Potential benefits of artificial intelligence ( AI ) in the financial market.

 

Is AI making inroads into the finance sector by displacing humans? Artificial intelligence (AI) is a science and engineering field which focuses on the computational analysis of intelligent behaviour and the ensuing development of intelligent machines (Kayid 2020). In the financial services sector, machine learning and artificial intelligence (AI) are being quickly adopted for a variety of applications. As a result, it's crucial to start thinking about how such uses can affect financial stability (board, 2017). Because financial applications of this technology are in a young and fast developing stage, with little availability of usage data, any analysis must inevitably be preliminary, and changes in this area should be carefully watched. Especially, after the COVID-19 pandemic which has hastened and intensified the drive toward digitalization, including the use of AI. Hence, it has been observed that potential benefits have been seen in almost all financial segments including banking, investment, and asset management.

AI has shown a huge improvement in fraud detection and uncovering abnormal behaviour to lower financial crime. Furthermore, it showed that larger benefits also come with greater risks and obstacles with uses of AI like Transparency, responsibility, and adherence. Henceforth, there are already several "use cases" for AI and machine learning. The adoption of these use cases has been influenced by both demand and supply variables, including profitability requirements, business competitiveness, and regulatory requirements, as well as technology advancements, the availability of financial sector data, and infrastructure. Several examples of current and future applications for AI and machine learning

In addition to helping corporate treasurers, accountants, and investors pursue long-term growth, AI may also lessen financial crime by improving fraud detection and spotting anomalous conduct. furthermore, The COVID-19 catastrophe has accelerated and heightened the digitalization trend, including the application of AI, which was already being seen before the pandemic. Growing AI usage is now achievable thanks to the wealth of data and processing power available.

 Therefore, growing AI usage is visible in domains like;

Asset management; By enabling analysts to quickly and accurately study precise investing insights, artificial intelligence is revolutionising every business, including asset management Asset management companies employ AI to mine structured and unstructured data for investment research and analysis. (RecoSense, 2021) By drawing important conclusions, producing summaries, and developing actionable steps from data, analysts can use AI to make smart investing decisions. Through big data analytics, AI benefits the front, middle, and back offices of the Data Asset Management sectors.

Credit intermediation; Customer-facing applications that could improve financial inclusion by increasing access to credit and other financial services by evaluating credit quality or pricing insurance policies using machine learning algorithms, and AI developments in banks to manage compliance and risk which are Already used in fraud detection, capital optimization, and portfolio management are handled by AI solutions (Hosanagar).

Algo trading; AI creates an advantage for everyone, not just companies, in financial trading by mining crucial data and providing affordable, easily accessible instruments. AI-driven investment judgments will be rational, precise, and impartial. AI will be included in the next generation of trading algorithms, enabling them to gain knowledge from the trading account's thousands of historical orders. Machine learning techniques are used to accomplish this by identifying patterns in the data and making predictions.

 Conclusion

This covid 19 pandemic lead to the progressive use of AI in the financial sector which results in positive and negative effects on the financial sector with benefits like showing massive growth in financial segments like business accountants, analysts, treasurers, and investors toward the case of long-term growth whereas  Moreover, the potential benefits associated with AI in the financial sector and the firm challenges that should predictable and managed accordingly, However, the research on AI in finance is still an under-researched area with significant potential to advance understanding of this goal.