Artificial intelligence is a scientific discipline that seeks devices that imitate or replace humans in certain implementation of their cognitive functions.
If artificial intelligence is not a new phenomenon – Alan Turing was already thinking about it in 1950 – it is the emergence of big data that makes it reach new heights. Indeed, artificial intelligence is the ability to intelligently process data. Today, more and more data is being created every day, and we are increasingly capable of processing it thanks to the arrival of ever more powerful algorithms.
In the banking sector, where data analysis is a key issue, it is quite evident that this technology is going to reshape the entire sector from trading to financial analysis, risk assessment, credit and portfolio management. What are the impacts of artificial intelligence in finance? What is the role of fintech players? What risks and challenges await us?
The Transformation of the Advisory Role in Banks
Artificial intelligence is gradually penetrating the banks and helping in the optimization of their financial advisory services. One can differentiate between two types of applications, which in both cases transform the traditional role of the advisor.
Firstly, let’s talk about these increasingly powerful software applications based on data processing algorithms, proposed for example by Yseop, IBM Watson or Oracle. By analyzing customer information in real-time, they are able to draw quick conclusions that are easy for advisors to use. For example, which financial product is best suited to my client, what arguments should I use to sell it to him/her, etc.?
The second type of application is chatbots. A tool to generate a natural conversation with users. The advantages? Real-time interactions with the bot can be quite helpful to beginners and save the valuable time of real advisors who can focus on higher value-added questions.
For banks, these tools are therefore the means to reduce their overheads while increasing sales efficiency, the average basket of goods purchased, and customer loyalty.
Artificial intelligence is not only developed by banks. In recent years, Fintechs have emerged that go even further and assume more roles like asset management. Since its arrival on the market, these services allow portfolio management 100% online with minimum human intervention lowering costs.
Software developed in the US has significantly transformed the banking sector in Europe and Asia:
- On the one hand, we have advisory management AI. Here, the investor remains in control of his portfolio and can choose whether or not to follow the advice given to him by the algorithm.
- On the other hand, we have delegated management products, which is more automated. Here, the software manages the portfolio all alone independently of any human input aside from very rare circumstances.
Conclusion: what Do You Need to Know
As you may understand now, artificial intelligence brings its share of opportunities to reshape the banking business from the role of the advisor in banks to the new asset management services offered by fintech companies.
As with any innovation, there are concerns about data protection, cybercrime, job preservation and market regulation. These issues will have to be taken seriously to build the robust and advanced financial sectors of tomorrow.