How Artificial Intelligence is Being Used in Finance

Artificial Intelligence Has the Potential to Improve Finance

Artificial intelligence, or AI, has many benefits to offer to a wide array of industries. The finance industry, for example, has had a lot of ups and downs over the years but AI has benefits that could offer financial institutions, businesses, and individuals solutions to past problems. AI works by examining multiple data sources (this could mean 50 or 5 million) to look for outcomes, trends, and other patterns that could help predict future outcomes with the same or similar criteria.

Quicker and Better Credit Decisions

We have all seen what can go wrong when lending and credit restrictions are too lax. But, we also know that many credit decisions are not so clear cut. The ability to make quick, smart credit decisions is a major asset to banking institutions, lenders and credit card companies because it reduces the risk of financial loss. Further, the expedited process allows individuals to get the credit decisions they need to make financial choices. Towards Data Science describes how AI is helping improve credit decisions, “Artificial Intelligence provides a faster, more accurate assessment of a potential borrower, at less cost, and accounts for a wider variety of factors, which leads to a better-informed, data-backed decision. Credit scoring provided by AI is based on more complex and sophisticated rules compared to those used in traditional credit scoring systems. It helps lenders distinguish between high default risk applicants and those who are credit-worthy but lack an extensive credit history…Automobile lending companies in the U.S. have reported success with AI for their needs as well. For example, this report shows that bringing AI on board cut losses by 23% annually.”

Regulatory Compliance

Lenders and banking institutions are held to certain regulations and rules. We have all seen the headlines of lenders or banks not meeting those regulations and facing major fines or potentially lawsuits. AI can more quickly analyze massive amounts of data than humans, making it ideal for finding and removing sensitive information. Further, AI can begin to learn individual spending habits, information, etc. and sense when something is awry or looks suspicious with someone’s account. There is much attention being paid to identity and financial fraud and AI can be leveraged by financial institutions to dramatically cut down on this pervasive problem.

Improved Customer Service with AI Chatbots

If you have browsed the internet you have probably come across a chatbot. Some are more sophisticated than others but, essentially, it works by allowing an individual to ‘chat’ with an institution, or as is often the case, get answers to a question. While the Internet of Things (IoT) is great in many ways, one way in which many people feel it suffers is that it lacks the person-to-person communication and service that one would get in a store or office. But, with chatbots, individuals can feel heard (which reduces frustration in negative situations) and even get accurate and correct answers to their questions – without there ever actually being a person on the other end. AI chatbots are taught the answers to many potential questions but they can also learn and, over time, supply better and more accurate and personalized responses. This saves money by cutting down on customer service personnel that a business would otherwise have to pay a salary and benefits to.

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