Exploring the transformative power of AI in finance

The introduction of chatbots and virtual assistants—byproducts of the AI revolution in the finance industry—has minimized wait times and sped up customer service. Customers can easily check their account balance, plan monthly payments, or review their bank account activity. It’s a must-have that all institutions need to deliver in the increasingly competitive world of banking and finance.

Our solutions exhibit adaptability and can be customized to meet the specific needs of financial enterprises. In an autoregressive model, the “autoregressive” part refers to the dependence on lagged values of the variable itself. The model assigns weights to these lagged values based on their importance in predicting the current value.

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For instance, if a customer suddenly conducts multiple high-value transactions from an unfamiliar location, the AI system can promptly flag it as a potential fraud case. These voice assistants, integrated into mobile banking apps or smart devices, enable customers to interact naturally through voice commands. Customers can check their account details, perform transactions, and obtain personalized financial insights by simply speaking to the AI assistant.

AI-powered systems can analyze customer behavior, communication patterns, and demographics to personalize debt collection efforts, improving the chances of successful debt recovery while optimizing resources. In recent times conversational AI for finance has gained traction, allowing users to interact with virtual assistants for financial planning. These AI-powered chatbots can answer queries, provide insights, and even execute financial transactions, offering personalized assistance and convenience. Conversational AI seems to be the future of AI in finance as it promises to bring a tectonic shift in the way financial planning is done. The cost-saving potential of artificial intelligence only adds to its appeal to banks and other financial companies.

Using AI in Finance

The true challenge will be for finance chiefs to identify where automation could transform their organizations. Further, they should check whether the opportunities to automate are in areas that consume valuable resources and slow down operations. Finally, CFOs must remember that the success of niche technologies will depend on the capabilities of the people using them. Lack of human interaction Financial services requires interaction with customers and personalized advice. But because AI doesn’t fully understand human emotions, it’s limited in its ability to handle complex interactions.

The banking industry is largely digital in operation, but it is still riddled with human-based processes that sometimes are paperwork-heavy. In these processes, banks face significant operational cost and risk issues due to the potential for human error. The opacity of algorithm-based systems could be addressed through transparency requirements, ensuring that clear information is provided as to the AI system’s capabilities and limitations (European Commission, 2020[43]). To date, there is no commonly accepted practice as to the level of disclosure that should be provided to investors and financial consumers and potential proportionality in such information. In the most advanced AI techniques, even if the underlying mathematical principles of such models can be explained, they still lack ‘explicit declarative knowledge’ (Holzinger, 2018[38]).

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The G20 Riyadh Infratech Agenda, endorsed by Leaders in 2020, provides high-level policy guidance for national authorities and the international community to advance the adoption of new and existing technologies in infrastructure. Although a convergence of AI and DLTs in blockchain-based finance is promoted by the industry as a way to yield better results in such systems, this is not observed in practice at this stage. The possible simultaneous execution of large sales or purchases by traders using the similar AI-based models could give rise to new sources of vulnerabilities (FSB, 2017[11]). Indeed, some algo-HFT strategies appear to have contributed to extreme market volatility, reduced liquidity and exacerbated flash crashes that have occurred with growing frequency over the past several years (OECD, 2019[12]) .

Additionally, generative AI enhances security measures through advanced biometric authentication and fraud detection, bolstering the overall integrity of the onboarding process. From fintech startups to global financial institutions, these companies are integrating revolutionise the financial services sector. With machine learning (ML) algorithms, natural language processing (NLP), and computer vision, these companies are automating manual processes, improving risk management, and enhancing the customer experience. By harnessing AI algorithms, finance teams can automate data collection, cleansing, and analysis, saving time and reducing errors. AI-powered analytics tools can generate real-time insights, trends, and forecasts, enabling CFOs to make data-driven decisions more accurately and quickly.

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Nevertheless, such mechanisms could be considered suboptimal from a policy perspective, as they switch off the operation of the systems when it is most needed in times of stress, giving rise to operational vulnerabilities. For example, Mastercard uses AI to monitor over 1.4 billion cards and 210 billion transactions per year, reducing false declines by 25% and increasing fraud detection by 40%. Another example is PayPal, which uses AI to analyze more than 10 million transactions per day, reducing fraud losses by 10%. Similar to the global trends, the Nigerian market has very much been disrupted by AI technology. Though this journey is still in its infancy, Executive Leaders of BFSIs are starting to realize the potential of AI and strides are being taken to accelerate this transformation.

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