Artificial Intelligence, or AI, is a technology that can’t seem to stop making headlines daily. What was once technology only really used and known by those in the tech industry is now becoming more and more accessible to people in their everyday lives, including those working in finance. Programs like ChatGPT have put the power of artificial intelligence in the hands of anyone who has a smartphone (and let’s face it, that’s nearly everyone). You may already be familiar with how AI works, but how exactly can it change the future of finance? In this article, we will look at some of the ways AI is going to change the way finance works and the pros and cons it will bring to the industry.
How AI is already being used in finance
As with many technological advancements, there’s never a specific day when everyone decides to start using a new technology. Usually, it’s a gradual shift in the different industries that benefit from them. AI is no different when it comes to this. While it is still not used everywhere, there are plenty of businesses in the financial industry that are already using AI to assist them in different ways.
Novelis Inc. is currently developing AI to assist them in cash flow forecasting through the use of machine learning. Bank of America’s app CashPro is another example of AI being used in finance. CashPro is an app that lets corporate finance teams manage daily operations from the comfort of their smartphones. It also uses machine learning to create financial-scenario forecasting.
These are just two ways in which AI is already being used in finance, but we are likely going to see many more examples of new ways it can be used in the near future. AI has been around for a while, but it’s still a fairly new technology that has much more room for improvement.
The pros of using AI in finance
We’ve already looked at some of the ways some companies are using artificial intelligence, but what are some of the pros companies can expect by using it? Here is a short list of some of the benefits that can be gained by using AI.
Productivity – AI has proven to be extremely productive by those who are already using it. This extends beyond the financial industry and can be seen just about everywhere it’s being used. AI is able to work as often as necessary. This alone is already a reason for it to have the potential to be very productive.
Increased Efficiency – AI has also proven to be more productive than its human counterparts in many different scenarios. Through machine learning, AI is able to learn the most effective ways of completing the tasks assigned to it. This is why you see examples of people who are masters of their craft being beaten by AI all the time.
Accessibility – While it still depends on how it’s implemented; AI can make certain financial processes more accessible. AI’s digital nature allows for it to be accessible to many more people than in might not have been before.
The cons of using AI in finance
No technology is perfect, and AI is certainly no exception to this rule. Now that we’ve looked at some of the benefits AI can bring to finance, it’s only natural that we look at some of the downsides to the technology as well.
Replacing Humans – One of the first arguments people have against the use of AI is that it is going to replace actual people and cause job loss. This is a genuine concern that extends to just about every field that uses AI. People working in the financial field are becoming more likely to potentially have their jobs outdone by robots.
Mystery – There is a bit of mystery that comes with the use of AI by anyone who isn’t the developer. AI isn’t an easy technology to program, and it requires a great deal of skill for one to get the algorithms just right. This means that whoever develops the AI is the one who will have the most understanding of how it works. For the financial industry, this can prove to be a bit of a security concern, so extra steps will have to be taken to ensure the technology is under control.
Risk of Overdependence – Another issue that might come with the use of AI is that it might end up working too well. This could lead to overdependence, and in the financial industry this could quickly prove to be a big issue. If a company uses a specific AI provider for example and this provider were to get compromised, there wouldn’t be much they could do if they relied on it for the majority of their services.
These three examples go to show that while AI is a great technology that will undoubtedly transform the financial industry, it’s important to take the necessary steps that make using the technology as safe as possible.
How to prepare
Now that we’ve learned of how it’s essentially inevitable that AI will be used widely in the financial industry, what are some things we should do to prepare? One way to prepare is to start learning how the technology works. This doesn’t mean you need to start learning how to code AI, but having a simple understanding of the technology can be very helpful. By understanding how the technology works, you’ll have a head start on it and may even already begin using it to assist you in your current work. Experts believe that by 2026, not having digital knowledge of AI will drive away about half of finance leaders. Now it is more important than ever to be as tech savvy as possible.
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