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Sincebusinessandhedgefundexecutivescannotstaycompetitivewithroboticsystemsthatcanoperatemassiveamountsofinformationandkeepimprovingtheirpredictionswhilemakinginvestmentdecisions, AImaybecomethemaininstrumentforcreatingearlierchallengingfinancialobjectives.

Roboticsystemswillsoontakeupthemajorityofpositionsinthefinancialsystem, whichisgreatnewssincethebestcollegegradswillnowbeabletomovetoindustrysectorsthatprovidemoresignificantadvantagestopeople andtheplanet, suchastechstart-upsandhealthcare.

AIandHistoricallyHighROI

Themajorityoftheworld'stradingplatformsusecomputingsystemsthatrelysolelyonalgorithmsandadoptnewapproachesbasedonrecentdata. Therehavealreadybeenrecordedexamplesofusingelectronicallystoreddatafeedstocopyreal-timeinvestments. Takingtransactionpricesintoconsideration, oneoftheconceptsenableda73% yearlyROIover the last 20years. Thisissimilartoanannualrealmarketrevenueofalmost10%.

Utilizingartificial intelligence in financial marketsforsharetradingisnotanovelconcept. Itsalternative—algorithmictradeorblackboxes—hascurrently been inuseforoveradecadeandisbecomingincreasinglypopular. Automatedtradingaccountedfor85% ofthebusinessin2012.

Ifthistrendholds, computeralgorithmswillhandle90% oftrading. Currentalgorithmsare shiftingtoHFTtransactions, inwhichsharesarepurchasedandsoldinfractionsofasecond. Thismethodologyrapidlyidentifiesandexploitsthesedisparitiesandtrevenuegraduallydecreaseswhilethetradingactivityremainsconstant.

Recentresearchinvolving23hedgefundsthatuseAIfoundthattheyoutperformthosecontrolledbypeople. Theyhaveobtainedanannualreturnof8.44% duringthelast6years, incomparisontostandardfunds, whichhavevariedfrom1.62% to2.62%. Thesurvey'sanalystsrefer to AI'sdominantpositioninthesectorasthefactthatitcontinuallyperformsrepetitivetestsratherthansimplyaccumulatingdata.

AIindefinitely operatesmassiveamountsofdata, suchasbooks, Twitterposts, media, economicmetrics, andevenentertainment such asTVshows. Thisishowitlearnstorecognizeoveralldynamicsandcontinuallyimprovesitsfinancialsectorforecasts. Hedgefundsusedtohiremathematicexpertstogeneratestatisticaldatasets,includinghistoricalinformationtodevelopalgorithmsthatforeseemarketpossibilities—AI, however,ismoreefficientandprecise.

Thatiswhyfinancialbehemothsareshiftingtoautomatedsystemsthatoutperformhumansinpredictingmarketdynamicsandselling.

The 7 Best Ways to Use Artificial Intelligence in the Financial Sector

Banking Services Using AI-based Chatbots

Now artificial intelligence is actively developing, and at the same time, the range of its capabilities is expanding. Chatbots and AI-based virtual assistants have been reducing the need for personal contact, wasted  time, and waiting for a response from support service for a long time. After all, artificial intelligence has proven its effectiveness: now, with the help of financial chatbots on AI, customers can independently check their balance, plan payments, monitor account activity, and conveniently ask a virtual assistant questions and receive personalized banking advice  anytime and anywhere they like.

Personal Financial Assistant

Another bright advantage of AI is the possibility of financial consulting services with virtual assistants.

Conversational bots with artificial intelligence or consulting robots offer financial planning services based on algorithms with virtually no human control. They can inform clients about the latest financial trends, help them expand their portfolio, achieve tax efficiency, maximize savings, and much more.

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Credit scoring

Another direction of using AI is lending. It takes a lot of time for banks to process loan applications and respond, so it is automated to simplify the process.

For example, AI algorithms determine a person's right to receive a loan, assess risks and even provide individual solutions. Artificial intelligence is not biased, so it can make a more accurate, fair, and timely decision about the right to receive a loan.

Online Identification

KYC (Know Your Customer) is a method used by banks and other organizations to verify the identity of a customer. It includes identification of the person, understanding of the nature of the clients’ activities and the origin of their finances, as well as risk assessment.

The KYC procedure is necessary to confirm the identity of clients and provide access to the services they need. The essence is as follows: the clients provide documents confirming their identity to the bank branch or through photo or video identification.

Collection of documents and other customer information

How else, besides verification, is AI connected with the client's documents?

Data in the financial environment is one of the most important resources, and their huge volume and structural diversity make manual processing difficult even for financial experts.

The use of AI-based solutions for data and document processing increases the efficiency of processes, and also allows you to extract useful information. Data analytics, data mining, and natural language processing are examples of AI and ML solutions that help companies obtain important information.

Risk management with comprehensive data analysis

In addition to processing claims, AI is even capable of such complex manipulations as risk analysis in the financial environment. The ability of artificial intelligence in finance to analyze large volumes of structured and unstructured data can improve risk management and compliance capabilities. Thus, risk managers in financial institutions can identify risks more effectively and in a timely manner in order to make more informed decisions.

Anti-fraud

Consumers need guarantees that their money and personal information will be kept safe, and artificial intelligence can help in this. It is believed that the human factor is the cause of up to 95% of cloud violations.

Robotics allows companies to prevent fraud in advance and helps to improve security by studying and identifying the usual patterns and trends of data, as well as warning agents of any anomalies or suspicious actions. If fraud is suspected, AI models can be used to reject or flag transactions for further investigation.