What is the future of AI in finance? Artificial intelligence is already an irreplaceable technology that powers most, if not any, finance software. It powers a variety of customer support chatbots. Also, it personalized marketing and customer experience. It detects fraud attempts. Simply put, it’s everywhere.
As integral as it is, AI is capable of much more than all of that. And it’s here to stay. The reason? Enough time has passed to make the adoption costs low enough. In other words, it’s become cheaper to implement AI features compared to just a decade ago.
It doesn’t matter whether you study finances or artificial intelligence – or if you’re just passionate about FinTech. Working on AI in finance is a safe bet if you want to make sure your occupation will be in high demand.
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So, what does the future hold for this technology in the finance industry? Let’s break down seven key ways AI will continue powering it in the nearest future.
You must already be familiar with chatbots. They’re in your mobile banking app, your insurance app, your trading app – you name it. They’re now synonymous with immediate customer support.
Still, some chatbots remain clunky. The thing is, some chatbots are designed to cater to a limited range of requests – and that brings down the quality of user experience. This is why full-fledged smart assistants are bound to become more mainstream and replace those annoying chatbots.
Think of these smart assistants as Alexa but for customer support. They’ll act and sound like real customer care team members, essentially making it impossible to distinguish the two.
Don’t think it sounds possible? Well, there are already smart assistants that can:
- Sound like a real person;
- Have a naturally flowing conversation with a customer;
- Support multiple languages (although their number is still limited);
- Have a virtual avatar that can express emotions.
Personal Financial Management
AI algorithms can know you better than you know yourself. You can already see a testament to that in how efficient targeted ads on social media are. But digital marketing is hardly the only industry where that peculiarity of AI can come in handy.
Personal finance, the ever-growing sector of the larger industry, can certainly take advantage of this particular strength of AI. This technology can put “personal” into “personal finance” with just the power of the right algorithms.
How would that work? Think about a personal finance app you’ve been using. There, you probably have a convenient user interface to track expenses with nice charts. But that’s it.
With AI, you’d be getting personalized tips on how to save money based on your transaction history. For example, you can get a message saying, “Hey, you seem to be spending a lot on clothes lately! Here’s how you can cut down on this type of expenses.”
However, in the end it often comes down to personal preference for making a trading app comparison for yourself. You might prefer one app’s interface, while another has lower fees. This can be a very personal decision.
Streamlined Credit Scoring & Loan Assessment
Let’s face it: credit scoring hasn’t been exactly a high-tech process this whole time. It requires tons of paper documents that are reviewed manually. Plus, it still gives too much weight to demographic parameters like age, occupation, and marital status, often skipping out on past behavior assessments.
AI can streamline this cumbersome process thanks to its three main applications:
- Optical character recognition;
- Predictive analytics and intelligent risk assessment;
- Automation at every step of the way.
The same principles can apply to the loan assessment process, too. Instead of reviewing every document one by one, a bank employee would only have to look at the assessment results and the suggested decision. That speeds up the review process, cuts down labor costs, and improves customer experience, all at the same time.
This is, by far, one of the most prominent applications of artificial intelligence in this industry as of today. And it’s not going to go out of fashion any time soon, just like fraud, scams, and cybercrimes themselves.
The best that AI has to offer in this field is automated suspicious activity detection. And you might’ve already encountered it.
That additional layer of confirmation you sometimes have to get through to make a transaction? It’s there because this transaction looks unusual; it doesn’t fit well with your history. Sometimes, such suspicious transactions are simply not allowed to happen – they get automatically rejected.
As for the future of AI in this field, there’s one thing you can be sure of. Frauds will come up with more and more inventive ways to scam people out of their hard-earned money. So, AI-powered software will continue to evolve to work against each new scheme.
Even accountants’ jobs aren’t fully safe from automation – and AI is the main reason. AI-powered accounting software can easily automate at least some of the tasks traditionally done manually. For example, AI is responsible for:
- Processing scanned documents using OCR and adding information they contain to the database;
- Analyzing large amounts of data to identify problem accounts;
- Sorting incoming data into multiple accounts;
- Generating reports and other documents like contracts and invoices.
This means some businesses, mostly small ones, won’t even have to hire an accountant at all – an app will be able to replace them with ease. Apart from a financial incentive to do so, there’s also another one: software is always available, no matter what.
Automated Underwriting & Claim Review
If you’ve ever had to file an insurance claim or apply for coverage, you know how sluggish the process can be. That’s because some insurance providers continue to review applications manually.
In these insurers’ cases, their employees have to get your filled-out forms and supporting documents, organize them, analyze them, and make a decision.
All of that is unnecessary, and more insurance providers have started to realize it. AI can help them cut corners and speed up the decision-making process without sacrificing accuracy or precision. Here’s how:
- It can process scanned documents and automatically extract data from them;
- For underwriting, this data can then be used by the algorithms to assess risks and determine the right pricing and policy rating;
- For insurance claim processing, the algorithms can automatically satisfy or reject the claim.
Robo-advisors for stock and crypto trading are currently in their prime. In case you don’t know what those are, robo-advisors track the current stock or crypto market, look for patterns, and advise you which assets are worth buying.
Automated trading solutions will take it one step further. They’ll be part robo-advisers, looking for the best assets to purchase, and part brokers, acting on behalf of their client-slash-user. It’ll be essentially trading on autopilot, done according to the user’s initial input (e.g., risk tolerance, desired profit, etc.).
For now, few solutions on the market can automate the whole process; the idea is still in its infancy. But that doesn’t mean it’s too radical to turn into reality soon enough!
These seven applications of AI in finances aren’t the only ones, by far. But they’re the most likely to become the new normal within the next half a decade. They’ll become as mundane as getting personalized emails and scanning credit card details with a smartphone’s camera.
The big picture remains the same: AI isn’t going anywhere from this industry. It’s already so deep-rooted in digital finance solutions that without it, they’ll be unrecognizable (and a lot less user-friendly, too).
For you, it can mean one more thing, of course. If you choose to work with AI in finance, you won’t have to be afraid to be out of work any time soon.