- Artificial intelligence (AI) is revolutionizing the way consumers and businesses access and manage their finances alike.
- Additionally, with the total potential cost savings from AI applications, estimated at $447 billion by 2023, banks are finding new ways to incorporate technology into their services.
- Are you working in the fintech industry? Get business insights into the latest innovations, market trends and competitors with data-driven research.
Finance's Artificial Intelligence (AI) and Machine Learning includes everything from chatbot assistants to fraud detection and task automation. According to AI from Insider Intelligence, bank reports show that most banks (80%) are highly aware of the potential benefits offered by AI.
The decisions of financial institutions (FIs) to adopt AI will be accelerated by advances in technology, increased user acceptance, and changing regulatory frameworks. Banks using AI can streamline boring processes and significantly improve their customer experience by having access to accounts and financial advice services 24/7.
With key business benefits and pressures from high-tech savvy consumers, AI algorithms are implemented by FI across all financial services.
Personal finance AI
Consumers are hungry for financial independence, and providing the ability to manage their financial health is the driving force behind AI adoption in personal finance. Whether you provide 24/7 financial guidance via chatbots with natural language processing or personalize insights in wealth management solutions, AI is a must for financial institutions looking to become the leading player in the industry.
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 the US bank. ENOs generate insights and predict customer needs through 12 preventative features, including warning customers about suspected fraud and price increases in subscription services.
Like what you're reading? For more information about Insider Intelligence's major financial services research, click here.
Consumer Finance AI
One of the most important business cases of AI in finance is its ability to prevent fraud and cyberattacks. According to Insider Intelligence, consumers are looking for banks and other financial services that provide secure accounts. AI has the ability to analyze patterns that are otherwise unnoticed by humans and to analyze single irregularities.
One bank that uses AI in consumer finance is JPMorgan Chase. In Chase's case, consumer banks represent more than 50% of their net profit. That's why banks are adopting major fraud that detects account holder applications. For example, it implements its own algorithm for detecting fraud patterns. Credit card transactions will be processed. Transaction details are sent to the central computer in Chase's data center to determine whether the transaction is incorrect. Chase's high score in both security and reliability (very enhanced by the use of AI) came in second in Insider Intelligence's 2020 US Bank Digital Trust Survey.
Corporate Finance AI
AI is particularly useful for corporate finance as it allows you to better predict and assess the risk of lending. For businesses looking to increase their value, AI technologies such as machine learning can help improve loan underwriting and reduce financial risk. AI can also reduce financial crime through advanced fraud detection and spot extraordinary activities as company accountants, analysts, financers and investors.
The US Bank uses AI in both intermediate and back-office applications. US banks can help unlock and analyze all relevant data about their customers through deep learning and identify bad actors. Money laundering It uses this technology for anti-money laundering, according to the Insider Intelligence Report. This doubled the output compared to the previous system's traditional features.
The Benefits of AI in Finance
Benefits of Implementing AI in Finance – The benefits for automating tasks, fraud detection, and providing personalized recommendations are monumental. Front and intermediate office AI use cases can convert the finance industry into:
- Enable frictionless, 24/7 customer interaction
- Reduce the need for repetitive work
- Lower false positives and human errors
- Save money
Automating intermediate office tasks with AI could save North American banks $70 billion by 2025. Additionally, the total potential cost savings for banks from AI applications are estimated at $447 billion by 2023, with front and central offices accounting for a total of $41.6 billion.
Fintech: The Future of AI in Financial Services
Between increasing consumer demand for digital products and the threat of tech-savvy startups, FI is rapidly adopting digital services. By 2021, Global Banks' IT budget will skyrocket to $297 billion.
Millennials and Gen Zers are quickly becoming the largest bank's addressable consumer group in the US, with FI being pushed to increase IT and AI budgets and meet higher digital standards. These young consumers prefer digital banking channels, and 78% of millennials will not go to branches if they can help.
And while the shift from traditional banking channels to online banking and mobile banking was a pre-pandemic as opportunities are increasing among digital native consumers, the coronavirus has dramatically amplified the movement as stay orders were implemented nationwide and consumers sought more self-service options. Insider Intelligence estimates that both online and mobile banking adoption among US consumers will rise by 2024, reaching 72.8% and 58.1%, respectively. It creates critical AI implementations to be successful and competitive in evolving industries.
