Close
  • Latest News
  • Artificial Intelligence
  • Video
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
Read Down
Sign in
Close
Welcome!Log into your account
Forgot your password?
Read Down
Password recovery
Recover your password
Close
Search
Logo
Logo
  • Latest News
  • Artificial Intelligence
  • Video
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
More
    Home Artificial Intelligence
    • Artificial Intelligence

    What is AI in Finance? A Comprehensive Guide

    Artificial intelligence is poised to reshape the finance industry, yet finance companies face numerous concerns about this emerging technology.

    Written by

    Kathryn Timonera
    Published July 15, 2024
    Share
    Facebook
    Twitter
    Linkedin

      eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

      The use of artificial intelligence (AI) in finance makes it possible for financial institutions to implement emerging technologies like machine learning to streamline, automate, and improve operations. In the financial sector, AI can facilitate high-frequency, predictive trading, manage risk with sophisticated credit scoring, detect fraud, analyze markets, and personalize banking services. Here’s what you need to know.

      KEY TAKEAWAYS


      • AI in finance is used to solve multiple problems to help increase productivity and improve the accuracy of financial transactions. (Jump to Section)

      • Learn more about the advantages of AI within the financial industry, such as improving fraud prevention methods, investment management, and market forecasting. (Jump to Section)

      • Understand the four main challenges of AI in finance where data privacy and regulatory concerns, bias in algorithms, data quality issues, and legal requirements are things that business owners need to be aware of. (Jump to Section)

      TABLE OF CONTENTS

      • KEY TAKEAWAYS
      • How is AI Used in Finance?
      • 3 Challenges of AI in Finance
      • 3 Key Companies Using AI in Finance
      • 3 AI in Finance Courses to Consider
      • Bottom Line: The Future of AI in Finance

      How is AI Used in Finance?

      AI can be used in financial industries to solve a wide range of real-world challenges, from detecting anomalies and analyzing financial trends and patterns to forecasting future financial outcomes. AI and its related technologies increase productivity and improve the accuracy and reliability of financial transactions. Here’s a look at some of the most common uses of AI in finance:

      • Customer Engagement: Voice-activated banking uses AI-driven speech recognition to improve client interactions, allowing customers to complete transactions or find support without manual input. Call center operations automated by speech recognition and chatbots can also improve customer service and reduce idle times.
      • Sentiment Analysis: Sentiment analysis—determining customer sentiment or opinions from text data—can be used to analyze customer calls for signs of financial distress using a variety of natural language processing (NLP) tools.
      • Fraud Prevention and Risk Assessment: AI models can detect unexpected trends or outliers in financial data to prevent fraud, assess risk, and maintain data integrity. Image recognition algorithms can also use visual data like scanned checks and ID cards to extract important information to help detect fraud, automate verification, and speed up document handling.
      • Personalized Banking Services: AI-powered recommendation systems provide tailored financial products, such as investment alternatives and insurance policies, based on user behavior toward financial industries’ websites and social media as well as their users’ potential interests. Customized recommendations from these technologies enhance customer engagement and can drive revenue growth for financial institutions.
      • Automated Document Processing: By automating document extraction, document classification, and such manual and tedious tasks as loan approvals, compliance checks, and contract management, AI improves efficiency and lessens human errors.
      • Customer Service: Conversational chatbots can handle customer inquiries, resolve issues, and provide tailored assistance around the clock to enhance customer satisfaction, lower operational expenses, and free up time.
      • Data Analytics: AI algorithms can analyze historical financial data to identify trends, forecast market movements, and optimize investment strategies. Algorithms use sophisticated techniques like regression analysis to understand the relationship between financial variables.
      • Market Forecasting: Predictive models analyze historical data to forecast stock prices, market movements, and credit defaults. These models improve over time as more data is collected, benefiting investors, financial institutions, and businesses by delivering better projections and improving decision-making.
      • Cybersecurity: AI detects and prevents cyberthreats to protect customer data by examining patterns for signs of an attack. Automated response systems provide for real-time threat mitigation by isolating impacted areas and neutralizing threats.
      • Stress-Testing: Generative adversarial networks (GANs) and variational autoencoders (VAEs) can produce synthetic data that can be used to stress-test financial models or simulate scenarios to help institutions plan for different market conditions and evaluate the effectiveness of their strategies.

      Graphic showing eight advantages of using AI in financial industries

      3 Challenges of AI in Finance

      While AI may enable financial institutions to provide better service and reduce manual tasks, there are still challenges to consider and address, including data privacy, bias, and quality concerns.

      Data Privacy and Regulatory Concerns

      In the U.S., legislation such as the Gramm-Leach-Bliley Act requires financial organizations to protect consumers’ personal data. Employing AI, such as chatbots, to access personal information raises data privacy concerns. To avoid breaches, organizations must publicly declare their data privacy policies.

      Global regulatory organizations are addressing AI deployment in financial services to preserve the system and stimulate innovation. The Bletchley Declaration, published by countries in attendance at the global AI Safety Summit in 2023, emphasized the value of safe and responsible AI practices, for example. A recent U.S. Executive Order on AI outlines recommended practices for handling AI-related cybersecurity concerns, while the European Union’s AI Act categorizes AI technology based on risk and prioritizes consumer protection.

      Read our guide to data governance to learn more about compliance.

      Bias in Algorithms

      Currently, artificial intelligence models must be trained on existing datasets. Unfortunately, it’s common for AI models to undergo training using biased datasets that may underrepresent certain groups of people. This results in AI tools exhibiting bias too.

      In finance, bias can result in serious consequences for consumers. For example, credit risk assessments completed using a biased AI model may keep an individual from securing a loan they’re qualified for, simply based on their demographics. For the customer, this may be detrimental to their livelihood.

      Data Quality Issues

      According to many industry experts, a key factor hindering the adoption of AI is data complexity. Data comes in all shapes and sizes and can be difficult to manage. This is especially true within the finance industry. The complexities of data can lead to subpar quality. Incorrect data can lead to models that make incorrect assumptions, resulting in organizations making uninformed decisions.

      These decisions can directly harm the financial well-being of their customers. This issue is exacerbated by the lack of data science and AI professionals within organizations. Many companies are finding that a lack of AI skills, expertise, and knowledge is a hindrance to AI adoption.

      3 Key Companies Using AI in Finance

      The use of AI has drastically revolutionized the financial business, allowing financial analysts to make better-educated decisions and provide excellent service to their clients. Companies like Enova, Workiva, and Trumid have been at the forefront of this digital transformation, using AI to optimize different parts of finance.

      Enova

      Enova International is a financial services company that offers loans and funding to over 9 million customers, including small enterprises and people who are neglected by traditional banks. It employs cutting-edge internet platforms, analytics, and machine learning algorithms to evaluate credit risk, detect fraudulent activity, and deliver consumer insights. Enova’s data-driven tactics maximize credit trading by combining agile technology with market understanding. The company’s AI-powered analytics enable it to learn client preferences, personalize offerings, and improve user experiences.

      Workiva

      Workiva is a financial technology firm that aspires to create a future trading network by combining agile technology, industry experience, and innovative product design by using generative AI, which generates text and conducts research, for reporting and assurance to improve productivity and data security. Its technology uses AI algorithms to automate financial reporting operations, and natural language processing (NLP) enhances document management, compliance, and regulatory reporting by extracting insights from unstructured text data. It also employs predictive analytics to anticipate financial trends and improve resource allocation.

      Trumid

      Trumid is a financial technology business that specializes in the corporate bond market. It provides an electronic trading platform with thousands of bonds available for purchase or sale, as well as numerous trading protocols and execution solutions. Trumid uses AI algorithms for bond trading and assessing market data, liquidity, and historical trends to make deals at the best pricing. It also employs market sentiment data to guide trading techniques and optimize bond portfolios, balancing risk and reward depending on individual preferences and market conditions.

      3 AI in Finance Courses to Consider

      The incorporation of AI into the banking industry is changing the way financial research, trading, and risk management are done. There are several extensive courses available to assist professionals and hobbyists in understanding the practical uses of artificial intelligence in finance. These courses cover a variety of AI approaches and technologies specifically designed for financial applications.

      AI for Finance, Packt Publishing

      Packt Publishing offers this AI for Finance course, which focuses on the practical applications of AI in the financial industry. It dives into numerous AI approaches and technologies that may help with financial research, trading strategies, risk management, and more. It includes an overview of AI’s influence on finance, machine learning approaches for financial modeling, the use of AI in algorithmic trading, risk management, fraud detection, and real-world examples. Intended for financial experts, data scientists, and anybody interested in using AI in the finance industry, it costs $10 on Udemy.

      Visit Packt at Udemy

      AI Applications in Marketing and Finance, University of Pennsylvania

      The University of Pennsylvania’s AI Applications in Marketing and Finance course focuses on the integration of AI, marketing, and finance, offering insights into how AI may influence decision-making and strategy. The course covers AI-driven consumer behavior analysis, predictive analytics, and AI applications in financial services. It also discusses ethical issues in AI use. The target audience consists of business executives, marketers, financial specialists, and students who use AI in their jobs. This course is available at Coursera and is included in the $59 monthly subscription cost for Coursera.

      Visit UPenn at Coursera

      AI in Finance Specialization, CFTE

      The Center of Finance, Technology, and Entrepreneurship (CFTE) offers an AI in Finance Specialization, which focuses on the use of AI in various financial industries. The program includes AI technologies in banking, insurance, and wealth management, data science for finance professionals, developing AI models for financial applications, and regulatory and ethical issues of AI in finance. The specialty is aimed at finance professionals, fintech entrepreneurs, and anybody interested in the changing finance and technology sector and costs $779.

      Visit CFTE 

      Bottom Line: The Future of AI in Finance

      AI is likely to transform the financial industry, with banking at the forefront. AI will improve analysis, integration, and business transformation as finance teams collaborate across enterprises to exchange insights and generate value. Generative AI will play an important role in corporate transformation by improving key processes and efficiency and providing individualized client engagement, tailored offerings, and effective data exploitation.

      AI-driven advances are predicted to save banks up to $487 billion by the end of 2024, but ethical issues, regulatory hurdles, and responsible use will continue to be concerns as the industry faces the future.

      Learn more about the step-by-step process of How to Train an AI Model to make accurate and reliable financial predictions.

      Kathryn Timonera
      Kathryn Timonera
      Datamation and eWeek staff writer Kathryn Pearl Timonera has covered a wide range of industries in her career, including technology, cybersecurity, e-commerce, and programming. Kathryn now applies her talent for presenting information to technology and cybersecurity professionals.

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      MOST POPULAR ARTICLES

      Artificial Intelligence

      9 Best AI 3D Generators You Need...

      Sam Rinko - June 25, 2024 0
      AI 3D Generators are powerful tools for many different industries. Discover the best AI 3D Generators, and learn which is best for your specific use case.
      Read more
      Cloud

      RingCentral Expands Its Collaboration Platform

      Zeus Kerravala - November 22, 2023 0
      RingCentral adds AI-enabled contact center and hybrid event products to its suite of collaboration services.
      Read more
      Artificial Intelligence

      8 Best AI Data Analytics Software &...

      Aminu Abdullahi - January 18, 2024 0
      Learn the top AI data analytics software to use. Compare AI data analytics solutions & features to make the best choice for your business.
      Read more
      Latest News

      Zeus Kerravala on Networking: Multicloud, 5G, and...

      James Maguire - December 16, 2022 0
      I spoke with Zeus Kerravala, industry analyst at ZK Research, about the rapid changes in enterprise networking, as tech advances and digital transformation prompt...
      Read more
      Video

      Datadog President Amit Agarwal on Trends in...

      James Maguire - November 11, 2022 0
      I spoke with Amit Agarwal, President of Datadog, about infrastructure observability, from current trends to key challenges to the future of this rapidly growing...
      Read more
      Logo

      eWeek has the latest technology news and analysis, buying guides, and product reviews for IT professionals and technology buyers. The site’s focus is on innovative solutions and covering in-depth technical content. eWeek stays on the cutting edge of technology news and IT trends through interviews and expert analysis. Gain insight from top innovators and thought leaders in the fields of IT, business, enterprise software, startups, and more.

      Facebook
      Linkedin
      RSS
      Twitter
      Youtube

      Advertisers

      Advertise with TechnologyAdvice on eWeek and our other IT-focused platforms.

      Advertise with Us

      Menu

      • About eWeek
      • Subscribe to our Newsletter
      • Latest News

      Our Brands

      • Privacy Policy
      • Terms
      • About
      • Contact
      • Advertise
      • Sitemap
      • California – Do Not Sell My Information

      Property of TechnologyAdvice.
      © 2024 TechnologyAdvice. All Rights Reserved

      Advertiser Disclosure: Some of the products that appear on this site are from companies from which TechnologyAdvice receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TechnologyAdvice does not include all companies or all types of products available in the marketplace.

      ×