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8 Reasons Why the Finance Industry Should Be Using AI in 2021

Steve Denby

Head of Sales Enablement

Artificial Intelligence (AI) is expected to become an essential dynamic across the financial industry in the next two years, driving business model innovation, and creating opportunities for new revenue streams.

In a recent report conducted by the World Economic Forum, 85% of executives from 151 financial institutions across 33 countries said they are currently using some form of AI. 77% expect it will become essential to their business within two years.

The technology presents a new and improved way to meet the demands of customers, as well as streamlining and optimising processes, from credit decisions to financial risk management.

 

AI driving digital transformation

The fintech industry was an early adopter of AI, and the technology is now one of the main drivers in digital transformation in traditional financial institutions.

Global financial giant PayPal has approximately 33.8m transactions per day and $22,577 payments a second. It utilises AI approaches to solve and optimise complex and business-critical problems.

PayPal’s AI blog shares knowledge it has gained as it continues to adopt more advanced AI techniques.

 

So what capabilities can AI add to our financial institutions?

1. Software for underwriting

An AI-powered underwriting solution can help companies assess borrowers with little to no credit information or history. The software can look at clients considered ‘at risk’ and examine thousands of data points, giving a more accurate decision on their likelihood of default.

 

2. Forecasting and analytics

An AI-powered database can offer analytical solutions and make predictions. The technology can provide short and long-term forecasting and identify market price changes. Accurate forecast predictions are crucial to reducing risk in the finance world.

 

3. Anti-money laundering

Companies in the fintech space must have anti-money laundering detection solutions. Large amounts of investigations are a huge strain on financial institutions, and software to understand and manage risk can reduce these issues.

 

4. Quantitative trading

Artificial Intelligence is particularly useful in quantitative trading as it can use large data sets to identify patterns used to make strategic trades. AI technology can analyse data quicker and faster than humans, saving time and minimising the risk of error.

 

5. Search engine

When a more powerful search engine is needed, AI technology can dig deeper. It utilises natural language processing to analyse keywords within transcripts, research, news and filings to find changes and trends in the financial markets.

 

6. Improving customer service

AI chatbots can help customers with budgeting, savings goals, expense tracking and other daily financial decisions. This real-time support provides customers with self-service options and solutions.

 

7. Cyber security

AI software can analyse billions of requests and effectively distinguish between real consumers and bots. The technology is also able to detect compromised login credentials and alert both the business and customers.

By locating fake users, it can curb credit application fraud, gift card cracking, scraping and credential stuffing.

 

8. Payment systems

As payment technology becomes more sophisticated and self-learning algorithms help secure digital payments, AI will enable businesses to benefit from the payment data.

By using machine learning to determine the trends in transactions – for example, seasonal decreases - companies can fine-tune their business strategies, manage inventories and prepare exclusive customer offerings.

 

A future-proof technology foundation

Artificial Intelligence in finance is transforming how we interact with money, but the challenges financial CIOs and their teams face are significant.

They must respond to the pace of change and cost pressures, yet embrace the necessity of expanded digitisation.

Technology performance has become critical to business success, and financial institutions large and small need to be fit for a digital age.

Many organisations are still in the early stages of this journey. Still, with the addition of Artificial Intelligence technology, they are certain to evolve into modern, agile and innovative companies with flexible and secure platforms.

Learn how you can prepare for the next phase of digital transformation by downloading our whitepaper, Investing in Progress: The Financial Services Success Matrix.