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AI and the World of Finance
AI and the World of Finance
AI and Finance Series Part IV
by Dana Leland
How many times have you received a text or voicemail from your bank or credit card company about several suspicious purchases? Scary stuff! Thanks to the use of AI and other types of fraud detection systems, it is becoming easier to evaluate client buying behavior based on a deep-level transaction analysis. This real-time use of trends and activity algorithms is allowing firms to both protect their clients and reduce risk and overall financial exposure in terms of financial costs and prolonged financial damage.
The use of AI by banking firms and other financial institutions is becoming the norm as the tools for preventing such credit card fraud has expanded. If you are familiar with the field of fintech, or have taken one of PG’s amazing fintech courses, then you know that this field is cutting edge and in demand when it comes to security and controls. AI technology will continue to improve as it becomes familiar with new models which simulate even the riskiest and overexposed situations.
What about money laundering? Banks are typically the victims when it comes to this type of financial crime. Now with AI, these institutions can deter suspicious activity and reduce the costs of investigating money-related schemes. Per a recent AYADSI study, there was a 20% reduce in the investigative workload alone based on the use of AI applications.
Further, firms such as Plaid (which coordinates with companies such as Goldman Sachs and American Express), are known for their state of the art fraud detection tools. The firm’s detailed programs and simulated models can break down transactions and interactions within different parameters and conditions. It even works to build specific patterns by replicating loopholes and risky threats and updates the fixes in real-time. How does it work? Plaid, along with many other types of these AI based firms, connects a bank with the consumer’s app to ensure safe and secure financial transactions going forward.
What is the moral of the story? The use of AI is here to stay. As a student of PG, you will learn more about how this powerful tool can work to improve banking relationships with consumers by protecting and safeguarding key assets (FinTechtris, 2018). As a PG student, you will have the opportunity to learn more about the emergence of this field within the finance environment and finance-related curriculum. The synergy between AI and finance is just starting!
AI is especially effective at preventing credit card fraud, which has been growing exponentially in recent years due to the increase of e-commerce and online transactions. Fraud detection systems analyze clients’ behavior, location, and buying habits and trigger a security mechanism when something seems out of order and contradicts the established spending pattern.
Banks also employ artificial intelligence to reveal and prevent another infamous type of financial crime: money laundering. Machines recognize suspicious activity and help to cut the costs of investigating the alleged money-laundering schemes. One Case study reported a 20% reduction in the investigative workload.
Aggregators like Plaid (which works with financial giants like CITI, Goldman Sachs and American Express) take pride in their fraud-detection capabilities. Its complex algorithms can analyze interactions under different conditions and variables and build multiple unique patterns that are updated in real time. Plaid works as a widget that connects a bank with the client’s app to ensure secure financial transactions.
Sources:
AYADSI, Anti-Money Laundering Solution Deep Dive, White Paper study. Retrieved from:
FinTechtris. Oct. 24, 2018. DEEP DIVE with Plaid: Fintech's Super-Connector. Retrieved from: https://www.fintechtris.com/blog/2018/10/20/plaid-fintech-super-connector
Finance Student Spotlight: Amanda Snow
Finance Student Spotlight: Amanda Snow
My name is Amanda Snow, and I am graduating in April 2024 with my Bachelors of Science in Managerial Accounting. In 1998, I received a Century 21 award for accounting excellence while attending a trade school. Although the award was nice, I decided then that accounting may not be my cup of tea. During the pandemic I rethought my decisions and chose to pursue my degree in Accounting through Purdue University Global.
My journey with PG started in 2021. Since starting this journey I feel I have become a better employee in my current position and have equipped myself for almost any position in the finance industry. The finance and accounting departments have educated me with ratios, internal control procedures, financial statement analysis, stock investment strategies, and more.
I am honored to say I just completed my role as a Student Advisory Board Advisor for the 2023 academic year. I am active in BAMSA and the Purdue Global Finance and Investments Club. I was also accepted into the Tri Alpha Honor Society. I am hoping to achieve my ACES Award as well. The experience here has given me hope for a great future. I am so glad to say I am a part of the Purdue Global family.
Amanda Snow
Purdue Global Finance Insights:
Purdue Global Finance Insights:
Decentralized Finance and the Future of Emerging Technologies
What does the Future Hold?
Meet Professor: Derek Dant
Meet Professor: Derek Dant
The new year has brought much optimism to the markets with high hopes for the Big 7 in the stock market. It is also an election year, so we can almost guarantee a good year in the markets. Since 1928 there have only been four negative years for the S&P 500 total returns index reported by Morningstar during election years. What does this mean for the broader markets? Will A.I. continue to drive the stock market higher to continued new highs? Will new regulations help Bitcoin and the emerging DeFi companies to prosper as well?
So far in the first three weeks of 2024 the market has seen a steady rally to new all-time highs. The Nasdaq is leading the way and pulling the S&P 500 with it. On January 24, 2024, The S&P 500 hit new all-time highs for the 3rd straight day in a row. A combination of investors feeling strongly about the economic outlook of the broader markets, the federal reserve signaling for rate cuts to loosen their grip on inflation control and an upcoming election has left investors and companies alike bullish for the year ahead.
A.I. is continuing to drive the U.S. economy to new all-time highs. I realize that A.I. has a plethora of questions and areas that are being debated by everyone. We are seeing more and more executives come forward and saying that A.I is the future and has the capability to change our lives in similar ways to the internet. For example, Jamie Dimon the CEO of Chase Bank believes that A.I. will be the future of this country. He even said in an interview he believes A.I. will ultimately lead to a 3.5 day work week and our children living well past the age of 100, which is fine by me!
Article 1: https://www.cnbc.com/2023/10/03/jpmorgan-ceo-jamie-dimon-says-ai-could-bring-a-3-day-workweek.html
Article 2: https://www.pbs.org/newshour/show/how-the-rise-of-artificial-intelligence-is-boosting-tech-stocks
For those who don’t know what DeFi is here is the definition, “Decentralized finance, or DeFi, uses emerging technology to remove third parties and centralized institutions from financial transactions” (Sharma, R. (2023, December 23). In 2008 when idea of Bitcoin was started, it was to create a new wealth class that would have no regulatory 3rd party central banking system. Everyone thought the idea was crazy and that it would never happen. It seems this idea however may be changing the very way we do banking, investing, purchasing, loans, and many other forms of Finance through blockchain, or a secure database ledger. Decentralized finance is still in its infancy, but we can expect DeFi, cryptocurrencies and other coin products to be around for a very long time. The asset classes have now passed a huge hurdle and now are legally allowed to create ETF investment vehicles for trading.
Article 1: https://www.coinbase.com/learn/crypto-basics/what-is-defi
Article 2: https://www.wsj.com/finance/regulation/sec-approves-bitcoin-etfs-for-everyday-investors-dc3125ef
Truth be told, we have no way of predicting the future and what is to come. Based on recent events from regulatory bodies like the SEC, we can assume with some certainty that Bitcoin and the other COIN asset classes will be around for the foreseeable future. Blockchain and DeFi will eventually combine with A.I. in the coming years to completely change the world of investing. As the field of quantitative derivatives continues to take off, humans are still able to challenge A.I. at investing since we are all emotionally based and A.I. cannot read through human emotion and psychology. One thing for sure, it is an exciting to be alive and I’m excited to see where the new and emerging technologies take us in the days ahead.
References
Sharma, R. (2023, December 23). What Is Decentralized Finance (DeFi) and How Does It Work? Investopedia. Retrieved January 24, 2024, from https://www.investopedia.com/decentralized-finance-defi-5113835#:~:text=Decentralized%20finance%2C%20or%20DeFi%2C%20uses,transact%20financially%20with%20each%20other.
Field of Finance: Trends
Field of Finance: Trends
Financial Professionals - What to expect in the new year…
Financial Professionals - What to expect in the new year…
by Dr. Dana Leland
by Dr. Dana Leland
1. Good Outlook in 2024?
Per the latest survey by the LPL Research team, next year the economy and markets look almost the same. Individuals will have to pay off excessive debt with excess savings. Labor wages can’t seem to catch up to inflation. All of this boils down to using proper risk management techniques. Hopefully, some interest rate decreases will be executed next year as individuals try to get out of bad financial situations. Financial professionals are needed now more than ever to help manage clients’ risk and enable them to plan given specific constraints.
https://www.lpl.com/research/blog/outlook-2024-a-turning-point.html
2. Is Optimism for 2024 in the financial markets overrated?
This article looks at 2024 in terms of investing and portfolio analysis. The author believes that the increase in model portfolios will continue next year, and the need for financial advice will be needed as this occurs. Retirement income planning will be another significant area, as well as the influence of AI in the investor advisor’s role. Finally, more growth in the tech arena should offset other areas and industries as this field continues to expand.
3. Is partnership in the financial field back for good?
Interesting take on the client-financial professional relationship and how more and more consumers are looking for a “partner” as opposed to a manager for their investments and fund management. The emphasis on customer relationships and communication is obvious as more individuals search for financial advice and support.
https://www.lifehealth.com/the-new-reality-for-financial-professionals/
4. Making Goals for 2024
According to one survey (New Year’s Financial Resolutions Survey, 36% more Americans are planning to make finance-related New Year’s resolutions for 2024, compared to 2023. Are you one of them?
Per the article, Americans are ready to make 2024 the year of Financial Resolutions that forces them to stick to a budget and focus more on debt management. According to the article, these are the key findings of the study:
Shared Financial Goals: Nearly 1 in 2 Americans are planning to make finance-related New Year’s resolutions.
New Year’s Spending Cut: Nearly 3 in 4 Americans plan to spend less money on New Year’s plans this year than last year.
Most Challenging Resolutions: More than 1 in 4 Americans say financial resolutions are the hardest resolutions to keep.
Price for Vice: People want an average of $176,550 to give up their top vice for a year.
Wallet Concerns for 2024: Nearly 1 in 4 people think 2024 will be worse for their wallet than 2023.
Financial Anxiety: Nearly 2 in 3 Americans are anxious about the future of their finances.
https://www.lifehealth.com/new-years-financial-resolutions-survey/
5. Bonds – the Comeback Kid?
Finally, an article on bonds and how fixed income securities are become a growing area as financial advisors navigate the variety of options for clients. The higher interest rates have made this financial investing area more popular than ever. Here’s a big “Bond” Voyage to 2023!
https://www.lifehealth.com/bonds-are-back/
Finance Degree & Opportunity
Finance Degree & Opportunity
Navigating Career Paths
by Edward Strafaci
This month features jobs within FINRA, the SEC, and the Federal Reserve. Check them out and let’s see if they pique your interest!
FINRA
FINRA, the Financial Industry Regulatory Authority, offers various career opportunities in the financial industry. They regulate brokerage firms, exchange markets, and ensure compliance with securities regulations.
As a FINRA employee, you join a diverse and talented team of industry leaders who make sure investors are protected and the market is trusted. Discover your opportunity to oversee more than 634,000 brokers across the country, analyze billions of daily market events, use innovative AI and machine learning technologies, and drive our award-winning diversity initiatives forward, and beyond.
FINRA Jobs include:
Compliance Examiner: These professionals ensure that member firms comply with FINRA and SEC rules and regulations. They conduct examinations and reviews to assess compliance.
Regulatory Analyst: Analysts interpret and implement regulatory changes, assist in policy development, and perform data analysis related to market trends and compliance issues.
Legal and Enforcement: Attorneys and legal professionals work on enforcing FINRA rules, handling disciplinary actions, and providing legal guidance.
Technology and IT: FINRA requires professionals in IT roles to develop and maintain the technology infrastructure that supports their regulatory mission.
Finance and Accounting: Roles in finance and accounting deal with budgeting, financial reporting, and managing the organization's finances.
Human Resources: HR professionals at FINRA handle recruitment, employee relations, benefits, and other HR functions.
The SEC
https://www.sec.gov/about/careers
The SEC is looking for the best and brightest to help strengthen their team in order to better serve as the investor's advocate. The Securities and Exchange Commission is currently seeking qualified applicants for numerous positions. Applicants must be U.S. Citizens. Positions are located in the SEC’s Washington, DC headquarters and in 11 regional offices in the United States.
Investing in your career – Could this be your next step?
Attorneys: The SEC hires attorneys to enforce securities laws, provide legal advice, handle litigation, and draft regulations.
Economists and Financial Analysts: Professionals in these roles conduct economic and financial analysis, assess market trends, and provide expertise in rulemaking and enforcement.
Compliance Examiners: These individuals examine registered entities (such as investment firms, advisors, and brokers) for compliance with SEC regulations.
IT and Cybersecurity Specialists: As technology is integral to securities markets, the SEC employs IT professionals to manage systems, cybersecurity, data analysis, and technology-related compliance.
Accountants and Auditors: Individuals in these roles review financial statements, investigate accounting fraud, and ensure compliance with accounting standards.
Policy Analysts: They research and analyze market trends, propose new regulations, and contribute to the development of SEC policies
Human Resources, Communications, and Administration: Support roles like HR professionals, communicators, and administrators are also essential in running the SEC.
The Federal Reserve
https://www.federalreserve.gov/careers.htm
The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest.
The Federal Reserve:
· Conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy
· Promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad
· Promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole
· Fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments
· Promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
Do these Fed jobs appeal to you?
Economists: Economists at the Federal Reserve conduct research, analyze economic data, and provide insights into monetary policy decisions.
Bank Examiners and Supervisors: These professionals assess banks' financial health, compliance with regulations, and overall risk management practices.
Financial Analysts: Analysts at the Fed examine financial markets, assess risks, and contribute to the development of policies related to monetary and financial stability.
Policy Analysts: They research and analyze economic and financial trends, contributing to the formulation of policies that influence monetary policy and financial regulation.
IT and Cybersecurity Specialists: The Federal Reserve requires professionals to manage and secure its technology infrastructure, ensuring the safety of financial systems and data.
Legal and Compliance Professionals: Attorneys and compliance experts provide legal guidance and ensure regulatory compliance within the Federal Reserve System.
Human Resources, Communications, and Administration: Support roles such as HR professionals, communicators, and administrators are essential in running the Federal Reserve efficiently.
For more information on jobs like this, check out each of the following sites:
US Jobs – Government Job site
Business and Finance – Government Job Site
https://gogovernment.org/career/business-and-finance/
Careers at the US Treasury
https://home.treasury.gov/about/careers-at-treasury
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