How Financial Firms Utilize AI as a Tool

Last month, we looked at how AI (Artificial Intelligence) is influencing the world of finance. What about specific areas though? Think about the evolving field of finance services and the banking industry, and how this area relies on AI to provide insight into the credibility of a firm and the protocols needed for secure and smooth transactions with clients and regulatory bodies.

This month we are going to evaluate well-known firms that employ the use of AI in terms of their financial processes and functions. According to Forbes, 54% of financial service organizations with 5,000+ employees are using artificial intelligence (Columbus, 2023). When you consider the significance of its use within the field, it becomes obvious that AI knowledge is essential for those in a financial profession. It will not only make you marketable, but also will enable you to stay relevant and proficient in your career.

Interestingly enough, we are seeing a surge in the use of AI in all key areas of financial services. For instance, many firms are using the automation and augmentation features of AI in complex decision-making processes (Muir, 2023). Further, personalized client experiences, customized client educational materials, and the technological enhancements to loan approvals, financial planning simulations, and other areas are all being enhanced with the use of these developments.

Think about how generative AI and LLM (Large Language Models) are being used to produce original outputs just by assessing data and different neural networks. While we see the benefits of this tool in terms of user-interface and more broad improvements, we can also see how it is taking financial institutions into new territory. How will the skills we are learning here at PGU transfer into these emerging areas and who will seek out our skills and services? Let’s take a look:

Capital One and Bank of America, for instance, use AI for different types of consumer questions and needs (Muir, 2023) Further, we are seeing how some banks, such as JP Morgan Chase, are using fraud detection applications to identify red flags and potential fraud occurrences within transactions (Aleksandrova, 2023). The algorithms set up are being applied to determine fraud patterns, irregular credit card use, and suspicious requests or irregular purchases.

Finally, there are some firms who are strictly working to build these platforms for financial service firms and institutions. Kensho, a data firm, creates some of these products for BoA and Merrill Lynch (“About Kensho,” n.d.). Further, there is a search engine used within the finance industry call, Aphasense, which focuses on providing AI powered search options for its clients (Schroer, 2023). This tool has successfully helped in the pursuit of analyzing keyword searches and discovering irregularities and trends in the markets on a continuous basis.

Overall, these tools and the firms which use them will open up doors for those in the financial industry. The capabilities of these tools partnered with the benefits of a better client-interface and customer-focused interactions will only benefit those who are bold enough to embrace them.

We exist in an exciting time in which the traditional approach to financial service engagements and institutional products and options are changing. Not only do financial students need to adapt to these changes, but they need to stay proficient in this technology. Further, finance professionals need to contribute and further add to these developments within their own knowledge base. As we move through this innovative time, PGU will continue to incorporate the latest trends and developments into the curriculum so that you will be prepared, successful, and confident in the road ahead.  

Sources

About | Kensho. (n.d.). Kensho Technologies. https://kensho.com/about

Aleksandrova, A., Ninova, V., & Zhelev, Z. (2023). A Survey on AI Implementation in Finance, (Cyber) Insurance and Financial Controlling. Risks, 11(5), 91. https://doi.org/10.3390/risks11050091

Columbus, L. (n.d.). The State Of AI Adoption In Financial Services. Forbes. Retrieved November 19, 2023, from https://www.forbes.com/sites/louiscolumbus/2020/10/31/the-state-of-ai-adoption-in-financial-services/?sh=249f56ac2aac

Muir, M. (2023). AI: the answer to everyday finances? FT.Com, https://www.proquest.com/trade-journals/ai-answer-everyday-finances/docview/2866013110/se-2

Schroer, A. (2019). AI and the bottom line: 15 examples of artificial intelligence in finance. Built In. https://builtin.com/artificial-intelligence/ai-finance-banking-applications-companies

5. Digital banking and Neobanks

Both areas continue to exceed expectations. Digital banking trends continue to grow, with many banks transitioning to online services without the need for physical bank representatives

Digital banks are quickly taking over the traditional banking industry. Neobanks are entirely digital and independent.   They are primarily related to a personalized customer experience. While maintaining a competitive edge, some traditional banks partner with various technology platforms to deliver more innovative services. The future belongs to digital banks.

4.  RegTech

Regulatory technologies (RegTech) are transforming the financial industry by streamlining and speeding up compliance work. This innovative trend in financial services offers fresh solutions for regulatory reporting, transaction monitoring, risk management, identity management, and compliance software. With RegTech applications, firms can reduce administrative costs, protect customers, and ensure financial stability.

3. BNPL

One of the significant financial industry trends in recent years is the growth of Buy Now, Pay Later (BNPL) payment models. As a result, the popularity of services is growing, allowing you to buy now and pay for a product/service later. Several systems exist, such as Affirm in the States and Klarna in Europe.

2. Sustainable Investing (aka Socially Responsible investing)

Sustainable investing is a new age approach to investing which considers environmental, social, and governance (ESG) investing factors alongside traditional financial metrics. It aims to generate positive social and environmental outcomes alongside financial returns. SRI investments can include renewable energy, green bonds, and companies with solid records on diversity, equality, and labor practices.

1. Big Data & Data Analytics

Finally, the winner is… Big Data and Data Analytics – basically AI in a nutshell. This area of big data tools and their functionality will allow firms to transform data into an effective weapon in the highly competitive financial field. Now, firms can use big data methods to sift through information in a way that refines and customizes outcomes. It is rapidly taking over the finance industry and enabling the financial world to excel in areas which are cutting edge!

Sources:

Accounting and Finance Trends | Randstad Canada. (n.d.). Www.randstad.ca. Retrieved November 19, 2023, from https://www.randstad.ca/employers/workplace-insights/job-market-in-canada/accounting-and-finance-trends/

Kiselova, M. (2023, May 16). 12 Main Financial Industry Trends and Their Impact. Digicode. https://www.mydigicode.com/trends-that-are-going-to-improve-financial-services-in-2023/d