Six Ways AI Could Change the Finance Industry in the Future
Artificial intelligence (AI) is already here, and it’s becoming more powerful all the time. Indeed, the finance industry is already investing heavily in the technology to leverage the incredible insights and competitive advantages it delivers.
According to Tractica, investment in AI for enterprise applications reached $3.7 billion worldwide in 2017. But this is only the tip of the iceberg. It is estimated that this figure will reach more than $80 billion in 2025. With this huge level of investment pouring into AI tech, the possibilities are going to grow and grow.
AI and machine learning are already driving efficiencies and profits within the finance sector. But in the future, they’re going to change how the industry operates in six very exciting ways.
1. Big Data Will Be Used More Effectively
Big Data is a precious commodity in the finance industry — but only if it’s interpreted effectively. This process of extrapolating big data and turning it into usable information is already being performed by machines. However, as the technology behind AI continues to improve, Big Data is going to take on even more significance.
Humans struggle to deal with such huge amounts of data, particularly when it’s generating and changing on a continuous basis. Artificial intelligence will be able to process increasingly large data sets in the future. With the help of machine learning, AI will be used to pick out the most pertinent finance trends in real time.
2. More Efficient and Reliable Legal Compliance
The finance industry is perhaps the most regulated in the world, and it is incumbent on organizations and individuals to ensure they remain on the right side of laws and regulations. A major part of remaining compliant is reliable and regular reporting, which has always been a time-consuming and laborious task for humans.
Thankfully, AI is changing the way finance businesses approach legal compliance. In the future, machines will be used not only to assess legal issues but also to prioritize, report and address them. Every aspect of operations will be monitored for potential deviations and contraventions. Any problems will be reported at the earliest opportunity, keeping companies on the right side of the law.
3. Increased Customer Engagement
One of the biggest criticisms aimed at companies in the finance sector relates to the customer service they provide. For too long, customers were passed from pillar to post by automated telephony systems which relied on human input and unreliable technology. But AI is going to change all that.
Finance businesses will rely on AI to deliver streamlined and efficient customer service via web browsers and smartphones. Customers will be able to have their queries answered by service bots. Text-to-voice systems will ensure answers or actions are executed without delay, and human error will be almost completely removed from the process. Sophisticated language parsing will also help finance companies to slash their labor costs.
4. Better Trading Decisions Through Algorithms
Millions of transactions and trades are already performed by trading algorithms — and they’re only going to get more and more fast and effective. Right now, even the most complex algorithms rely on relatively basic artificial intelligence tech. But in the future, machine learning will take many of the most complex decisions away from humans.
In the future, decisions in the finance industry will be made based on hard data, harvested in real time. It won’t be long before human intuition and decisions made according to trading theories are relics of the past. Eventually, these machines will even train themselves and learn from their mistakes. The result will be far fewer bad decisions — helping finance firms to squeeze every penny from each transaction.
5. More Effective Fraud Detection
Fraud has been, and always will be, a major problem in the world of finance. The problem costs the sector billions each year — and these costs are either absorbed or passed onto the consumer. But artificial intelligence will fully automate monitoring, reporting and compliance processes in the future.
Humans take a long time to identify fraud within large organizations — but with AI, criminality will often be identified in a split second. Crucially, machine learning will be able to spot the signs of fraudulent behavior that have been identified in the past. There may come a time when such activity can be reported before it’s cost the business money.
6. Counterintuitive Reasoning
The world of finance is inextricably linked to irrationality, emotion and human nature. While the science behind economics is irrefutable, bad judgment calls and misinterpreted data lead to a level of unpredictability that is impossible to account for — at least right now.
In the future, AI will become so sophisticated it will be able to make these judgment calls based on real-time data, historical context and proven theory. Machines will be able to analyze data without emotion or irrationality. Without the prejudices of the human mind getting in the way, AI will be able to reach counterintuitive decisions that humans often find almost impossible. As a result, financial models will be created based on a realistic and dispassionate assessment of how the world of finance operates.
Finance drives the world’s economy. The more efficient and effective AI makes it, the more prosperous the global community will become.
