AI In Finance Believed To Change The Industry For Good

It is safe to say that Artificial Intelligence is the technology of the future. Why? Mostly because every industry in the world has started incorporating and leveraging AI’s immense potential. However, finance is an industry where AI is said to have an unrivaled impact. AI in finance has ample applications, and it can make the industry much more efficient and accessible to many more people. But what are the applications of AI in finance? What are the ways AI can revolutionize the finance industry? In this blog, we will shed some light on the topic. 

Applications Of AI In Finance

There are a lot of AI applications in finance, from automating operations to enhancing the customer experience, and there is a whole host of other AI applications aswell. Let’s have a look at some of the most prominent examples. 

1. Automated Data Analysis

One of the most prominent uses of AI in finance is its capability to automate data analysis. Generally, data analysis is very time-consuming and can take hours to complete. Moreover, it is also prone to human errors. Conversely, AI can perform this task much more accurately while taking a lot less time as compared to humans. This is the reason why many financial institutions use AI in automated data analysis. 

Example: JPMorgan Chase‘s Contract Intelligence system, or COIN, is one of the most prominent examples of AI automated data analysis. It has been around for almost 7 years now, automating the interpretation of loan agreements, which is a very time-consuming job. As per JPMorgan Chase, this task previously took around 360,000 hours of analysis by humans. 

2. Predictive Modeling

One of the best examples of AI in finance is predictive modeling, which uses AI to analyze massive data sets and historical data and identify patterns in the data to determine future trends. This allows companies to make proactive, informed, and future-proof decisions. It also allows companies to capitalize on upcoming trends and stay ahead of the rest of the industry. 

Example: One of the best examples of AI predictive modeling in action is the predictive model of American Express, the world’s biggest card company. The company uses AI to study patterns and historical data to predict consumer behavior and potential fraud cases. This allows the company to take measures in advance and decrease the chances of fraud. According to American Express, this AI system has lowered the cases of fraud by a whopping 30%, which is very significant. 

3. Risk Management

Cybersecurity and data leaks are some of the biggest risks for the finance industry, and AI in finance mitigates that risk by identifying and assessing patterns. Many firms use advanced risk management algorithms that adapt to risks and evolve their threat response protocols based on those risks. Moreover, AI in finance also helps identify market risks, minimizing the probability of a major profit loss. 

Example: Swiss firm UBS uses AI to enhance its risk management system. Machine learning algorithms analyze patterns and detect risks based on those patterns. According to UBS, AI in finance has allowed them to mitigate many cybersecurity threats and reduce their exposure to potential financial risks. 

4. Customer Service

Another application of AI in finance is in customer service. Firms worldwide use AI-based chatbots to enhance customer experience. These chatbots and virtual assistants can answer customer questions and queries and can even assist in transactions. 

Example: One of the biggest users of AI in finance and customer service is Bank Of America. They use an AI model called Erica, which provides customers with personalized banking services. Erica can analyze customers’ financial histories and suggest tailor-made financial advice based on those histories. In addition, Erica helps enhance the customer experience. According to the Bank Of America, by mid-2023, Erica had successfully completed more than 1.5 billion customer interactions. 

5. Financial Forecasting

AI can also be used in financial forecasting. It allows us to analyze more data, obtain relative and accurate insights, and access dynamic market trends faster and more efficiently than humans. Firms all around the world are using these AI applications to get insight and combine these insights into their financial knowledge to make informed and profitable decisions. 

Example: IBM uses AI to study market patterns and obtain insights. Their AI model, Watson, provides accurate financial insights to make informed and profitable decisions. This is not the only financial forecasting model out there, but it’s definitely the fastest and most accurate. It is a testament to the extraordinary amount of data an AI model can process. 

The Immense Potential Of AI In Finance

AI in finance has many applications. However, mentioned above are some of the industry-leading practices where AI is being leveraged to enhance operations. AI has immense potential in finance and new and more powerful AI models are coming to the market with every passing day. This industry is destined to change once AI completely takes over the world. 

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