What does AI bring in finance and why is it advantageous?
Technology and finances managed to merge perfectly over the last couple of decades, but that doesn’t mean that the development needs to stop there. There are thousands of developers and financial experts working on enhancing the industry even further as we speak, and their biggest asset at this point is Artificial Intelligence.
Many tend to not understand the importance of AI in the future of financial markets or the lives of regular people in general. Most tend to see AI as a threat to the number of jobs we have in the current market. Banks absolutely love the idea as they are able to cut costs, but employees fear for their lives and tend to be against AI in a company if they have a say in it.
But, misconceptions need to be addressed one way or another. All of the issues need to be cleared out so that everybody can truly understand the importance of AI integration in not only the banking system we are used to nowadays but also the overall financial reality that we live in.
I will try to touch upon three or four points that legitimize Artificial Intelligence in our daily financial lives, and hopefully, all of the aversion you may have about the technology will be gone by the end of the article.
Easier to operate a business
Let’s tackle the most important part first. Regardless of how we look at it, AI makes running a business, especially in finances much more affordable than just having hundreds of employees do routine jobs every day all year.
Think of all the processing that the transactions need to go through, the questions that customer relations specialists need to answer, the scheduling of various projects, meetings and overall business operations of the company. It all requires a large resource of people, with mediocre or no skills at all. Basically, they’re called static jobs, where people don’t really need any kind of focus to have the job done.
One of the perfect examples of how AI can cut costs is in the gaming sector, to be honest. Australia used to have and still has hundreds of casinos dotted around the country, but they’re slowly becoming less and less of a major employer due to the implementation of technology and AI in general.
In fact, a representative of GunsBet, a digital casino had this to say about the implementation of AI:
“We first implemented Artificial Intelligence in our KYC system in 2018. The technology helps us identify any suspicious behavior from a client’s account, be it a substantial deposit, a substantial withdrawal, uncharacteristic betting or pretty much anything that is not necessarily in tune with how the customer had been behaving in the past.
This allowed us to save around AU$200,000 on staffing for direct monitors of such behavior but helped us turn it into a 24/7 thing.
This means that we don’t have to have people online at 03:00 AM in the morning watching what people deposit or withdraw, the AI will handle it themselves.
So far, we’ve managed to prevent 12 cases of unauthorized access to a client’s account, 3 cases of substantial deposits from a different account than the client had registered, and one case of a large withdrawal due to unauthorized access.
All of these things happened during the night when the staff is either not 100% present or prepared.
Although we had to let around a dozen or so people go, we managed to re-invest those saved funds into new projects, or simply increased the salaries of our back-office which is now crucial for the operations.
Once the new projects are completed we can immediately start hiring new staff or re-hiring the old ones all thanks to AI.”
According to this correspondence with the representative of GunsBet, AI not only managed to deliver a more unique and reliable product for the company but also guarantee the creation of new projects that compensates for the loss of jobs in previous, static positions.
Although it’s likely that banks will have to close down branches across their respective countries, and unfortunately let several employees such as consultants go, the end product will be much more convenient for the consumer, and encourage the laid-off staff to better their skills for a manager position which is currently impossible to compensate with AI.
Accuracy and speed
The next advantage that AI brings is accuracy in its predictions for those involved in financial markets, and speed for those using banking services on a daily or semi-daily basis. Let me try to emphasize it on a clearer basis.
Imagine that you are a stocks trader looking for a particular company to invest in. In order to do so, you have to read through hundreds of pages of company information, relative news that could impact its performance and various other things such as executive board shifts, new hires and etc. All of this takes quite a lot of time, not factoring in simply finding the information in the first place.
By the time you’re aware of the company’s performance, future prospects and overall profitability, they’ve already achieved most of their goals while you haven’t invested a single dollar.
Artificial Intelligence tries to mitigate the time required for this research as much as possible. Several systems have been created which screen popular financial news websites, blogs, social media channels of market influencers, press releases from relevant companies and compiles them into a single list of key points, which the investors can glance over.
Naturally, the prediction of price movements and overall analysis is a bit further ahead in the future as comprehension needs more development for our robots, but the data compiling capability is more than enough for the current market reality.
Having so much information delivered to you on a silver place is more than enticing to go for.
Let’s now focus on the speed
How many times have you found yourself waiting in line at a bank or any other financial service company? How many hours have you wasted just standing there and scrolling through social media apps on your smartphone? How much could you have done in those dozens of hours?
Artificial Intelligence aims to solve that. Although the initiative comes with a sacrifice of thousands of consultancy jobs in such companies, the value that it creates for the market compensates for it completely.
Plus, considering how most countries have only 1-2% of the population involved in banking jobs, it’s not going to be a hit that they simply cannot cope with.
The analysis may seem a bit insensitive from my part, but try to look at it as a bigger picture. Sure around a few thousand people will lose their jobs as consultants, but millions of hours will be saved for the customers worldwide, which they can use in self-betterment or for whatever they want.
Just like with the case of GunsBet though, the saved funds aren’t just going to go to waste for the banks either. They will undertake new projects which will add newer and newer jobs.
That was the case during industrialization. Sure it destroyed multiple jobs in favor of mass production, but how many did it create? Think about it.
When demand outpaces supply, prices tend to rise
As already mentioned, the shift in open job positions is going to make executive positions or jobs that require creative and logical thinking much more desirable and well-payed.
Remember how I mentioned the hundreds of thousands or even tens of millions in saved funds? Well, guess where those will be going. The pockets of retained staff and the accounts of newly founded projects.
Just as the demand grows for experienced and creative positions after AI, the pay is predicted to increase substantially as well.
Those who preferred to be employed in static jobs will now have the opportunity to open up new avenues in their careers by undertaking much more challenging and complicated tasks, thus bettering themselves in every way possible.
Overall, I truly believe that AI will encourage people to be much more innovative in their lives, as easy jobs become virtually nonexistent.
How long until this become reality?
We are already seeing such developments in countries like the United States, Canada, the United Kingdom, Japan, China, and South Korea. These countries will most likely lead the world in its technological advancement regarding Artificial Intelligence and introduce a whole new perception of living.
In the US, several presidential candidates for 2020 are even campaigning on preparing for the AI takeover. People like Andrew Yang are talking about universal basic income to compensate for the lost jobs in trucking, retail and various other consultancy positions where AI will dominate.
Judging by such preparations, it’s likely that AI will be a market necessity by 2040 at least.