AI in Finance

AI will completely revolutionize every industry we have today on Earth. It already is rapidly changing industries such as the automation industry, but what if I told you that a robot in the future may be assisting you with your finances? Or what if I said that AI might be predicting your business’s economic future? Sounds pretty odd, but in the near future, that might just be the case.

What is AI?

An AI program is called an Intelligent Agent, the program can sense things from the external environment and react accordingly. Another part of AI is actuators which execute tasks decided upon by the agent. But what is the process? How do we get AI to execute tasks? The perception-action cycle explains the very basics of AI and presented in this cycle are sensors which get information from the environment. The agent then uses this data collected to come up with a decision, and that decision is executed through the actuators doing the task and interacting with the environment.

Generally, AI can be categorized into 2 categories; strong and weak AI. Strong AI tends to be categorized by its capabilities as well as how well it can function compared to weak AI. Additionally, strong AI tends to mimic the human brain relatively well. Weak AI tends to be set up to do specific tasks and work by the rules set for it. Weak AI doesn’t go beyond its boundary set by rules and focuses on narrow tasks, like Siri or Alexa.

A few ways that AI can be used in finance are:

1. Risk Assessment- AI can be used to help determine and customize interest rates on cards for people, customizing things such as interest rates if far more efficient for banks. Additionally, they may take the spot of human analysts because there are fewer inaccuracies and mistakes when using ML. It saves millions of dollars as they can analyze vast amounts of data and have less possibility of mistake.
2. Fraud Detection and Management- AI is very useful at eliminating fraud and maximizing security, it can look at previous spending actions to highlight trends and behavior in spending so that when something abnormal happens it can alert the user and bank. Additionally, if it raises red flags for regular transactions it is able to learn from its mistakes and its experience making it more sophisticated at choosing what is and isn’t fraud.
3. Financial Advisory Services- In the future, we will see more robotic advisors as they are very cost efficient as well as better at making financial decision making. ChatBots are also super useful for customer communications and relations.
4. Trading- Data scientists could be replaced with AI left to predict future patterns in the market. Trading and investment rely upon predictions of the future accurately to do well and AI brings this. AI can learn to predict anomalies too and look for abnormal signs in the market such as the stock market crash in 2008, incorporating them into predictions of the future.
5. Managing Finance- AI can help manage our finances, replacing personal financial managers. Wallet which is a company that started in San Francisco is an example of this, using AI to help consumers make the best decisions with their money and spendings.

Final Thoughts

I think AI could and most likely will completely revolutionize what the financial industry will look like in a few years, and it ensures that we have fewer surprises such as the stock market crash of 2008. It provides for a safer financial future, and I wanted to share that with you in this article.