Sarath Babu Yalavarthi is an AVP of Product Management & Development at AT&T and a Salesforce CTA.
The financial industry is undergoing a tectonic shift from traditional banking to cutting-edge fintech. Artificial intelligence (AI) is playing a huge role in accelerating that transformation. By quickly processing massive amounts of data, AI is reshaping how businesses operate and serve their customers.
From my experience, here are the ten spaces in the finance industry where AI will have the most transformative potential.
10 Areas Where AI Is Reshaping The Finance Industry
Fraud Detection
AI can scan huge amounts of transaction data in real time to find suspicious fraud patterns. Prompt detection and immediate response can prevent unauthorized transactions from being completed, reducing financial losses for both customers and financial institutions. As we know, this is incredibly personal and important to customers, so this will enhance the overall trust and reputation of financial institutions.
Risk Assessment
Using multiple data sources, AI can create advanced models to accurately assess creditworthiness, investment risk and insurance premiums. This will allow businesses to make data-driven decisions, optimize their strategies and reduce potential losses—ultimately leading to improved financial stability and growth.
MORE FOR YOU
Algorithmic Trading
AI trading systems can process market data in milliseconds, and execute trades based on complex algorithms. Investors can pounce on opportunities and potentially get higher returns by having an additional metric data to track and explore.
Customer Service
AI chatbots and virtual assistants provide 24/7 customer support. By handling everyday queries and issues, AI frees up human agents to focus on complex problems and customer satisfaction. This can enhance resource optimization, ensuring consistent and personalized interactions, which will contribute to considerable cost savings and scalability. By continuously learning and improving, AI-driven support systems help businesses deliver exceptional customer service and develop long-term customer loyalty.
Investment Advisory
AI algorithms can analyze market trends, investor risk appetite and financial goals to give personalized investment advice so individuals can make informed decisions and achieve their financial goals. Of course, there is always a need for human supervision, as errors can always be made.
Credit Scoring
Beyond traditional credit history, AI can analyze alternative data sources like social media, online behavior and employment history to create a more complete credit profile. This approach helps expand credit access to underserved populations and provides fairer assessments. This will help financial institutions increase their customers and mitigate risk.
Loan Underwriting
AI can underwrite loans by assessing borrower eligibility based on multiple factors. This will benefit lenders by increasing their efficiency, reducing costs and enhancing risk management. Borrowers will enjoy quick turnaround time, greater accessibility and an improved customer experience. In my experience, I've found that these fast responses can help empower customers to make proactive decisions more regularly.
Dispute Claims Processing
Dispute claims processing can be sped up by automating tasks like document verification and fraud detection. Processing time is reduced, customer satisfaction is improved and fraud is prevented. Businesses can save cost, increase efficiency and the ability to scale and improve their claims processes.
Financial Forecasting
By analyzing historical data and current market trends, AI can generate financial forecasts. Like with the investment advisory, AI can serve as another tool or metric that leaders can incoporate into their investment strategy. These forecasts can support strategic planning, risk management, resource allocation and policy formulation.
Regulatory Compliance
AI can track regulatory changes, detect compliance risks and automate reporting so institutions can comply, avoid fines and protect their brand. The benefits here can be operational efficiency and improved customer trust. Of course, you will always need to double-check when major industry shifts happen to ensure everything is up to date.
How Impactful Is AI In The Financial Industry?
It's hard to be clearheaded about AI when the hype around it has been so nonstop. While some of its powers are certainly overstated, here are some aspects that are undeniably changing due to AI incorporation.
More Efficient Workstreams: Improve the productivity of employees by automating mundane tasks so that they can spend their valuable time in higher-value work. This will improve overall operational efficiency.
Decision Making: AI will work with large datasets and give valuable insights at the right time. Use that insight and make data-driven decisions.
Customer Experience: AI-powered personalized services will result in quick support. Predictive analytics will proactively solve problems, thereby achieving better customer satisfaction.
New Business Models: AI is driving innovation in financial services, thereby helping to launch new services and revenue streams.
Challenges And Considerations
Here are some of the areas I find the most concerning when it comes to the widespread adoption of AI—to deal with these hurdles, leaders need to think proactively and contend with some hard decisions.
Data Privacy and Security: The top challenge is making sure that the data being used by AI is secure and not being saved in any public LLM models. This is both an ethical and strategic issue—bad data can completely misguide a company's decision-making.
Hallucinations / Algorithmic Bias: Ensuring fairness and no discrimination in AI models is very important to gain trust. This is why human oversight still will be necessary. Proper implementation depends on it!
Upskill Employees: The workforce needs to be reskilled to ensure that they use the tools responsibly and correctly. Further, I've found that the tool is only incredible when it is used well; like any other tool, the more practiced someone is with it, the more efficiently they can work.
Regulatory Compliance: Clear regulations are not yet framed by most governments. So institutions should be ready to adapt to future regulations from governments. This can be an intimidating problem at this stage of AI's adoption, as heavy investments could backfire.
Ethical Dilemma: AI, especially in finance, must be developed and used ethically. As leaders, we must consider the impact on society and remember it's all about improving people's lives.
Conclusion
AI can change the financial industry in a major way. If we tackle the challenges appropriately and use AI responsibly, financial institutions can drive us into a future of efficiency, innovation and customer happiness.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
