Many technologies have come in the last decade and have changed how we live. One technology paying higher dividends than others is Artificial Intelligence – AI in finance. AI has completely changed the way customers save, spend, and invest their money today.
AI has adapted itself to almost every industry. It has done wonders for the financial industry. As per a recent report, over 70% of total financial companies use AI and ML for doing business better. In this article, to help you understand the power of AI, we are listing down all the financial domains where AI has created an impact.
Application of AI in Finance
Credit Scoring – Before giving you a loan, the banks and the fintech companies accurately assess your creditworthiness. Earlier, such decisions were taken by the analysts after talking to the client and gathering the relevant data points. It was a time taking process and could be biased too.
However, AI allows faster and more accurate assessment of the borrower. More complex and detailed algorithms are used today to arrive at the final score to determine whether to give them a loan or not. With AI, there is no human error nor scope for unbiased decisions.
Personalized banking – You may not be aware of it, but you are using AI in many areas related to your finances. You get a personalized banking experience as your bank is most likely using AI.
Today, when you go to your bank’s website, you see chatbots, right? These chatbots are driven by AI. You must have used them to check your balance or schedule a transaction. There is so much more happening within banking technology, and AI plays a significant role in the transformation.
Algorithmic trading – You must have heard of the saying – Time is money. The saying holds more importance in trading. The faster analysis means you can interpret the pattern faster to make better decisions and trades. In the world of AI, if you are doing everything manually, you will be too late to react and will miss the opportunity. Companies invest heavily in algorithmic trading to autonomously execute trades based on the identified pattern.
Such systems can outperform human traders on any given day. Another advantage of AI in trading is that the decisions are not impacted by emotions. Algorithmic trading is gaining popularity among the individual practitioners of data science. They are trying to build their own trading systems, either on their local machines or in the cloud.
Robo-advisory – Today, you cannot make money by opening a fixed deposit account and depositing your savings there. The inflation is on the higher side, and fixed deposits interest will not be able to beat inflation. People have realized this fact, but there are not many other alternatives for them because of low financial literacy. This is where robo-advisors come into play.
Wealth management services give you the option to use technology to create your portfolio based on your individual goals (both short and long-term), risk preferences, and disposable income. AI is helping you to pick the asset, create the portfolio, and rebalance it as and when needed. All this helps you when you have limited knowledge of the market. Using AI, you can achieve your desired goals at a reasonable rate. Robo-advisors tend to be cheaper than the services of asset managers. Hence, you can start investing even if you plan to invest a small amount.
Jarvis Invest has gone a step further and used AI for risk management. Jarvis not only gives you a recommendation for buying and selling but also protects your investment through its risk management system. We are using AI for risk management which is completely unbiased.
Challenges of AI in Finance
We have discussed the key areas where AI is making an impact in the financial domain. It makes sense to understand the potential challenges connected to it:
- Data quality – The efficiency of an AI system is dependent on the quality of data fed into the system. If corrupted data or even just a few wrong observations are fed into a trading algorithm, it can have dire consequences for the entire system. It eventually leads to bad trades and financial loss.
Jarvis is using millions of data pointers to select stocks for its customers. Our data is tested for months in the testing environment before it goes into the production environment.
- Biased data – It is essential that there is no biasing happening, and there should not be any human intervention in AI processing. If it happens, the whole purpose of AI goes wasted as it can corrupt the system.
Before you go
Without a speck of doubt, AI is the future of the finance industry. With the speed at which it is making progressive steps making the financial processes easier for the customers, it will soon replace humans and provide faster and much more efficient solutions.Jarvis Invest is making the most of AI and helping thousands of customers invest in the market and build wealth. If you want to invest in the market, you can start NOW. You don’t need any expertise. All you need is to trust the power of AI. We hope the article has given you some glimpses of the power of AI.