Financial markets are constantly evolving, facing some of the biggest challenges in their history like full digitization of markets, technology-driven disruption, reduced client switching costs, etc. To cope up with these challenges and keep moving ahead, the industry timely embraced the new opportunities created by technology advancements like high-speed processing, the convergence of data ubiquity, AI software solutions, etc.
As the industry continues to work towards digitizing and transforming for new growth and operations efficiencies, they are proactively focusing on innovating and differentiating by partnering up with AI development companies to deliver enhanced client experience. From AI trading to AI fraud detection, AI solutions are helping organizations redefine their operations more efficiently. By implementing such solutions, the firms are able to leverage their own data and deliver bottom-line results.
Artificial Intelligence is being used in different industries and finance is no exception. One of the main advantages of AI solutions is their ability to work with huge databases and finance is one industry that can utilize AI solutions to its full potential. These solutions are already being implemented in areas such as insurance, banking, asset management, etc.
Applications of AI in finance
AI solutions can be used in different ways. AI based chatbots can help financial firms communicate with their clients. It also serves as the basis for virtual assistants. With the help of AI solutions, organizations can also enable algorithmic trading based on machine learning algorithms and can be used for risk management, relationship management, and fraud detection, etc.
AI in finance offers a lot of benefits but one of the main advantages is that it brings along endless automation opportunities for financial organizations. Automation can help organizations increase their productivity and operational efficiency. Moreover, in some situations, AI can replace manual efforts and helps in eliminating human biases and errors. AI solutions enhance data analysis. AI based machine learning solutions help in identifying patterns, therefore providing valuable insights and helping firms with better decision making.
Below are some of the ways in which AI solutions are applied in finance:
- Automation: Automation enables organizations to enhance productivity and cut down their operating costs. Time-consuming tasks could be completed much faster. For example, AI can use character recognition to verify data automatically and generate reports based on certain parameters. It helps organizations in eliminating human errors and enables the employees to focus on more important tasks by providing them with extended bandwidth. Research suggests that AI helps organizations to save up to 70% of the costs associated with data entry and other repetitive tasks.
- Credit Decisions: AI solutions help banks analyze potential borrowers more accurately. They can quickly analyze countless factors and parameters that can impact the bank’s decision. AI solutions can use complex credit scoring approaches as compared to traditional systems. These solutions offer a higher degree of objectivity as these solutions are not biased which is essential especially in the financial sector.
- Trading: The trend of data-driven investments has been picking up pace in the last couple of years. AI and machine learning solutions are being used for algorithmic trading. These systems can analyze huge amounts of structured and unstructured data quickly. The speed at which these systems process data leads to quick decision making and transaction, leading to increased profit within the same time period. These algorithms make precise predictions based on a lot of historical data. They can test different trading systems, offering the traders insights for each of them before making a decision. It can also help in analyzing the long-term and short-term goals to provide recommendations on portfolio decisions.
- Risk Management: Risk management is another area wherein AI solutions help organizations. AI solution’s incredible processing power can help in handling risk management more efficiently than by human efforts. Algorithms can analyze the history of risks and can detect any potential problems in a timely manner. AI based solutions can analyze various financial activities in real-time, ignoring the current market environment if required. Organizations can opt for important parameters for their business planning and use them to get insights around forecasts and predictions for the future.
- Fraud Prevention: AI based solutions are proving to be effective in preventing and identifying fraud cases. Cybercriminals are quick on developing new tactics but with the help of AI based solutions, organizations can quickly identify and adapt to hackers’ strategies. These solutions are effective when it comes to dealing with credit card fraud situations. AI driven algorithms can analyze a client's behavior, keep a track of their locations and identify their purchasing patterns, therefore they can detect if there are any unusual activities associated with a certain account.
- Personalized Banking: AI based solutions are one of the best when it comes to providing a personalized experience. Financial institutions can use AI based chatbots to offer timely help to their customers while minimizing the workload of their customer representatives. They can also adopt various voice-controlled virtual assistants for the personalized experience. These solutions are self-learning in nature i.e they identify patterns and learn on their own so they become more effective with time. There are a lot of solutions that offer personalized financial advice to their users. These systems use algorithms that can track their regular expenses, income, and purchasing habits to provide necessary financial suggestions based on the user's financial goals.
The financial market has been strongly influenced by technological advancements. We are operating in an environment where speed and convenience are the competing advantages in the industries, especially in the financial markets. The digital transformation has increased the competition like never before, therefore this industry is becoming increasingly volatile and competitive. To stay relevant in the given circumstances, organizations need to keep up with the latest technological advancements while partnering up with tech companies like AI development companies as these companies would help them gain a significant advantage by preparing them for the new opportunities that the tech offers.