Impact of AI On Finance

The ability to manage one’s financial conditions is driving the adoption of AI in personal finance – consumers are starving for financial freedom. AI is a requirement for every financial institution aiming to be a top player in the market, whether providing natural language processing-powered chatbots with 24/7 financial advice or tailoring insights for wealth management products.

The ability of AI to stop fraud and cyberattacks is one of the most significant business cases for the technology in the finance industry. Customers seek banks and other financial institutions that offer secure accounts, particularly in light of Insider Intelligence’s prediction that annual losses from online payment fraud will double to $48 billion by 2023. AI can examine and identify pattern abnormalities that humans would typically miss.

Nine different facts outline the impact.

Cost centers generate profit centers: Institutions will transform AI-enabled back-office activities into external services, accelerating the rate at which these capabilities advance and forcing others to use them to stay ahead of the competition.

A new front in the fight for consumer loyalty: AI offers a chance for institutions to avoid a “race to the bottom” in pricing rivalry by bringing new ways to differentiate themselves from clients as previous methods of distinction deteriorate.

Automated finance: AI will be at the center of future customer experiences since it automates many aspects of customers’ financial lives and enhances their financial outcomes.

Collective answers to common issues: The accuracy, timeliness, and performance of non-competitive processes will be dramatically improved by collaborative solutions built on shared datasets, resulting in mutually beneficial operational efficiencies and enhancing financial system security.

Splitting of the market structure: The market structure will be split in two as AI lowers the cost of search and comparison for consumers. This will increase profits for large-scale businesses and open up new opportunities for specialized and agile entrepreneurs.

Uncomfortable data alliances: In a system where every institution is fighting for diversity in data, maintaining alliances with rivals and potential rivals will be essential but rife with strategic and operational hazards.

The impact of data regulators: The relative ability of financial and non-financial institutions to use AI will be shaped by regulations governing data protection and portability, which will make them just as significant as conventional regulations to the competitive positioning of businesses.

Developing a balanced talent strategy: The most difficult speed restriction for institutional AI implementations will be talent transformation, placing at risk the competitive posture of businesses and regions that fail to successfully move talent alongside technology.

New ethical paradoxes: To overcome the ethical ambiguities and legal uncertainties that prevent institutions from adopting more revolutionary AI capabilities, AI will require a collective reexamination of principles and supervisory procedures.

FIs are being pressured to expand their IT, and AI costs to comply with greater digital requirements as millennials and Gen Zers soon overtake baby boomers as the largest addressable consumer group for banks in the US. Since 78% of millennials never visit a branch if they can avoid it, these younger customers prefer internet banking methods.