Effects AI and Machine Learning Have on Finance Now and in the Future
While AI is currently in use throughout most of the finance sector, its continued growth is going to be a disruptive force throughout the industry. From its humbler beginnings in administrative use with customer services, its increasingly being used for making financial decisions to maximize financial gains throughout the trading world.
Job Elimination in Finance Sector
By automating processes, AI is expected to reduce the number of front office jobs within the finance sector, which has been an ongoing trend for several years. Banks and stock traders have turned to “chatbots” to answer customer questions, make account changes or direct customers to the proper channels for other inquiries. This has reduced lower-level staff and freed up others to devote their attention to other higher-level tasks.
Over the last few years, trading firms have reduced the number of trading jobs by 30%. It’s expected that by 2025, the finance sector overall will see 230,000 jobs eliminated because of AI with 90,000 of these eliminated jobs being in asset management. There will be a shift toward more jobs in finance requiring advanced technical skills to support machine learning systems.
What to Expect with Financial Trades
In 2016, 75% of all global trade is being performed with trading algorithms. This is only expected to continue to grow because of how successful trading algorithms have become. AI-powered hedge funds can generate high returns regardless of the volatility of the market. Using probabilistic logic, many of these funds do not require any human intervention.
AI will be available to the masses, not just corporate traders. Individuals will be able to make more informed choices while picking stocks with the aid of AI. Stock information is constantly analyzed for extreme accuracy while trading models continually adapt to changes in the market. Because tools using AI will be available to all, corporate traders will increasingly face competition from smaller firms, especially new FinTech startups that can run leaner and meaner.
Even though AI has played a big part in finance for years, there are investors that still want that human element when making trading decisions. AI can be used to develop more effective investment strategies to assist in investment decisions. Maintaining the human factor with investors who are hesitant to fully adopt AI to control investments will help ease the transition.
