In a study conducted by the Cambridge Center for Alternative Finance and World Economic Forum, 56% of financial institutions use artificial intelligence for multiple fields, with 75% of those surveyed holding over $100 billion United States dollars in total assets. Artificial intelligence is a forever developing system in the world of business. As our society continues to develop on the technological scale, digitizing and optimizing everyday processes will always be a priority as we attempt to maximize efficiency. Artificial intelligence in finance is the way of our future as a society. 

The COVID-19 pandemic decimated our economy at its birth, as even now in 2022 we face a possible recession larger than any other recorded in United States history. A conducted study showed that across just shy of 6,000 small businesses only had enough funding to last two weeks after the start of the pandemic, with monthly expenses in the five-digit range (PNAS, 2020). From lack of employment and financial hardship for nearly every citizen, the world of finance was and still currently is under threat. Increased inflation has resulted in interest rates skyrocketing along with nearly every other product or service. This has resulted in those applying for loans to withstand high interest rates. Additionally institutions continue to struggle for hires, as six million people remain unemployed in our country (BLS, 2022). This means that institutions may struggle to approve applicants not only due to the economic struggles, but also due to lack of staffing.

The “Front” office represents the verbal communication or introductory stage in communicating with an institution. Banks and firms will use artificial intelligence assistants to answer introductory calls and transfer those who need to speak to different departments. Additionally, artificial intelligence may be used on websites of these corporations, providing customer service or guidance with issues or questions. 

The ”Middle” office contains the processes of fraud detection and risk management. These processes evaluate applicants for loans and uses implemented and learned knowledge to determine if an applicant is worth the risk of providing a loan to. When reviewing an applicant for a loan, the loan provider must look at several factors in order to decide if the potential client is credible enough to take out a loan. A.I is used to determine eligibility for loans when presented with the data of the application. A.I is able to determine this through calculated factors such as the risk factor, mainly determined by credit score and credit history in addition to calculating an interest rate based on income and also credit history.

From our technological advancements, artificial intelligence is now able to use systems with the information provided to evaluate an application and accept or deny an applicant. A.I is able to make a decision on an application after using the given knowledge provided by the firm. It may also gain further knowledge using machine learning, where the intelligence is learned after storing every action before.

Artificial intelligence is also able to detect illegal transactions and transfers such as money laundering. Banks such as Chase use A.I to evaluate transactions on a large scale. Artificial intelligence will then evaluate lists of transactions and look for suspicious patterns, before alerting those in the fraud detection center if a pattern is found. Capital One’s “Eno” program is also another example of fraud detection A.I. Upon its launch in 2017, Eno is used to investigate possible fraudulent activity on client accounts, and using one of twelve possible outcomes will notify the account owner on information ranging from fraud warnings to significant price hikes in subscription services. Similar to the Chase system, Eno will use the default information provided to the system in addition to the machine learning conducted after every successful or unsuccessful fraud bust. By retaining this information from machine learning, A.I is able to improve its knowledge of financial irregularities.

The “Back” office carries out the business of the institution that does not involve clientele. In this sector, individuals finalize loans, handle accounting, IT management, and other non-communicative actions with clients. While A.I has a significantly smaller role in the back office, it does contribute to the processes of underwriting. This is done by the A.I assessing risk in the middle office, which is then brought to the back office to begin the underwriting. Underwriting is the process of writing and distributing a loan to an approved applicant.

However, artificial intelligence is not without its cons in the financial scene. A transition to a purely A.I based system strips the business and process of its humanity. A lack of moral awareness from A.I may push some individuals away from providing business to an institution. Clients may prefer to speak directly with a worker, and until that is no longer an option may go the other way with their applications. A removal of human communication strips processes of emotional thought and room for negotiation, which could affect profit and productivity. 

Additionally, A.I is not perfect in its processes. When evaluating a loan applicant, A.I may use their digital footprint to reconsider an acceptance. This means that even despite good credit and a standing income, there still may be reconsideration if the applicant has had spending behavior in their past that is similar to those that have been rejected, even if that is not the case now. This also unfortunately is left without reasoning, as at this time A.I makes these decisions without leaving a trail. A lack of provided reasoning by the program can at times cause confusion. Another current issue at hand is artificial intelligence bias. Biases by A.I can be formed by the hands of the designer or when provided skewed data that outweighs others. For example, in recent studies it has begun to show that minorities are more likely to be denied loan applications. In 2021, it was found that black loan applicants had up to an 80% higher chance of being rejected (Forbes, 2021). This was found to be the same case for other minorities, showing an increasing problem with this system. However, artificial intelligence in this field will only continue to grow and improve, and eventually remove these faults. Improvements and developments will be made to curb these awful errors, and eventually create a more balanced system.

Artificial intelligence has a substantial role in future finance. In addition to the modern-day innovation, A.I will continue to benefit the financial world in the future with given projections. A.I provides an opportunity for less tedious work, corporate saving, a lower chance at human error, and a consistent service at all times. Artificial intelligence currently has the capability to save institutions in the North American region $70 billion dollars by 2025. Potential cost savings are currently predicted to be $447 billion dollars by just next year, with $417 billion of that obtained from use of A.I in the front and middle office.Firms and institutions may be able to use programs called artificial neural networks to evaluate and predict stock market behavior, which could possibly save our economy from the recession that we are not far away from now.  

Artificial intelligence is the way of the future. As we move towards the future our society will only become more digitized, and with it the interest and need for artificial intelligence. Although in 2022 artificial intelligence has shown to have faults, they should not be a long term concern with our rapid technological development as a society.