Artificial intelligence once loomed as a boogeyman in the doorway. People feared the development and implementation of these technologies. Many fretted over how artificial intelligence would change our day to day lives. Some of that fear had value. After all, artificial intelligence can replace some human-held jobs. Yet, people are becoming more accepting of artificial intelligence and the benefits it can bring to daily life, especially in the realm of financial services.
Finance is already a convoluted industry that depends largely on human judgment. While humans can be quite intelligent–they can’t always predict financial markets or make sound decisions. This is where artificial intelligence comes in. Now more than ever, artificial intelligence is taking on an evolving role in financial services.
Let’s explore how this technology is truly changing the landscape of finance as we know it.
1) Timely and More Advanced Credit Decisions
Back in the day, lenders would have to pour over a potential borrower’s history with a fine-tooth comb. Even then, there was little way of garnering an accurate assessment of risk on that borrower. Artificial intelligence can allow lenders to discern a faster and more accurate assessment of a potential borrower, often at little-to-no cost. Credit scoring services provided by AI and developed by financial software developers are based on more complex and sophisticated rules as compared to those utilized in older scoring systems. This can help any lender to distinguish between a high-risk high default applicant and one who is credit-worthy, but perhaps lacking in extensive credit history.
2) Increased Risk Management
Risk is the thorn in the side of the financial sector, making risk management paramount in any financial service. Thanks to the ever-evolving role of artificial intelligence, risk management is easier than ever. The enormous processing power of modern AI systems allows for vast amounts of data to be sored in a short amount of time. Additionally, cognitive computing can help to manage structured and unstructured data. Something most humans would never have the time to do. Algorithms created by financial software developers can also help to analyze the overall history of risk and identify warning signs of future issues. In this way, artificial intelligence is proving a powerful ally in risk management.
3) Better Fraud Prevention Practices
Few things are more detrimental to a financial institution than fraud. Luckily, artificial intelligence has proven highly effective in battling financial fraud. As the years wear on, the technology is becoming more adept at catching up with the bad guys and thwarting would-be criminals.
Artificial intelligence has proven particularly effective at preventing credit card fraud. Credit card fraud grows each year due to the increase in online transaction services. Where humans can fail to spot potential fraud, AI boosted fraud detection services can analyze client behavior, location, and buying habits to trigger a response when something seems out of order.
Banks can also employ artificial intelligence to reveal and prevent the act of money laundering. AI machines pick up on suspicious activity which can curb the costs of launching a full-on investigation of money-laundering schemes in high-risk sectors. Some studies suggest that AI can reduce the workload produced by cracking down on fraud by a whopping 20%.
Artificial intelligence might have once seemed frightening but many industries are now inviting this technology into their worlds with open arms. In the financial sector, artificial intelligence continues to make it easier to assess risk, curb fraud, and screen potential borrowers. All things, humans simply wouldn’t be capable of doing to the same capacity.