Artificial intelligence (AI) and machine learning (ML) are slowly becoming the most talked about topic in the financial world. Listen to any business channel, and you’ll find it is the hottest topic of the day. Investors, looking for new areas to conquer are turning to the field of AI and ML. Financial experts and analysts are looking at this field as the one that will drive extreme revenue across different industries. The assessment is that in fifteen to twenty years AI will contribute a 38% surge in profits for the economy. That means that the prediction is a mindboggling 14 Trillion dollars in economic growth through the use of AI and ML capabilities. With such a positive forecast, everyone in the financial sphere should have at least an overview of what AI and ML is all about.
Why all the hype? Well, first of all the solutions offered by data collecting and web learning are answering questions that have troubled the business world for many years. AI and ML, while some have the Hollywood-infused notion that they are a detrimental device, meant to rob humanity of privacy, anonymity and peace, are in fact a game changer. The truth is AI will modify work environments, living habits and relationships. Reading up on the subject, it seems fair to say that AI and ML will have the same overwhelming effect the computerized revolution of the last twenty years has had on modern life, over the next decades.
Easy Access to Data and its Advantages
Fintech companies are looking to incorporate advanced innovation into their capabilities. In the world of lending, data sourced through AI and used with ML is offering credit risk analysis through new platforms. The information is out there for the asking. Take a look at the access offered by social media accounts. Anything from the client’s address to their fashion choices to the purchases they are looking to make, is available. It is no wonder the different “face apps” are raising all kinds of fears. Once the information is online, it is there for the taking. This, of course, instigates all kinds of questions about online fraud capabilities. Indeed, this is a big hurdle to overcome for the field. Still, just as banks are not perfect systems, AI has more benefits than disadvantages.
In the US, if the client grants permission, credit profiling is actually simple. Questions like whether they have taken loans in the past, if they are still paying off a mortgage and even if they have a criminal record are easily answered. As long as strict usage rules are set, and institutions strive to protect their clients’ information and data, using advanced technological abilities are an incredibly useful tool. AI goes far beyond credit worthiness questions and allows an accurate assessment of a client’s financial state. When AI is used responsibly, it is an important means that allows better service for customers. Basically, helping lenders appreciate a bigger picture of the loan applicants worth.
Complicated Models, Simple Solutions
In 2018 the alternative lending market set an all time peak with a 17% growth, according to TransUnion. In fact, 38% of all US personal loans were given by fintech companies. The point is that of those fintech companies, the ones willing to incorporate AI models throughout their platforms will have two distinct advantages above others. First, in using these advanced systems they will be reducing costs. Second, the possibility of boosting revenues is much higher for AI users. Their clients do not even need to be made aware of this capability.
For example, a company utilizing a call center can use an ML driven algorithm to decipher between a potential successful call and a non-successful one. Collected data can help not only recognize the “good” clients, but create a combination of different models, with unique analysis advantages. All businesses have issues stemming from inefficiency, whether in the accounting, legal or customer service. Sophisticated AI and ML solutions solve this incompetency. The result is overall better service to the customer & bigger profit. Without a doubt AI and ML require extremely careful and responsible implementation. Yet, the results of their use can be astounding. Not to mention, highly profitable.