How AI represents the next stage in digitalising the finance industry

October 12, 2022

With the significant advancement of technology, our lives have experienced considerable changes. By leveraging innovative technologies such as AI, ML and Big Data, we are transitioning into a new stage of innovation where industries worldwide are automating manual processes. This has made our lives similar and seamless, and the finance industry has also embraced this shift towards digital.

Artificial intelligence has emerged as a pivotal part of this digital transformation. In a report by McKinsey Global Institute, it’s estimated that utilising AI to improve core finance functions and provide customised services to customers will increase industry value by over $250 million.

A range of innovative tools is continuing to reshape the finance industry, and this is only the beginning. As we progress to the next stage of technological discovery and development, we must explore what role AI will play in disrupting the finance industry, its influence on businesses and how it will create a range of new opportunities.

The finance industry is recognising the significant transformative potential of AI. Industry analysts believe that by leveraging AI, the finance industry can save $1 trillion by 2030. Another study by Narrative Science a few years back suggested that over 30% of financial service businesses had already adopted AI-focused solutions such as predictive analytics and voice recognition services.

The emergence of innovation is predominantly focused on the customer experience. New AI-powered tools like chatbots are becoming a necessity for many new businesses on the front-end experience. Process and task automation and other analytics strengthen and elevate finance services on the back end. As suggested by Gartner, Robotic Process Automation (RPA), as an example, provides a very cost-effective service, amounting to around a third of the compensation provided to an offshore employee and about a fifth provided to an onshore employee. RPA does the manual work, utilising a rule-based system that automates repetitive tasks
AI in finance focuses on machine learning, but automation plays a significant role in banks. The finance industry has benefited considerably from machine learning. Banks can gather and explore vast amounts of finance-related data. Machine learning is a discipline of AI which enables machines to learn and progress by using data and not relying on human intervention.
Voice recognition is another modern innovation that applies AI to perform banking operations through voice commands. At the core of this technology is Natural Language Processing (NLP). This AI-driven technology is used to design a range of virtual assistants and chatbots.
In the financial scene, leveraging AI provides two distinct advantages; firstly a big increase in efficiency, and secondly, reduced stages that could be exploited for fraud. The trend of AI-focused lending initially emerged within the tech startup and was then rapidly adopted by other entities. Since market investment is mostly dominated by individual fund managers, it might be difficult to understand their influence on AI. However, AI-focused funds can considerably reduce the possibilities of human error through their ongoing evolving rules and algorithms.
Other significant factors behind the increasing demand for AI in finance include the development of cheap and efficient resources, the digitisation of financial services and the rise of new data on individuals and organisations.
The progression in advanced technology like Artificial Intelligence has transformed the financial industry. With the rise of next-gen tech applications disrupting the industry, technologies like AI and ML have significant potential to transform the sector for the better. Investment banks and financial startups are now utilising the best AI to enhance profits, maximise efficiency, eliminate errors and generate the best returns.

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