillion.
There is increasing trust among consumers in receiving computer-generated financial recommendations. Although digital counsel is gaining popularity, some institutions are opting for a more hybrid adaptation. When it comes to questions, support, and guidance, many consumers prefer human advisors, which is the reason for the inclusion of hybrid human robo-advisors in some areas of asset management.
There has been an integration of AI to make robo-advisors more like humans in order to appeal to customers. The advanced emerging technology will allow the integrated AI capabilities of the robo-advisors to help companies keep track of their products’ activity. The advanced robo-advisors will be able to provide insight as to how account holders are investing, how they are making financial choices and spending their funds, and even offer tailored advice.
Should There Be Concern for Security Risks?
The financial services and technology of fintech have impacted just about everyone. The innovation rising from fintech has caused many companies to falter in their security for quick market entrance. There is risk involved with advances in the industry, as technological evolution and the frameworks of security move at different paces and create a gap.
To prevent breaches, these companies should take the necessary time to discover points of weakness in their security when creating their products. However, consumers should use extreme caution and take their time when new technology gets introduced. Right now, cybersecurity isn’t fully able to keep up with technology, and because of the lag, there is an imminent risk that should be of concern.
With personal finance, there is an increased risk for identity theft and fraud because of commonplace access to funds. Indeed, security has gotten better than in previous years, but while online venues and apps open the door to our finances, it also could expose our financial information to thieves. It’s crucial that the next steps in fintech be to heighten security measures and for consumers to have stronger passwords, virus protection, and monitor bank transactions more closely.
