How AI is Transforming Financial Services

How AI is Transforming Financial Services

In our last blog post, we looked at the pros and cons of using artificial intelligence in recruitment. In this blog post, we stay with the artificial intelligence theme and look particularly at ways that AI is helping transform the financial services industry.

Fraud and Money Laundering

While cybercrime, fraud and money laundering make great stories for gripping movies, these sorts of activities aren’t quite what the financial services industry wants. Accenture estimates that AI will add $1.2 trillion to the financial industry by 2035. With this level of capital potentially being injected into the economy, more innovative solutions will be necessary to keep it safe from cybercriminals. Artificial intelligence can help achieve this.

 

Want the short version? Download our free “How AI is Transforming Financial Services” cheat sheet!

 

In fact, in 2012, HSBC received a $1.5 billion fine over money laundering and even admitted that some of its processes and controls were insufficient. After this event, HSBC invested in Google Cloud machine learning technology to help the finance giant improve their processes and better identify potential money laundering activities.

The UK’s Financial Conduct Authority (FCA) is urging all banks to invest in artificial intelligence and to deploy solutions that leverage technology. Machine learning and natural language processing can keep financial data safe and reduce the chance of fraud and money laundering from taking place.

 

The UK’s Financial Conduct Authority (FCA) is urging all banks to invest in AI and deploy solutions that leverage technology. Click To Tweet

 

Trading

One of the most exciting things about artificial intelligence is its ability to learn, identify patterns and make decisions by itself. Being able to process data – at scale, is another benefit that AI has over more traditional systems. Traditional financial systems are often programmed with relatively static business rules which can make it hard for them to adapt to new situations in the financial markets. AI, however, can adapt to incoming data that might not have been anticipated. Assuming it has been trained with an adequate set of training data, it can arrive at a conditional probability in terms of the action to take.

It’s these sorts of characteristics that make AI a good choice for financial trading systems. In fact, we’re already beginning to see new AI solutions hit the financial markets that can help give businesses a competitive edge.

AI being utilized for financial trading systems

For example, Merrll Lynch recently experimented with a stock picking solution that leveraged artificial intelligence to help them find value in small-cap stocks that financial analysts might miss. Also, with Bloomberg reporting that the third-largest lender in Japan is using AI in the equities market, we can only anticipate that the use of AI to help banks and traders make better-informed decisions is only set to increase.

AI Trader is another solution that supports cryptocurrency trading which uses (as the name suggests) artificial intelligence to review and make better training decisions based on real-time financial market information.

Screening and Risk Assessment Loans

Another area in the financial services world where artificial intelligence is having an impact is during the screening of loans. These typically involve processes that determine the level of risk attributed to lending funds to individuals or businesses. This involves ingesting multiple data points where no two applications are typically the same. Machine learning solutions can help finance providers create forecasting models that can predict, with relative accuracy, who is at higher risk for defaulting on loan payments. Michael Schidlow, HSBC’s head of financial crime and risk development, admits that artificial intelligence should be deployed to help the financial giant roll out automated solutions to improve the efficiency of their business.

 

Want the short version? Download our free “How AI is Transforming Financial Services” cheat sheet!

 

Personal Finance

Financially savvy consumers are always looking for ways to optimize their income and stretch their valuable dollars as far as they can go. PFM, or Personal Financial Management, is another growing area in the financial world that is feeling the positive effects of artificial intelligence.

A startup based out of San Francisco has developed a product aptly named Wallet, which uses artificial intelligence to help consumers make smarter decisions about their money and spending habits.

One of the key features of Wallet is that it accumulates as much data as it can from your spending footprint. It can generate spending graphs, let you know that you spent more than normal on one day compared to the next, and even let you know how long your paycheck typically lasts.

Deploying AI like this may be a tad too intrusive for some, but it sure beats sitting in front of Excel!

Chatbots

We’ve talked about chatbots before and how they can optimize business processes and solve real-world business problems. The financial services industry is another area where AI-powered chatbots are helping customers make smarter decisions.

AI-powered chatbots are helping customers make smarter decisions

Bank of America

One of the largest US banks, Bank of America, is leading the way when it comes to chatbot technology. In 2016, BofA developed a voice and text-enabled chatbot called Erica, which contained a wide range of features that included:

  • sending valuable notifications
  • identifying areas where money can be saved
  • updates on FICO scores
  • easier bill payments

 

Machine learning can help finance providers create forecasting models to predict who is at higher risk for defaulting on loan payments. Click To Tweet

 

Capital One

Capital One is another major player that is getting in on the AI and chatbot revolution, with the release of their text-enabled chatbot called Eno.

Customers can perform a wide arrange of activities using the chatbot. From checking recent transactions to viewing payment history or even processing payments, Eno has it covered.

American Express

Finally, American Express has developed a Facebook Messenger bot which lets account holders perform key account administration tasks. The bot lets users view their benefits and can provide users with contextual recommendations.  A more novel feature of the Amex bot is that it can be linked to user Facebook accounts, enabling the in-app purchase of products or services through Facebook itself.

 

Want the short version? Download our free “How AI is Transforming Financial Services” cheat sheet!

 

Summary

In this article, we’ve looked at some ways that artificial intelligence is transforming the financial services industry.

We’ve seen how AI can help prevent or identify fraud and money laundering and looked at how AI-powered solutions are ideal for identifying optimal trading patterns to help analysts make better-informed trading decisions.

We’ve looked at how banks can deploy AI to mitigate risk when it comes to lending, seen how consumers can use AI Apps to help them save money and how chatbots are changing the consumer experience when it comes to personal banking.

Here at Growth Acceleration Partners, we have extensive expertise in many verticals. Our nearshore business model can keep costs down while maintaining the same level of quality and professionalism you’d experience from a domestic team.

Our Centers of Engineering Excellence in Latin America focus on combining business acumen with development expertise to help your business. We can provide your organization with resources in the following areas:

  • Software development for cloud and mobile applications
  • Data analytics and data science
  • Information systems
  • Machine learning and artificial intelligence
  • Predictive modeling
  • QA and QA Automation

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