- Artificial intelligence (AI) is revolutionizing the way consumers and businesses alike access and manage their finances.
- Additionally, the total potential cost savings for banks from AI applications is estimated at $447 billion by 2023, and banks are exploring new ways to incorporate technology into their services.
- Do you work in the fintech industry? Data-driven research provides business insights on the latest innovations, market trends, and competitors.
Artificial intelligence (AI) and machine learning in finance includes everything from chatbot assistants to fraud detection and task automation. According to Insider Intelligence's AI in Banking report, most banks (80%) are keenly aware of the potential benefits offered by AI.
Decisions by financial institutions (FIs) to adopt AI will be accelerated by technological advancements, increased user acceptance, and changes in regulatory frameworks. Banks using AI can streamline tedious processes and significantly improve customer experience by providing 24/7 access to accounts and financial advisory services.
With key business benefits and pressure from tech-savvy consumers at the forefront, AI algorithms are being implemented by financial institutions into all financial services. Here's how:
AI in personal finance
Consumers are craving financial independence, and providing the ability to take control of their financial health is driving the adoption of AI in personal finance. Whether it’s providing 24/7 financial guidance via chatbots powered by natural language processing or personalized insights for wealth management solutions, AI is essential for financial institutions aiming to be top players in their industry. is.
An early example of AI in personal finance is Capital One’s Eno. Eno was launched in 2017 and was the first natural language SMS text-based assistant offered by a US bank. Eno generates insights and anticipates customer needs through more than a dozen proactive features, including alerting customers to suspected fraud or price increases for subscription services.
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AI in consumer finance
One of the most important business cases for AI in finance is its ability to prevent fraud and cyber-attacks. Consumers are seeking banks and other financial services that offer secure accounts, and losses from online payment fraud in particular are expected to soar to $48 billion annually by 2023, according to Insider Intelligence. AI has the ability to analyze and identify irregularities in patterns that humans would not notice.
One bank that is leveraging AI in consumer lending is JPMorgan Chase. For Chase, consumer banking accounts for more than 50% of net income. As a result, banks have adopted leading fraud detection applications for their account holders. For example, we implement proprietary algorithms to detect fraud patterns. Every time a credit card transaction is processed, transaction details are sent to central computers in Chase's data centers to determine whether the transaction is fraudulent. Chase received high scores for both security and trust, powered primarily by its use of AI, earning it second place in Insider Intelligence's 2020 U.S. Bank Digital Trust Survey.
AI in corporate finance
AI is particularly useful in corporate finance as it can better predict and assess loan risk. For companies looking to increase their value, AI technologies such as machine learning can help improve loan underwriting and reduce financial risk. AI can also help reduce financial crime through advanced fraud detection and identify anomalous activity as corporate accountants, analysts, treasurers, and investors work toward long-term growth. .
US Bank uses AI in both middle-office and back-office applications. Through deep learning, US Bank unlocks and analyzes all relevant data about its customers to help identify malicious actors. The company uses the technology to fight money laundering, and Insider Intelligence reports that it has doubled the output compared to the previous system's traditional capabilities.
Benefits of AI in Finance
The benefits of implementing AI in the financial sector are immense, including automating tasks, detecting fraud, and providing personalized recommendations. AI use cases in the front and middle office will transform the financial industry in the following ways:
- Enabling smooth 24/7 customer service
- Reduces the need for repetitive tasks
- Reduce false positives and human error
- save money
Automating middle-office operations with AI could save North American banks $70 billion by 2025. Additionally, the total potential cost savings for banks from AI applications is estimated at $447 billion by 2023, with front- and middle-office costs accounting for $416 billion. Of that total.
Fintech: The future of AI in financial services
Between growing consumer demand for digital services and the threat of tech-savvy startups, financial institutions are rapidly adopting digital services, with global bank IT budgets expected to reach $297 billion by 2021. It is expected to increase rapidly.
In the US, Millennials and Gen Z are rapidly becoming the largest consumer group for banks to cater to, forcing financial institutions to increase their IT and AI budgets to meet higher digital standards. These young consumers prefer digital banking channels, and a whopping 78% of Millennials would never go to a branch if possible.
Additionally, the shift from traditional banking channels to online and mobile banking was underway before the pandemic due to expanding opportunities among digitally native consumers, but with stay-at-home orders implemented nationwide, , a movement dramatically amplified by the coronavirus as consumers demand more services. Self-service options. Insider Intelligence predicts that the adoption rate of online and mobile banking among U.S. consumers will increase by 2024, reaching 72.8% and 58.1%, respectively, increasing success and competitiveness in an evolving industry. The introduction of AI has become essential for financial institutions that want to secure.
