Artificial Intelligence has been the talk of the town for the past couple of years. We’ve witnessed AI tools that can make movies, realistic portraits, and even music. And it’s not just in the entertainment world, but the financial industry is all about it too. As we roll into 2024, AI tech is only getting more and more accessible every day, and banks and finance teams are gobbling it up like hotcakes.
The adoption of advanced technologies in finance departments is continuously set to soar and shows no signs of slowing down. Gartner predicts that by 2025, a whopping 75% of finance teams will harness AI-powered apps for smarter decisions and seamless task automation. So, here’s the million-dollar question: How exactly has AI been shaking things up in the finance world in 2024?
In this article, we’ll explore the AI-driven technology trends that have been at the forefront of revolutionizing the financial industry throughout 2024.
How Has AI Impacted Banking and Finance So Far?
Before we get into the nitty-gritty details about the top AI trends in the finance industry, let’s delve into three key main areas where AI has made a significant impact in the first place.
Payments
AI has streamlined and accelerated transactions and made financial interactions smoother and more secure than ever before. Not only that, but AI-powered payment processing systems save a lot of time for transactions. People now have access to real-time fund transfers and quicker settlements across borders with AI-powered financial apps.
With machine learning algorithms, these systems can also detect and prevent fraudulent activities with remarkable precision – which can safeguard customers’ assets and reinforce trust in the financial ecosystem.
Anomaly Detection
To piggyback on the last point, AI’s prowess in anomaly detection has been a game-changer in the fight against financial fraud. Traditional rule-based systems often struggle to keep pace with the sophisticated tactics employed by fraudsters. With AI-powered anomaly detection algorithms, banks and other financial institutions can now identify unusual patterns and fraudulent activities with ease.
Through continuous monitoring of transaction data and customer behavior, AI systems can swiftly identify deviations from normal patterns and flag suspicious activities in real-time. Not only will this prevent monetary losses, but it will also help protect customers from falling victim to various forms of financial scams.
Algorithmic Trading
The financial markets are well-known for their complexity and volatility. This is what makes them a fertile ground for AI’s application in algorithmic trading.
In this case, AI-powered trading algorithms can analyze vast amounts of market data, identify patterns, and predict market trends with remarkable accuracy. Thus, these algorithms can execute trades more efficiently and respond to market fluctuations in ways that real human traders often struggle to match.
Even better, AI-driven trading systems are not bound by human emotions (fear, greed, indecisiveness, etc.), which too often can cloud judgment and even lead to irrational decisions.
Top-Rated AI Fintech Trends in 2024
Now that we’ve understood areas that AI has made a significant impact on, let’s break down some top-rated trends that are shaping the AI landscape in the financial industry for 2024 and beyond.
Invoice Processing Automation
Do you know that nearly 40% of invoices contain errors? Not only is the whole process of invoice processing time-consuming, but it’s also back-breaking.
But, with AI, gone are the days of mundane, repetitive manual invoice processing. AI-powered automation solutions streamline the entire time-consuming invoicing process. These intelligent systems can accurately extract data from invoices, match it with relevant records, and seamlessly process payments, all with minimal human intervention.
Now finance teams can focus on higher-value tasks, reduce error rates, and achieve faster payment cycles– which can help them improve efficiency and cost savings.
Regulatory Compliance and Reporting
AI algorithms come in handy for analyzing vast volumes of data and detecting potential compliance violations. This can help organizations stay ahead of regulatory changes and ensure adherence to industry standards.
And when financial institutions use AI-driven reporting tools, they can also generate comprehensive and real-time reports, facilitating transparent and efficient communication with regulatory bodies.
Improved Credit Underwriting
AI is taking the way credit underwriting up to the next level by making the process faster and more accurate. Using machine learning models, financial institutions can assess credit risk with greater precision by analyzing a diverse range of data points. This includes alternative credit data such as transaction history, social media, email outreach activity, and even psychometric analysis.
With all of these, lenders can make more informed credit decisions, expand access to credit for underserved populations, and reduce default rates more effortlessly.
Data Analytics and Forecasting
As it’s mentioned briefly before, AI is well-known for analyzing vast datasets. In the financial industry, it’s used in such areas as credit risk scoring, economic and financial variables forecasting, risk management, and so on.
That means by harnessing the power of AI-driven forecasting, finance teams out there can make data-backed predictions about market trends, customer behavior, and economic indicators. Now it’s easier for them to make even more proactive decisions and respond quickly to changing market conditions to gain a competitive edge.
Biometric Security and Authentication
With more people spending more time online, cyber threats are also on the rise. Robust security measures are no longer a nice-to-have feature for financial institutions– it’s of paramount importance.
AI has paved the way for biometric authentication systems that use unique physical traits, such as fingerprints, facial recognition, and voice patterns, to verify customer identities. Juniper Research shows that global spending on biometric payment authentication technology is expected to reach $43.3 billion by 2025, up from $18.3 billion in 2020.
These biometric methods provide a higher level of security compared to traditional passwords. Plus, customers are no longer required to remember passwords or carry tokens with them in order to authenticate transactions.
Enhanced Customer Experience and Service
With virtual assistants and chatbots, customers can enjoy seamless interactions, instant support, and personalized assistance around the clock.
Whether it’s checking an account balance, setting up a payment schedule, or understanding complex financial terms, AI-powered assistants and chatbots are at the forefront of transforming customer service in the finance industry. These AI-powered assistants are always ready to address queries and guide customers through various financial processes 24/7 – regardless of time or location.
Wrapping Up
AI is rapidly transforming how finance professionals approach their daily work and how customers access their assets. That all said, there’s one thing to bear in mind here: AI should only be used as a tool. It means harnessing its potential to augment human capabilities, not replace them.
While AI can automate tasks, forecast, and improve financial decision-making, the human touch remains irreplaceable in building trust, interaction, and understanding with customers. So, striking a balance between technology and human expertise is always the key here.