If you had told someone 30 years ago that cars would be able to park themselves, or software could give a more accurate assessment of a potential borrower, they might have laughed.
Who would have thought that the concept of technology behind space invaders would eventually improve our credit scoring systems and fraud prevention?
Finance has come a long way since then, and a large part of the credit can be given to the introduction of Artificial Intelligence.
Artificial Intelligence is defined as the theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages. Here are the key ways in which Artificial Intelligence is affecting the finance industry:
Since AI began to really take off and develop, one of its main capabilities has been learning from past data. This makes it a perfect tool for the financial services domain where identifying trends and bookkeeping are crucial to a business.
Credit Scores can be calculated using AI. The complex learning algorithms look at an individual's data. This could relate to repayment habits from credit histories or alternative data such as smartphone data. This helps to distinguish high risk applicants, versus those that are credit-worthy but lack the credit history to prove it.
Fraud Assessment and Detection
AI can identify fraud by utilising information on previous spending behaviours. Anomalies will flag potential issues. for example, withdrawing a significant amount of money or carrying out a transaction in another country a few hours after paying for your lunch in your local supermarket.
Another useful feature of AI is its ability to learn. Areas that have been flagged by AI can be overridden and corrected by the human user. If the same pattern occurs a number of times, AI will learn that it is a normal action. In future, AI will look for more sophisticated irregularities than before.
Today, the functionality of AI plays an important role in risk management of financial services. Its ability to process enormous amounts of data in a small amount of time, be it structured or unstructured data, is key.
AI can use algorithms that analyse the history of risk cases. Through the analysis of this data, AI is able to flag points at which there may be potential future problems.
Due to AI’s ability to evolve and mimic the human brain, it can highlight concerns and trends within business systems.
AI in the Future
It is clear to see that AI is benefiting the financial world massively. It reduces the chance of human error to a minimum, it is able to predict trends and problems before a human would be able to, and AI can monitor multiple aspects of a process at the same time, maximising efficiency.
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