The Impact of AI and ML on the Finance Industry
What was once considered a niche piece of technology that was mostly thought of by the mainstream for the gaming world is now a part of our everyday lives. Of course, we’re talking about artificial intelligence and machine learning, or AI and ML for short. You’ve probably tinkered around with AI when it comes to using a chatbot or even had to talk to AI yourself when attempting to contact customer service.
However, AI has a much broader scope than you might think. These days, AI is used in just about everything, and that includes the finance industry. From predicting trends in stocks to detecting fraud, AI and ML have a massive impact on the field. Let’s take a look at that impact through some of the examples of how these technologies are used
Predicting Stocks
Some of the most predictable people in stocks have done years of research to find trends, look at specific stocks, and analyze what their potential profits could be in a certain amount of years. However, artificial intelligence is able to do all of this within a matter of seconds. It’s quite remarkable to see how machine learning can take all of the historical data available and predict which stocks will see an upward trend in the coming weeks and months and which will take a dip.
There was once a time when someone could simply play the stock market on a hunch, using their emotions to predict the next big company. While that still plays a large part in potential massive earnings, AI can help you with safer bets. This has allowed a lot of people to get into stocks for the first time in their lives as you don’t have to spend hundreds or thousands for expert opinions to see the trends in front of you.
Personal Spending
There are still a lot of people who will painstakingly write down all of the money that they’ve brought in and spent, keeping receipts in a shoebox and going over the financials at the end of the month. Thankfully, there are now AI programs that come with just about every bank account that will tell you all of these numbers in real time and come up with a budgeting solution that will make your life much easier.
Some of the more useful aspects of this include telling you where you’re spending your money, what categories you’re spending your money on, and what payments you have coming up for the month. This has been instrumental in helping a lot of older generations have their finances more accessible as they adjust to a more digital era. With cash quickly becoming less frequently used, there are going to be more people who lean on AI for financial help.
Enhanced Security
In this growing digital age, we all want to make sure that our assets are protected, making security more important than ever. Fraudulent transactions can get by a human rather easily, but AI is able to detect trends easily and will flag any potential fraudulent charge so that a human can take a deeper look.
This is one of those great examples of how AI isn’t exactly replacing people, but rather making the work easier for those who are already in the field. Many of the largest financial institutions are already using AI to go over every transaction on a daily basis because it’s capable of handling that workload.
Underwriting/Credit
Back in the day, you could simply walk into a bank, show them a paystub and a few other documents like a deed to show them that you were worthy of a loan without a full risk assessment of your finances. Times are much different, and computing is used in every major financial decision from mortgages to car loans. Now, AI is being used to streamline that process and give a yes-or-no based on your debt-to-income ratio among other details.
Within a matter of seconds, AI has the ability to pull up your financial history and determine an approval, interest rate, terms, and more. While this might not be ideal for the person who is applying for the loan, the risk assessment is what finance companies are most worried about. Since AI doesn’t have any feelings in the transaction, they’re able to make a calculated decision instead of an emotional one.
Accounting
Whether your business has 10 employees or finds itself firmly within the Fortune 500, there is a lot of accounting that needs to be done. However, even the smartest humans can make the simplest math errors on a consistent basis. While human accountants are likely to never be replaced, some of the more simple accounting tasks are now being handled by AI.
That’s because AI uses nearly foolproof systems that can cut accounting errors down to almost zero. Of course, humans are going to be needed to double-check that AI didn’t get anything wrong while adjusting the AI to make sure that the same mistake isn’t made again.