You might already know that banks and other businesses can adopt artificial intelligence (AI) to automate tedious processes and streamline workflow. But when it comes to the financial industry, AI is doing much more than that.
Whether you’re applying for a credit card, banking online, or looking for ways to improve your financial situation, you’re almost certain to find out firsthand how AI is making waves. Here are some of the ways AI is shaping the future of finance.
Lenders Can Automate Borrowing Decisions
Applications for mortgages, auto loans, and credit cards are a part of life.
In the past, credit applications were viewed and scored manually. This process was time-consuming and prone to bias and human error.
Now, lenders can use AI to quickly and accurately assess credit applications. AI helps lenders accurately assess risk. It also adds a convenience factor for borrowers, as some applications can be instantly approved.
Chatbots Offer Financial Guidance
When you’re trying to improve your finances, guidance from a bank can help. And with the help of AI chatbots, institutions can now offer their customers personalized financial guidance.
Chances are good that you’ve seen (or used) an AI chatbot at some point. These bots are at work in many customer service chat windows.
In 2017, Capital One came out with one of the first finance-specific chatbots, Eno. Eno uses customer data to give specific suggestions for financial success.
Chatbots like Eno also help a bank’s customer service representatives save time. They can usually answer simple questions. If a customer needs more help, the bot can connect them to a representative.
Fraud Detection Is Faster than Ever
Online banking is fast and convenient, but it also creates a risk for banks. In many cases, by the time a bank detects credit card or online payment fraud, the money is long gone.
AI fraud detection helps reduce losses and lets customers know their money is safe. For example, JPMorgan Chase uses a specialized AI algorithm to track credit card transactions. This algorithm looks for purchase patterns and flags possibly fraudulent transactions.
Algorithms Compete with Human Traders
One of the most controversial uses of AI in finance is the adoption of algorithmic trading, which is just what it sounds like: AI-powered algorithms, rather than human traders, deciding when to make critical stock market trades. An accurate algorithm can theoretically net far greater profits than a traditional human trader.
You might be wondering whether algorithmic trading is legal. After all, it seems like a way to cheat the system.
Although some brokers have argued that it should be banned, algorithmic trading is completely legal, at least for now. It’s still a very new technology, but as it becomes more commonplace, we’ll likely see the stock market shift in unprecedented ways.
AI and the Changing Financial Landscape
Thanks to AI, the future of finance is both exciting and uncertain. Even if you don’t work in the finance industry, watching this new technology unfold can be fascinating.
As AI evolves, one thing appears certain — for a financial institution to succeed, the decision to adopt AI technology is non-negotiable.
This article is for information, illustrative and entertainment purposes only and does not purport to show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular investment action.