Exploring the Role of AI and Machine Learning in Revolutionizing the Financial Sector
The financial sector is undergoing a significant shift towards Artificial Intelligence and Machine Learning. And this is evident in the recent disruption of traditional banking practices to boot. The value of the worldwide AI banking market reached an astounding $3.88 billion in 2020. By 2030, it is expected to rise to $64.03 billion.
A study by The Economist Intelligence Unit found that most bankers (77%) believe that using Artificial intelligence effectively is essential for banks to succeed. In other words, banks that don’t implement AI effectively are more likely to fail or, at the very least, railroaded by competition.
Recent forecasts indicate that by 2030, integrating AI into financial services could lead to savings surpassing $ 1 trillion. Notably, traditional banks are expected to reduce approximately 22% of their overall costs through the adoption of AI.
Equinix’s 2023 Global Tech Trends Survey indicates that 47% of Nigerian businesses are actively integrating Interconnection into their operations, with more than 90% relying on the benefits of AI to scale up, boost efficiency, and retain competitiveness in the digital landscape.
The integration of AI and ML into the financial sector offers advantages such as cost savings and effective customer relationships. AI algorithms can explore financial history, market trends, and behavioural patterns, to provide a comprehensive understanding of potential risks. This means implementing precautionary actions to minimize credit risk, market risk, and operational risk that protect financial stability in the sector.
A few of the roles that AI and ML are playing in revolutionizing the financial sector include:
Customer Relationship Management: By analysing a customer’s financial background and preferences, AI can offer tailored recommendations for financial products and services, catering to individual needs.
AI-driven chatbots manage simple queries, resolve common problems, and assist with complex tasks such as money transfers and bill payments. This results in quicker issue resolutions and a more efficient experience for clients.
Combat fraud with exceptional accuracy: AI has the potential to spot abnormalities, which is quite useful for preventing fraud. Artificial intelligence (AI) systems can uncover suspicious behaviour accurately and quickly. They do these by scrutinizing transactional data and recognizing irregular patterns that might escape human detection. This strengthens the security of the financial institution and promotes reliability.
According to an Economist Intelligence Unit survey, banks primarily leverage AI for fraud detection (58%extesively and an additional 32% to some extent) and optimizing IT operations (54 extensively and 36% to some extent).
Almost all banks plan to deploy AI in the next three years in different areas of their businesses. There is an expected area of significant growth and these include personalized investments (17% planning adoption in the next 1-3 years, portfolio optimization 913%, and credit scoring 15%).
Identify market trends: Artificial intelligence (AI) can analyse large volumes of news and financial data to identify minute patterns that human scrutiny might overlook, facilitating the prediction of market variations and the identification of profitable investment prospects. With this, it is possible to forecast changes in the market and spot profitable investment possibilities.
The role of Artificial Intelligence and Machine Learning in revolutionizing the financial sector cannot be overstated. From fraud detection and prevention to customer relationship management, AI and ML have caused a significant shift in the way the financial sector operates.
