AI in Finance: Benefits, Real-World Use Cases, and Examples

In many cases, tasks that people perceive as simple are nearly impossible for a machine to replicate. AI’s human-like outputs may seem like an obvious benefit to a productivity-minded manager, but employees perceive artificial intelligence as an employment threat. Our research revealed that 70% of the active workforce believes AI can replace people — so it’s not surprising when new AI-driven solutions are rejected and fail to gain traction. Only 10% to 30% of organizations report that they’ve realized significant financial benefit from artificial intelligence. Insufficient skills and employee acceptance are two of the top 3 leading causes for low returns on AI.

Building processes to promote the strengths of people and machines, while avoiding their respective weaknesses, introduces a new collaboration that improves business performance and employee satisfaction. Successful finance teams design processes so that people and machines are each tasked with the actions they perform best. These organizations recognize that AI performs some narrowly defined tasks better than people, but it cannot do everything better.

However, the survey found that frontrunners (and even followers, to some extent) were acquiring or developing AI in multiple ways (figure 9)—what we refer to as the portfolio approach. It is also no surprise, given the recognition of strategic importance, that frontrunners are investing in AI more heavily than other segments, while also accelerating their spending at a higher rate. Close to half of the frontrunners surveyed had invested more than US$5 million in AI projects compared to 27 percent of followers and only 15 percent of starters (figure 5). In fact, 70 percent of frontrunners plan to increase their AI investments by 10 percent or more in the next fiscal year, compared to 46 percent of followers and 38 percent of starters (figure 6).

For example, AI can be a powerful tool to optimise windmill operations and safety, analyse traffic patterns in transportation, and improve operations in energy grids. Computer vision is the ability of computers to identify objects, scenes, and activities in a single image or a sequence of events. The technology analyzes digital images and videos to create classification or high-level descriptions that can be used for decision-making. This technology allows users to extract or generate meaning and intent from text in a readable, stylistically natural, and grammatically correct form. NLP powers the voice- and text-based interface for virtual assistants and chatbots. From our survey, it was no surprise to see that most respondents, across all segments, acquired AI through enterprise software that embedded intelligent capabilities (figure 9).

  • In theory, it could act as a safeguard by testing the veracity of the data provided by the Oracles and prevent Oracle manipulation.
  • AI is particularly helpful in corporate finance as it can better predict and assess loan risks.
  • Those models can then continuously refine themselves to generate stronger future outcomes.
  • In certain jurisdictions, such as Poland, information should also be provided to the applicant on measures that the applicant can take to improve their creditworthiness.

That said, there is no formal requirement for explainability for human-initiated trading strategies, although the rational underpinning these can be easily expressed by the trader involved. As such, rather than provide speed of execution to front-run trades, AI at this stage is being used to extract signal from noise in data and convert this information into trade decisions. As AI techniques develop, however, it is expected that these algos will allow for the amplification of ‘traditional’ algorithm capabilities particularly at the execution phase. AI could serve the entire chain of action around a trade, from picking up signal, to devising strategies, and automatically executing them without any human intervention, with implications for financial markets.

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AI focuses on oversight such as addressing anomalies, managing exceptions, and making recommendations so teams can focus their time on strategy. We tapped into the minds of our very own F&A experts at IBM Consulting — the ones that know that how you help businesses make data-driven decisions indicates your ability to support future business. Our experts at IBM Consulting are taking a comprehensive look at generative AI for F&A and considering the need to balance risks.

Increased automation amplifies efficiencies claimed by DLT-based systems, however, the actual level of AI implementation in DLT-based projects does not appear to be sufficiently large at this stage to justify claims of convergence between the two technologies. Instead, what is currently observed is the use of specific AI applications in blockchain-based systems (e.g. for the curation of data to the blockchain) or the use of DLT systems for the purposes of AI models (e.g. for data storage and sharing). Similar considerations apply to trading desks of central banks, which aim to provide temporary market liquidity in times of market stress or to provide insurance against temporary deviations from an explicit target. As outliers could move the market into states with significant systematic risk or even systemic risk, a certain level of human intervention in AI-based automated systems could be necessary in order to manage such risks and introduce adequate safeguards. Potential consequences of the use of AI in trading are also observed in the competition field (see Chapter 4). Traders may intentionally add to the general lack of transparency and explainability in proprietary ML models so as to retain their competitive edge.

The company offers simulation solutions for risk management as well as environmental, social and governance settings. Simudyne’s secure simulation software uses agent-based modeling to provide a library of code for frequently used and specialized functions. AI, large language models and machine learning have disrupted the financial industry for over a decade. What began small with simple routines has now expanded possible applications to more complex and precise use cases. The ability to read, process and analyze vast amounts of historical data and news revolutionizes how AI can enhance client satisfaction and make more informed decisions in finance. Cybercrime costs the world economy around $600 billion annually (that is 0.8% of the global GDP).

The implications of generative AI in Finance

Figure Marketplace uses blockchain to host a platform for investors, startups and private companies to raise capital, manage equity and trade shares. Wealthblock.AI is a SaaS platform that streamlines the process of finding investors. It helps businesses raise capital and handle automated marketing and messaging and uses blockchain to check investor referral and suitability. Additionally, Wealthblock’s AI automates content and keeps investors continuously engaged throughout the process. AI and blockchain are both used across nearly all industries — but they work especially well together.

Companies using AI for data analysis begin by collecting datasets from trusted sources. The AI then takes care of removing irrelevant information from the raw data and extracting the data to focus on during data analysis. The data analysis looks at the data to identify valuable insights before the final step of data interpretation, which helps to make the right decisions based on the analyzed data. Robo Advisors use artificial intelligence-empowered strategies to minimize risk and actively seek above-average returns by identifying smart investment strategies. Those investment strategies are tailored to defined investment themes and risk levels clients can choose from.

Benefits of AI in Finance

Ocrolus offers document processing software that combines machine learning with human verification. The software allows business, organizations and individuals to increase speed and accuracy when analyzing financial documents. Ocrolus’ software analyzes bank statements, pay stubs, tax documents, mortgage forms, invoices and more to determine loan eligibility, with areas of focus including mortgage lending, business lending, consumer lending, credit scoring and KYC. Enova uses AI and machine learning in its lending platform to provide advanced financial analytics and credit assessment. The company aims to serve non-prime consumers and small businesses and help solve real-life problems, like emergency costs and bank loans for small businesses, without putting either the lender or recipient in an unmanageable situation. Called Snowflake Cortex, the fully managed service lets the data management platform’s users tap its custom LLMs to more easily analyze their data and build applications, according to the company’s blog post.

2.3. Credit intermediation and assessment of creditworthiness

The profile of artificial intelligence has risen massively recently, mostly as a result of ChatGPT, customer service chatbots, and generative AI. Likewise, credit decisions that previously required people to process vast amounts of customer data and credit history are now accurately informed by AI systems. Leading finance organizations are already using AI and ML technologies in Workday to help deliver better employee experiences, improve operational efficiencies, and provide insights for faster data-driven decision-making. Historically, ERP systems have been held back by their legacy origins, with long, costly upgrade cycles; the need for IT to add or modify functionality; and frustrating data silos.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

AI in Finance: CFO Strategies for Successful AI Deployment

AI techniques such as NLP12 are already being tested for use in the analysis of patterns in smart contract execution so as to detect fraudulent activity and enhance the security of the network. Importantly, AI can test the code in times interest earned ratio ways that human code reviewers cannot, both in terms of speed and in terms of level of detail. Given that code is the underlying basis of any smart contract, flawless coding is fundamental for the robustness of smart contracts.

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