In today’s fast paced digital world, Artificial Intelligence (AI) has emerged as a powerful tool that is revolutionizing the way we act, think, learn and make decisions. In the financial industry, AI has managed to change the way we manage our finances, making it a trusted assistant. From budgeting tools and investment advisors to fraud detection and personalized banking options, AI is reshaping the way we interact with money making it faster, simpler and smarter than ever before
AI is here and it can transform the way we bank. Millennials and specially Gen Z, are turning to AI for money management advice and it has become an easy to access advisor for personal finance, budgeting, savings and finding interesting investing opportunities.
What is Artificial Intelligence in finance?
Artificial Intelligence generally refers to machines or software that “simulates” human intelligence regarding learning, thinking and making decisions. In the financial sector AI is used to analyse data, recognize patters, automate tasks and provide financial insights helping people to make more informed decisions concerning their money. However, the use of AI in finance is not about technology taking over your bank account or replacing your Relationship Officer, but helping you make faster and better informed decisions. From chatbots and virtual assistants to fraud detection and investment advice, AI can be integrated into almost every aspect of modern banking.
How can AI help you manage your finances?
The correct use of AI can make it a game changer in personal and business finance.
Important note: AI is not always correct with its financial advice, since it bases its suggestions on the information you give it. If AI interprets the information the wrong way, then its recommendations may not be the best.
1. Budgeting
Budgeting is an essential part of financial management. A budget is your personal financial plan concerning how you spend and save the money you earn and it will help you have an estimation of your expenses and avoid unnecessary overspending. AI and AI-driven budgeting apps can analyse your income, categorise your expenses and provide you with helpful insights concerning your spending habits. Moreover, they can provide real-time alerts for overspending, set goals for savings and track your expenses patterns. With AI the budgeting process can be adaptable to your financial behaviour with personalized recommendations providing you tailor made suggestions that fit your needs.
2. Savings
Saving money is one of the biggest challenges people face in modern society. With the help of AI you can put money aside consistently without even noticing. AI-driven tools use algorithms to calculate and foresee how much money you can afford to save based on your financial goals and spending habits. They can move small amounts to your savings account on specific days that your balance is high, monitor your savings goals progress. Furthermore, they can help you set tangible saving goals based on your transaction activity and lifestyle.
3. Investments
Investing is something that only financial experts could do with any consistent success. Not anymore. AI has demystified the whole investing and stock market process making it clearer and easier to understand for everyone. There are AI-powered tools and platforms that can build and manage your investment portfolio based on your risk level and goals. In addition, these platforms can provide you with personalized recommendations and typically offer lower fees than investing companies.
4. Personalised financial advice
Now, with AI, you have your own personal financial advisor at your disposal anytime, anywhere. It can give you tailored advice and custom strategies based on your analysed financial behaviour. AI can suggest the best way to pay off your debts, build an emergency fund, make smart investments, refinance your loan or alert you when your subscriptions are costing you more than expected. With these AI tools, you can learn more and be financially literate staying on top of your finances.
5. Fraud detection
Online frauds are on the rise, however, AI can be your digital security. With advanced AI models that can monitor your overall banking activity in real time, it is easier to flag unusual behaviour that might be fraudulent. Namely, AI can detect and freeze suspicious transactions and recognize uncommon spending patterns preventing potential financial loss.
6. Loan applications
Applying for a loan can be a, time-consuming process with a lot of paperwork and stressful bank visits. AI can help streamline the loan application by automating a large part of the process, avoiding unnecessary paperwork. Moreover, it can be taken a step further with automating the application review, evaluating your eligibility instantly.
7. Predicting your financial future
AI doesn’t just analyze your finances, it helps shape your future. By leveraging your spending habits, income patterns, and market trends, it can make personalized projections and simulate different financial scenarios, forecasting your financial future based on your current trajectory.
What are the benefits of using AI in banking?
The way modern banks will operate in the future is bound to change due to the use of AI in banking.
- Personalised financial services: AI can analyse spending habits and offer personalized advice, helping customers to better manage their finances and make informed decisions.
- 24/7 support: Using AI powered chatbots makes banking available 24/7, making it easier for customers to get instant, efficient and most importantly, quality support .
- Fraud detection: AI can detect and stop unusual account activity preventing unauthorized transactions and helping to keep your money safe from fraudsters and cybercrime.
- Automated processes: By automating the banking processes through AI, loan applications and account openings become faster and more efficient, reducing human errors and increasing accuracy.
What are the concerns in using AI in banking?
While AI has many advantages in banking there are some questions and concerns about its use.
- Data privacy: One of the most common worries about AI in banking is the security of private data. AI relies heavily on personal information and it’s natural for people to ask the question of how secure the data is stored and used.
- No human interaction: This is another issue that arises especially concerning complex decisions such as loans approvals and specific financial advice. People still feel more comfortable having a personal interaction with another human rather than a screen.
- Ethical practices: One of the main concerns is if AI aligns with human values, societal norms, and fairness. Without ethical considerations, AI can perpetuate biases, invade privacy, and cause harm. Transparency and trust are pillars that responsible banks, like Ancoria Bank operate, maintaining a clear communication with customers focusing on fair treatment.
- Algorithmic bias: This issue is often times connected with ethical practices when using AI. Algorithmic bias refers to the unintentional, discriminatory or unfair outcome for certain groups based on society’s prejudices embedded in the data that AI uses and bases its answers on.
What is the future of AI in banking?
AI is constantly evolving and we can expect even more advanced and integrated uses of hyper-personalized banking in the near future. For example, integrating mobile and online banking with AI, creating a virtual banking assistant, using voice activated task management, like making secure payments using only your voice. As AI progresses, Banking Institutions will have to keep up with its rapid progression and be ready to take advantage of the constantly evolving and innovative digital solutions.
Artificial Intelligence is all about enhancing your ability to make informed decisions about your finances. Now, even complex tasks can be easy to implement using the right tools. Especially when you combine AI with financial literacy, you can take control of your money, achieve your saving goals, build a retirement fund and much more with less stress. Let’s not forget that AI is not about replacing human interaction, but making you more informed and confident.
