Artificial Intelligence (AI) is also referred to as machine learning. It’s used for a variety of things, such as auto-completing search engine results and recommending adverts for you based on your browsing history. It’s highly likely that AI has already influenced your life without you ever knowing it.
However, the internet isn’t the only place where artificial intelligence is improving our lives. One area where AI could become even more important is within the personal finance industry. In this post, we’ll look at what AI can do and how it could transform the personal finance industry.
AI and the Personal Finance Industry
AI has the ability to improve the way that software performs tasks. In finance particularly, software is used commonly, from apps for mobile banking to calculators for loans. This is why banks particularly have begun to embrace AI, as it transforms the way that they perform functions.
Within banks, this technology has already led to greater automation. Repetitive and manual processes have now been automated to optimise internal workflows, freeing up employees to do other tasks.
On the customer-facing side, banks often use AI in an attempt to engage customers, allowing them to make smarter decisions and investments, as well as helping them manage their money.
A particular strength of AI lies in predictive technology. This can be used to help predict the spending habits of customers, helping provide them with genuine advice. This is invaluable for people who are living payday to payday.
On the other side of the coin, AI based technology can also help some users build and manage their wealth. It can help customers identify savings opportunities without visiting a fund manager by acting as a financial assistant and manage risk while they’re investing.
More information is available on these types of investing here.
How AI can help in management of finance
- AI can help in super-fast Data processing
The human lives revolve around so many machines. The human race is still dependant on gathering, interpreting and coming up with conclusions of data that is an extensive number. Undeniably, AI has to unfold several prospects to outshine human brain completely. But then again when it comes to manifesting thousands of variables in some specific areas, vis-a-vis, personal finance and scrutinizing them, AI can beat it very easily.
This feature is especially beneficial to the industries and institutions dealing in complex economies and studying the financial flow of several thousand people at once.
- AI helps in Clinical Decision Making
It’s the human tendency to get subjective to emotions and biases. And hence, the decision making is somewhere influenced by this human nature and not under absolute scrutiny.
In general, the objectivity of the decision defines whether it’s going to turn out in the favour or not. This objectivity is simply based on number and calculations and not human emotions. The algorithms of AI are not influenced by any such emotions or bias. Its conclusion is not the victim of human thinking and emotions. Thus it makes it more reliable and analytical in deriving long term clinical decision making.
- AI helps in identification of Potential saving opportunities
It is quite easy for the business houses to create data simply based on the information of what a person is buying. This information is then leveraged by these entities in enticing the customers and eventually to sell their products. When the business houses can make the most of this information, the customers can too and easily leverage it to analyze their financial activities. This analysis can help in identifying the potential saving opportunities. In fact, it can promote the automated saving of money simply based on the financial situation. This is helpful especially for people struggling with the management of personal finance.
- AI can easily forestall fraud situations
The algorithms of AI are programmed to stimulate the countless scenarios where a cybercrime or fraud may happen. It thus makes the environment for financial services more secure and breach proof owing to its proactive approach.
Primarily, the developers can only detect the crime only after its occurrence, but now the times have changed. They do not have to wait for a fraud occurrence to detect and thereby securing the system. With the continuous understanding of human psychology, AI can help them in the field of finance by securing its product and services.
Keeping a “stern regulatory oversight”, AI ensures the follow up of all policies and regulations. It also ensures that every safety measure is incorporated well for a more secure and safe personal finance environment.
The Expert View
Experts agree on the above, with many believing that human financial advisors can be replaced by algorithm-driven chat-bots. AI alone may actually make physical banks on the high street redundant entirely, although it’s likely that the technology will have to advance significantly to reach this point.
However, it’s undoubted that because AI can provide specific, tailored advice to each customer, analysing their spending habits in the process, it can transform the way we provide financial advice. Due to the fact that it can also automate tasks for bank employees, AI appears to be the future of the personal finance industry. Watch this space to see how it develops.