3 Ways Artificial Intelligence Could Influence The Way You Bank - Blog
AI or Artificial intelligence is a term that has been around for decades now but has picked up the pace in the recent past. AI has permeated almost all the fields, however, it is the finance sector which has benefited the most. Since the finance sector deals with a lot of data, it is easier for AI to integrate and apply its intelligence in this field. As artificial intelligence transforms the financial sector, Banks and institutions are moving fast to keep pace. Let us see how AI can affect the way you bank, invest, receive loans and prevent financial frauds.
1. Risk Assessment: AI is good at learning from previous data. Certainly then, AI can prove much beneficial for the finance domain. In the banking sector, historical data holds great value to determine the present & future trends. Let’s take the example of credit cards. Banks rely heavily on credit scores to determine who is eligible for a credit card and who isn’t. Wouldn’t it make more sense if data pertaining to the individual’s loan repayment habits, the number of loans currently active, the number of credit cards etc. could be utilized to customize the interest rate on a card for the financial institution that is offering the card? Now, take a minute and think back which system has the capability to scan through loads of previous financial data and come up with a solution- Artificial Intelligence!
Since AI is completely data-driven, scanning through these records also gives AI the ability to make a recommendation of loan and credit offerings by utilizing Credit risk analytics. Many financial organizations are implementing AI and ML (Machine learning) in place of human analysts, potentially saving millions of dollars in losses due to human error. Much like the human brain, the machine learning algorithm self-improves as it is fed more and more data, a trend that the financial industry can benefit from immensely.
2. Fraud Detection & Management: The popularity of E-commerce has simplified our financial lives while also opening new avenues for online fraud. No business would want itself to be exposed to the possibility of fraud, and most certainly not, a bank. Artificial intelligence can come in handy here. By analyzing various data points, the ML algorithms can detect fraudulent activities that would otherwise go unnoticed by human analysts. This will also improve the accuracy of real-time approvals thereby reducing false declines.
An example can be given of CRIF Highmark, a credit reporting agency in India, who have come up with an antifraud solution called SHERLOCK to help detect and investigate application and identity frauds. Sherlock combines the power of intelligent search algorithms and multiple data sources for a significantly better fraud-detection experience. Another advantage of using AI is that the user can override and teach AI to make the right decisions, in case it raises an uncalled alarm to avoid the same in the future.
3. Stocks & Trading: With the advancement in machine learning algorithms, computers are now able to use their expertise in computing numbers for financial activities such as trading stocks. Investment companies are heavily relying on computers and data experts to determine future patterns in the market. With the use of Machine Learning and data, computers can be taught to observe past patterns and use them to determine the future. AI made decisions are especially ideal to rely on for the person with a high-risk appetite. AI can also suggest a favorable time to invest in the market and the right time to abstain or move out. The accuracy of AI in the stock market is still a matter of debate and has many skeptics in the form of traditional traders. However, what’s clear is that the AI algorithm can provide valuable insights to make better decisions.
The fintech revolution is still in its nascent stage, but alongside AI, it has already had a substantial impact on the way traditional banks do business. This presents digital entrepreneurs and investors with a myriad of opportunities for improvement.