How AI Is Transforming the Finance Sector
Jun 17, 2024
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Artificial Intelligence is revolutionizing the business world, driving innovation and efficiency across multiple industries. Today, we'll examine AI in the finance sector and how it is used to detect fraudulent activity and enhance the banking experience to deliver a more secure, efficient, personalized service.
Fraud Detection
Fraud detection is a crucial priority for financial institutions, and AI is making significant strides in this domain. Leveraging machine learning and predictive analytics, AI systems can detect unusual patterns and behaviors that signify fraudulent activities, such as credit card fraud (source: Forbes). For instance, machine learning algorithms would flag this activity as potentially fraudulent if a user who typically makes minor purchases over the day suddenly makes a large purchase in a different city or country. These algorithms also continuously adapt and learn from new fraud patterns, increasing their efficacy over time (source: PwC).
In the United Kingdom, credit card giant VISA has recently piloted an AI-powered fraud detection service designed to detect a fraudulent transaction before money has left the account holder's account (source: PYMNTS). The other leading credit card company, MasterCard, has also announced that it will launch Decision Intelligence Pro in 2024, a gen AI-powered tool that will, in real-time, leverage one trillion data points to assess whether a transaction is fraudulent (source: MasterCard).
Banking
AI is also changing how customers and banks engage in banking services. By analyzing customer data, AI-powered systems can offer personalized financial advice, predict customer needs, and provide tailored product recommendations. One example is how AI uses information that a customer has started a family – which may be provided by the customer or inferred from their transaction data – to recommend high-yield savings accounts or life or health insurance plans suited for families. JPMorgan has confirmed they are working on this tool to identify suitable customer investments. Morgan Stanley has already launched an internal AI assistant to help employees advise clients better; 'AI @ Morgan Stanley Assistant accesses over 100,000 research reports to answer employee queries (source: Forbes). Another everyday use of AI in banking, which may be familiar to most of us, is online chatbots offering real-time customer support (source: McKinsey & Company).
Looking ahead, AI's role in finance will only grow. As AI technologies evolve, their applications will become more sophisticated, further transforming the financial landscape. Financial institutions that embrace these innovations will stay ahead of the curve, driving growth and customer loyalty.
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