Artificial Intelligence is sweeping through every industry globally, and finance is not left out. AI is assisting to speed up and improve processes in every area of finance, from how organizations manage their money to helping individual consumers make better investment decisions.
As Forbes reports, 70% of finance firms employ AI applications like machine learning to calculate credit scores, predict cash flow, and tackle fraud. In addition, organizations around the world are unlocking new and better ways to use AI in their day-to-day financial management, thereby eliminating financial leaks and improving profitability.
However, while AI is improving finance in so many ways, its growing global acceptance is creating uncertainty about the place of humans in a world that is increasingly machine-enabled. Finance professionals find themselves faced with difficult questions: Will AI make finance workers redundant? How many jobs will be lost to the AI wave? Is there a place for humans in the AI-led world that seems to be dawning with every day that passes?
The compelling case for AI in finance
I believe there can be no doubt about the immense possibilities that AI holds for finance. More importantly, AI is entering into spaces and carrying out jobs that were once reserved for highly experienced financial advisors.
For instance, there are specialist investment companies called quants that employ AI and big data to understand and predict market forces. They make use of alternative data comprising information sources like social media, private jet activity or even satellite imagery to provide investing insights and take decisions. Consequently, they have a potentially wider range of vision that lets them access insights that would not be readily apparent.
Robo advisors are also gaining prominence in trading, where they help novice (and even experienced investors) place trades and manage their portfolio. The technology has found application in numerous verticals within capital markets and the financial industry. From risk assessment, personal banking, and financial advisory to credit decisions and ERP finance, the technology is everywhere.
Unsurprisingly, up to 80% of banks now say they know about the benefits of AI and its potential to save them $447 billion in productivity and plugged leaks by 2023. They’re able to streamline processes and automate routine tasks, thereby saving money and opening opportunities for growth.
But AI doesn’t only excel at the mechanical tasks that dominate finance. It can also help tackle some of the deeper issues in the sector, such as predatory lending and discrimination. For instance, the National Bureau of Economic Research found that financial algorithms cut discrimination in financial decisions by 40%, compared to lenders who make face to face decisions.
So, there’s a clear case for AI in finance, and I daresay the hype around the technology is justified on this basis. But will AI push humans out of the sector? Not in my opinion.
AI can’t do it all alone – the Human Factor is still critical
AI is great, but it isn’t great all on its own. The technology still needs humans to fully deliver on the value we know it possesses. As I have discussed in a previous post, AI lacks “intellectual capitalism” – a quality that physicist Michio Kaku says is involved in how humans express “creativity, imagination, leadership, analysis, humor, and original thought.”
While AI has energized the financial sector and facilitated some of the most influential advancements in the industry, it will not replace humans. As researchers from the University of Cambridge and Oxford Brookes University note, “despite all their imperfections, empirical evidence strongly suggests humans are currently ahead of AI. This may be partly because of the efficient mental shortcuts humans take when we have to make rapid decisions under uncertainty.”
Ultimately, we stand to gain much more by combining the mechanical efficiency of AI with the intellectual capacity of humans.
