The impact of artificial intelligence on the financial industry

Artificial intelligence (AI) has long been the subject of research, but recent advances in technology and the abundance of data have accelerated its integration into commercial applications. Tech giants such as Google, Amazon, Apple and Facebook are investing heavily in AI, signaling its importance in shaping global business models. Although the data-driven financial industry is actively exploring AI through pilot projects, its widespread implementation remains limited. However, the potential impact of AI on financial services is undeniable, promising transformative possibilities that can revolutionize industry operations and outcomes (52nd Hawaii International System Sciences Conference, 2019).

"Artificial intelligence (AI) is revolutionizing the way both consumers and businesses access and manage their finances. And with total potential savings for banks estimated at $447 billion by 2024 from AI applications, banks are finding new ways to incorporate this technology into their services" (Emarketer, 2024).

Artificial intelligence (AI) and machine learning in finance range from chatbot assistants to fraud detection and task automation. Most banks (80%) are well aware of the potential benefits presented by AI, according to Insider Intelligence's report on AI in banking.

Within the financial sector, banks and insurance companies navigate a complex and competitive landscape, compelled by significant transformational pressures to maintain market relevance. In this dynamic environment, preserving customer loyalty, characterized by satisfaction, trust, engagement and perceived value, assumes paramount importance. Technology giants such as Google, Facebook and Apple have demonstrated the transformative power of customer centricity and modern technology to reshape financial services processes.

However, many traditional financial service providers lack the agility and innovative prowess to meet customers' changing needs. As a result, FinTech is emerging as a disruptive force capable of revolutionizing traditional financial markets. Leveraging cutting-edge technologies, these market participants are abandoning legacy architectures and adopting agile and efficient processes to deliver better customer experiences, reduce costs and accelerate innovation. Driven predominantly by entrepreneurship, fintechs have spearheaded significant advances in diverse domains such as payments, wealth management, lending and crowdfunding. In addition, they have catalyzed the adoption of AI and machine learning within the financial services sector. The proliferation of customer-centric digital fintechs is forcing traditional financial institutions to adapt. Amid the convergence of customer expectations and institutional frameworks, the abundance of continuously generated data presents vast opportunities for evaluation, analysis and product innovation.

What are the benefits of AI?

The benefits of implementing artificial intelligence (AI) in finance are vast and transformative. AI technology has the potential to revolutionize various aspects of the financial industry, particularly in task automation, fraud detection and personalized recommendations. By leveraging AI, financial institutions can:

• Facilitate 24-hour customer interactions, improving user experience and satisfaction.
• Drastically reduce the need for repetitive manual tasks, freeing up valuable time and resources.
• Significantly decrease false positives and human error, improving accuracy and efficiency.
• Generate substantial cost savings as AI-driven automation optimizes operations and reduces overhead.

The adoption of AI in front and back offices has been projected to generate significant financial benefits. For example, automating middle office tasks with AI could save North American banks a staggering $70 billion by 2025. In addition, total cost savings for banks from AI applications are estimated to reach $447 billion by 2024, with front and back office accounting for a significant portion of this total at $416 billion.

How is AI revolutionizing the financial industry?

In fact, it does so in several key areas:

• Algorithmic trading: AI develops trading algorithms that analyze market trends and historical data to execute trades faster than humans.
• Automation and efficiency: AI automates repetitive tasks, processing large amounts of data faster and more accurately.
• Competitive advantage: AI fosters innovation, providing financial institutions with a competitive advantage.
• Regulatory compliance: AI automates monitoring and reporting, ensuring regulatory compliance.
• Credit evaluation: AI analyzes various data to accurately assess creditworthiness.
• Cost reduction: Automation reduces manual labor, streamlines workflows and improves operational efficiency, reducing costs.
• Customer service: AI-powered personal assistants and chatbots offer 24/7 support, personalized service, fraud protection and cybersecurity.
• Data analysis: AI extracts information and trends from large data sets, enabling informed decision making and insight into market behavior.
• Fraud detection: AI algorithms prevent financial crime by identifying unusual transaction patterns.
• Loan processing: AI predicts and assesses loan risks, automating tasks such as risk assessment, credit scoring and document verification.
• Personal financial management: AI tools analyze spending patterns and risk tolerance to provide advice on budgeting and savings strategies.
• Portfolio management: AI analyzes market conditions to optimize investment portfolios.
• Predictive analytics: AI enables predictive modeling, helping to anticipate market trends, risks and customer behavior.
• Risk management: AI effectively assesses and manages risks, creating a secure financial environment.
• Sentiment analysis: AI assesses market sentiment from news and social media sources, influencing decision making.

And what about the shareholders?

The implementation of AI in the financial industry involves a vibrant ecosystem of stakeholders responsible for its development, oversight and utilization. From auditors ensuring compliance to developers creating innovative solutions, each participant contributes to the transformative power of AI in finance.

However, navigating this complex landscape can be daunting. That's where partnering with a trusted organization like Inmov can make all the difference. With our expertise in software development, application creation and AI implementations designed specifically for the financial industry, we provide a seamless path to success.

When you choose Inmov, you gain access to a team dedicated to excellence, adherence to industry standards and an unwavering commitment to your success. With us by your side, you can confidently embrace the potential of AI and unlock new possibilities for your organization's growth and innovation.