Artificial intelligence (AI) technology is rapidly progressing, impacting various industries in many positive ways.
As consumers demand more innovative processes, the financial industry, for example, is finding ways to use AI that will help clients save and invest. AI is expected to be pivotal in decision making, financial planning, risk assessment, and making predictions. Moreover, AI’s ability to anticipate based on gathered data is key to making accurate predictions, improving results for finance professionals and their clients.
5 Artificial Intelligence Trends To Watch This Year | Data Driven Investor
Expect a broad range of AI-enabled significant advancements in 2019. From Google searches to handling complex jobs like…
Take a look at how AI will impact the financial services industry in the coming years.
AI and Lending
AI is expected to change lending significantly over the next decade. Millions of Americans hold loans worth trillions, so even a small-scale improvement to the lending process makes a big difference. Major banks and smaller startups continue to look for ways to simplify the loan process, and companies of all sizes can benefit from what AI has to offer.
The entirety of the loan process deals with data sets, making this an ideal use for AI integration. Artificial intelligence works best with data, and it can better determine creditworthiness based on large data sets in comparison to human evaluations. The more data gathered about a person, the better AI will be able to predict future behavior. The data used by AI goes well beyond standard demographic information such as a person’s name and Social Security number. In the past, a favorable credit score was a good indicator of a consumer’s financial responsibility. Today, AI digs deeper to help banks and underwriters make more informed lending decisions.
A few ways that lenders are utilizing AI technology include the following:
Finding more information on borrows with little to no credit history — In development are machine learning platforms that analyze data points currently untouched by standard underwriting software. One major advance in AI technology indicates that auto lenders can reduce their losses by over 20 percent.
Predictive model software — AI software companies are working on technology that will improve decision-making and better identify fraudulent transactions using data patterns.
Underwriting AI software — Currently being tested is an AI underwriting platform that analyzes large data sets to assess risk and cut losses. Preliminary results indicate that loan defaults can be reduced by up to 50 percent.
AI and Investing
The investment sector also has some promising developments on the horizon thanks to AI technology. Machine learning is being used to make uber-personalized recommendations to investment clients as well as provide an in-depth analysis of the current market. Various asset management firms are experimenting with AI-powered algorithms that are predicted to make decision-making less emotional and more profitable.
AI is also impacting investments through its ability to anonymously analyze the portfolio activities of investors all over the world. This kind of insight is invaluable when it comes to making investment choices because data is aggregated quickly and is more than just anecdotal. Machine learning is also being used by major investment firms to advise clients, provide detailed financial reports, and keep clients updated about portfolio performance.
Top asset management professionals agree that AI will have a huge impact on investments. Anthony Cowell, head of asset management for global professional services network KPMG, notes, “The rise of machine learning will make our industry unrecognizable in the future.”
AI and Banking
Mainstream banks are exploring how AI can help them connect with customers. The use of chatbots is becoming more common, but it is not viewed as a replacement for human intelligence. Instead, AI is used to enhance what humans do and gives banking customers real-time solutions that aren’t dependent on banking hours. This personalized customer service gives AI-enabled banks an edge over the competition.
In addition, financial institutions are utilizing artificial intelligence to understand the banking habits of accountholders and even perform routine transactions without human intervention. For example, Bank of America has introduced Erica, a chatbot that serves as a virtual teller. Accountholders interact with Erica via text message, and the personalized banking AI assists consumers in identifying their spending habits and can make personalized recommendations that facilitate better money management.
The Future of AI
Although many companies remain cautiously optimistic about AI’s impact on how we do business, there is still some skepticism and uncertainty, particularly when it comes to AI replacing the human workforce. Regardless of the potential downsides, it is clear that AI is here to stay, and many companies are recognizing the need to embrace change. AI continues to evolve, so it will be interesting to see how this technology plays out in a variety of industries.