“AI” is a buzzword that you can’t really escape these days. All the big tech companies are racing to determine a place for AI in their products while their employees race to determine a place for it in their workflow. You might be surprised to learn how much AI is already integrated into your daily life! For example, AI powers voice assistants and chatbots (like our very own Ask Robert!), image recognition, fraud prevention, self-driving vehicles, healthcare, and education. But what exactly is AI? Answering that question first requires understanding what AI isn’t.
AI vs Automation
AI and automation serve important but distinct purposes in the fintech industry.
- Automation is the efficient execution of repetitive tasks by following predefined rules and procedures. It works best to streamline workflows that don’t require deviation or reasoning.
- AI aims to emulate human-like reasoning, decision-making, and adaptability. AI applications are most effectively used in situations that require autonomy.
Cautions of AI Usage
It’s easy to find discourse surrounding AI these days, and understanding the technology’s weaknesses is just as important as understanding its strengths. This will allow your institution to make ethical and effective decisions regarding if, where, and how you implement AI;
- Risk of Bias. AI models are susceptible to biases embedded in the datasets they are trained on. Reducing this risk necessitates careful evaluation of those datasets and making sure they include regulatory and ethical standards.
- Data Privacy and Cybersecurity. Implementing AI at your institution will require understanding the new and unique vulnerabilities it brings to your systems. Also, regardless of whether your institution has AI plans of its own, it would be wise to educate yourselves and your employees about the ways AI can be used by bad actors to enhance the effectiveness of phishing attacks and social engineering.
- Transparency and Accountability. AI systems generally function as "black boxes" with algorithms and decision-making processes that are not easily understood or explained. Your institution needs to be prepared to deal with this opacity when managing stakeholder relations and regulatory compliance.
- Need For a Balanced Approach. Excessive dependence on AI systems can be tempting, but the technology is imperfect and requires a human eye at key steps of the process. Don’t let your dreams of a completely hands-off system steer you away from maintaining the proper safeguards and contingency plans!
So AI is a lot of responsibility. But it’s also a lot of power, as can be seen by the companies who implement it effectively and ethically.
The Perks of AI in Fintech
The fintech industry is progressively adopting AI in a variety of ways that enhance operational efficiency and customer service. Examples include:
- Fraud Prevention. AI-powered fraud prevention systems can analyze transaction patterns in real time to identify anomalies. This reduces the time needed for fraud detection and strengthens the integrity of transactions.
- Risk Management. AI models evaluate risks by analyzing historical data and market trends. An institution can use this analysis to identify opportunities and inform their decisions.
- Customer Service. AI-powered chatbots and virtual assistants can function 24 hours a day to manage common questions. This guarantees that customers always have a lifeline of assistance available and human employees are freed up to manage more complex concerns.
- Operational Efficiency. When common tasks like data entry can be handled by AI, human employees can be redirected towards more productive tasks.
Where to Learn More
If you’re ready for a deeper dive into exactly what AI is and how it can be used, a few external resources are available to get you started:
- Educational Resources. Online platforms such as Coursera, edX, and Udacity offer comprehensive courses on AI applications in fintech as well as webinars and workshops led by industry experts.
- Industry Publications. Articles and newsletters from reputable sources provide valuable insights into the application of AI in fintech. A couple notable examples include:
- How AI Is Transforming The Finance Industry
- IBM Finance Consulting Services
- Professional Networks and Communities. Professional forums (such as the Financial Services AI Forum and AI in Finance LinkedIn groups) offer valuable opportunities to connect with peers, share knowledge, and stay informed about industry developments.
- Practical Experience. Your institution can start with small pilot projects to evaluate AI’s effectiveness on your system.
AI is here to stay and understanding how to understand and integrate it effectively is rapidly becoming a requirement in the fintech industry. By staying informed about best practices, engaging with industry experts, and implementing robust security measures, your institution can harness the power of AI to supercharge its growth and efficiency.
