July 24, 2024

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Use of AI in Finance Transformation

5 min read
Finance Transformation
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The AI apocalypse has already arrived. Across segments, industries, and walks of life – maybe you’re not aware of it – but, the technology has been playing out quite large. And as expected of the excellent creation of science, AI has been delving deep into finance too.

Keep reading to find out more about it.

The Relationship between AI and Fintech

Since when it was introduced, AI has been continuously professing that it wishes to transform everything. And, as of now, it has been true to its words as well.

For example, as seen in the BFSI segment, AI has the capability of processing massive data or information logs while delivering masterful insights too.

Thanks to pattern recognition, the technology can also help you make the right decisions. So, in a way, it has already taken its first step in the world of finance.

But, how will it bode in the other segments of Fintech?

To begin with, it can certainly deliver faster and better fraud detection, which will be nothing short of a blessing in the hyper-digitised world. Furthermore, advanced risk monitoring might also allow you to detect a threat in real-time and help you take care of it accordingly.

Secondly, the feature of automation offered by the same might also make it easier for you to do a bunch of tasks in an instant. The risk of getting plagued by errors will also be quite low.

But how else is AI going to help us in transforming our Fintech segment?

Using AI in Finance Transformation

What are the uses of AI in Finance transformation? The fundamental aim of integrating artificial intelligence into finance is to enhance efficiency, improve decision-making, and reduce the risk associated with financial operations.

Apart from this, it can also –

1: AI-Powered Risk Management

One of the most critical aspects of finance is managing risk. Traditionally, risk analysis has been a time-consuming process, leaving room for errors and delays.

However, with AI, financial institutions can analyse vast amounts of data at an unprecedented speed, identifying potential risks and assessing them accurately.

For example, a bank or an investment firm can use AI algorithms to predict the fluctuations in the market and evaluate the associated risk accordingly.

Such a capability will enable them to make well-informed decisions and adjust the strategies while mitigating potential losses or risks.

2: A More Personalised Experience

Have you ever received personalised product recommendations from an online retailer? Well, that’s AI at work! In the financial sector, AI is revolutionising customer experiences by analysing customer data to provide tailored financial products and services.

Let’s take the AI-powered chatbots as an example. They have recently become popular due to offering the right sort of assistance a customer asks for.

Furthermore, you can also use them to process transactions and offer immediate assistance to anyone who’s in trouble. This, in turn, can improve customer experience massively and lower a lot of workload on human agents almost immediately.

3: Early Fraud Detection and Prevention

Fraudulent activities cost financial institutions billions of dollars each year.

But AI is here to help! AI algorithms can detect unusual patterns in transactions, flagging potentially fraudulent activities in real-time.

These algorithms continuously learn from new data, adapting to evolving fraud tactics.

This ongoing learning procedure ensures that the system remains effective in protecting customers and institutions alike from malicious actors.

4: Improving Trading Strategies

Investing in the stock market can be both exciting and nerve-wracking. However, AI is helping to level the playing field by providing investors with powerful tools for analysing data and making smarter investment decisions.

AI-powered trading systems can process vast amounts of financial data, including market trends, news articles, and social media sentiment.

With this information, they can identify potential investment opportunities and even execute trades automatically, based on predefined strategies. As a result, AI-driven trading systems can outperform human traders in terms of speed and accuracy.

5: Enhanced Credit Assessment

Getting a loan or credit card approval often involves a detailed assessment of creditworthiness. AI is transforming this procedure by analysing a wide range of information points to determine a borrower’s credit risk.

Traditional credit scoring models primarily rely on historical credit data, which may not accurately reflect an individual’s current financial situation.

AI on the other hand, can incorporate alternative data sources, such as social media behaviour, payment history, and employment patterns, to build a more comprehensive credit profile.

Bonus: Automating Back-Office Operations

Finance isn’t just about flashy trading and risk management.

There’s a lot of behind-the-scenes operations involved in processing transactions, managing accounts, and handling administrative tasks.

AI-driven automation is revolutionising these back-office operations, reducing manual errors and freeing up human resources for more strategic tasks.

Tasks like account reconciliation, invoice processing, and regulatory compliance can now be automated, saving time and improving overall efficiency.

FAQs – Frequently Asked Questions

1: How Will Generative AI Impact the Financial Industry?

In the short term, the scope of aim of generative AI will be to automate financial analysis and create a report on it. However, if we’re talking about long-term, we think it may partake in the course of decision-making of an organisation. But, it’s still a speculation at this point.

2: How Can AI Help a Business Grow?

AI has long been used in the aspect of bookkeeping and financial management. In some cases, we have also seen it being utilised for accounting. And, now, if you want, you can also use the same for automating most of your mundane tasks.

The Bottom Line

AI’s integration into finance is undoubtedly transforming the industry, making it more efficient, customer-centric, and secure.

From smarter risk management to personalised customer experiences, AI is empowering financial institutions to stay ahead in a rapidly evolving world.

However, it’s essential to strike a balance between leveraging AI’s capabilities and ensuring ethical use and data privacy.

As we continue to explore the potential of AI in finance, collaboration between AI experts,  and financial professionals will be critical to navigating this journey responsibly.

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