The Role of AI in Finance

AI is already such a big part of our everyday lives. From helping us with homework to answering questions, its capabilities have continued to grow and become more powerful. Its uses are not limited to personal ones, though. AI is already beginning to reshape finance by automating tasks, uncovering insights, and strengthening risk management, to name a few. In this blog post, I will discuss how AI already impacts finance and where it could go from here.

The Current Impact of AI in Finance

AI’s early effects came from automating tedious tasks like email sorting and calendar suggestions. But now, it’s doing so much more than saving us some time.

Now, AI models analyze billions of transactions for fraud detection. Companies like IBM and AMEX have trained models to learn what fraudulent activity looks like, cutting false positives and allowing them to catch fraud much faster.

In traditional finance roles like investment banking, AI is helping banks identify acquisition targets and partnerships faster by scanning thousands of data points. It’s also being used to simulate multiple valuation scenarios. Analysts at places like Goldman Sachs are using AI to aid modeling for outcomes of M&A deals. Others, like JPM, are using predictive analytics to flag companies likely to seek capital or sell their assets. There have also been recent reports from the company that AI has vastly boosted their ability to provide advice and research to clients.

This isn’t all. There are so many other areas, like regulatory/compliance, risk monitoring, and client personalization, where AI impacts services.

What the Future Looks Like

The future of finance is already being shaped by the next wave of AI-driven innovation.

Imagine if you shop for a new laptop and at checkout, you’re offered an option that says you can pay for it through 3 payments with no interest and that you’re preapproved. This is called embedded AI. Platforms like Klarna are already trying to integrate this into e-commerce flows. AI agents will determine creditworthiness and approve microloans in real time. Embedded finance is projected to be $7.2 trillion in the market by 2030, so it’s no small project.

Also, AI-driven trading is becoming more popular and sophisticated. Reinforcement learning models (models that use trial-and-error to learn strategies based on whether they receive positive or negative outcomes) now power trading strategies of very high frequency, meaning they react in milliseconds. But there is some concern. Harvard researchers warned that these models could learn to manipulate prices without oversight. What this could mean for the market could be something to watch moving forward.

AI is also changing the reality of the jobs that are in demand. We could see routine analysis or research reports become automated in the future. Most of that data is public anyway, so the right AI model, which is trained appropriately, could easily do enough research and analysis to give us a good idea about companies. Within the past year, JP Morgan revealed an AI tool for research analyst tasks. There’s no telling how effective something like that could become in a few years.

AI is already such a big part of our everyday lives. From helping us with our homework to answering questions, it’s capabilities have continued to grow and become more powerful. Its uses are not limited to personal ones though. AI is already beginning to reshape finance by automating tasks, uncovering insights, and strengthening risk management, to name a few. In this blog post, I’m going to talk about how AI is already impacting finance and where it could go from here.

I would love to hear your thoughts in the comments! What did I miss and how do you feel about AI in finance/business?