Artificial Intelligence (AI) took the world by storm and quickly became a breathtaking technological advance. Remember how the Jetsons aimed to predict machines solving daily problems? Think of how the different branches of AI help users and companies in a myriad of industries!
The age of Digital Transformation has placed huge importance on users’ autonomy regarding their daily operations, from retail to EdTech or online education. Yet, there is still an intersection that, while explored, still holds huge potential: the confluence of Generative AI and the finance industry. From a business standpoint, how can tech-driven, disruptive firms in the finance sector harness GenAI? We’ll uncover it today!
What is GenAI?
Also called GenAI, Generative AI is the broad term used to define any type of Artificial Intelligence (AI) that is able to learn patterns from training data to create new outputs based on the same statical properties.
Generative AI models rely on prompts and transfer learning to make more efficient content generation. In fact, you may have already interacted with examples of GenAI, as it encloses formats like text, imagery, and audio, meaning it includes programs and platforms like Midjourney, Sora, and the newly launched LumaLabs, among others.
While often referred to as something new, GenAI has a long history, starting with chatbots in the 60’s. Yet, until the rise of Generative Adversarial Networks (GANs) and several other Machine Learning algorithms over the last decade, Generative AI models were often built and developed considering only specific applications.
A great example of this scope is Google’s DeepDream, which, while built to produce image-based visual effects, was not originally able to replicate its processing structure to other data types.
Currently, many Generative AI models have become multimodal to keep up with more demanding times. As a result, a single model can now handle different data prompts and rely on different data types to deliver convincing results. These outcomes can include, for instance, generating texts with different intents, answering questions comprehensively, describing images via text, and translating text data from one language to another.
What is Fintech?
An abbreviation of Financial Technology, Fintech refers to the use of technology to optimize and enhance financial operations, going from our well-used banking applications to more complex blockchain integrations.
The term first rose as a way to describe specifically financial institutions’ tech systems, like banks. Yet, over the last few years, Fintech's scope has extended to enclose all customer-oriented financial services.
We can see Financial Technology applied in a wide array of fields and industries today, such as retail e-commerce and fundraising. Likewise, the term also currently includes cryptocurrencies and other digital assets.
What is GenAI in Finance?
The Fintech industry has grown immensely in the last couple of years, but what competitive advantages does GenAI represent? Well, while Fintech is already a tech-driven field, there is an increasingly fast race for companies to adopt Generative AI.
A survey released by EY in Dec 2023 reveals that “77% of executives view GenAI as an overall benefit to the financial services industry in the next 5-10 years.” Likewise, EY states that almost 50% of interviewed executives stated data processing risk reduction as the main benefit GenAI can bring to the industry. Other reasons include hyper-personalized marketing (38%) and improved data management (37%).
However, the same survey states that, in terms of implementing GenAI in the finance sector, companies face several challenges, like lack of data infrastructure (40% of polled business leaders), lack of technology infrastructure (35%), and unclear governance framework (33%). So, how is GenAI used in Finance, and how can finance leaders and teams ensure they make the most out of it?
The applications of Generative AI in the financial sector seem endless! From anomaly detection to sentiment analysis, GenAI can customize products, enable transparency, and automate operations. How do these seemingly general applications work on Fintech? Let’s explore three main applications of GenAI in Finance:
1. Risk Assessment
A great example of the power of GenAI in finance is risk assessment. By harnessing Generative AI, banks can use Machine Learning models and algorithms to determine loan eligibility and further provide options based on financial transactions and credit history, along with other aspects.
A great example is JP Morgan Chase, one of the US’ largest banks, which blends Data Science and industry expertise to make more informed decisions on who to lend money to and under what conditions. The firm even has an AI Research Publications division to share its AI knowledge and application procedures.
2. Fraud Detection
GenAI can also enhance the financial sector by providing a robust framework for fraud detection. Specifically in credit card fraud, GenAI can analyze user patterns, such as behavior, location, and habits, to trigger alarms for fraudulent activities or if something doesn't seem right.
This procedure is particularly useful given the rise of e-commerce and online retail, giving companies strong safety-focused procedures and action courses. There have also been AI-driven efforts regarding the battle against money laundering, with a study from Ayasdi concluding that its GenAI-based solutions cut over 20% on investigative workload.
3. Cyberattack Prevention
While customer satisfaction in the finance sector is often associated with customized assistance, another key element to ensure long-term user loyalty is cyberattack prevention. Yet, according to several studies, over 70% of data breaches are human-made.
Generative AI has the power to analyze data patterns to alert companies of discrepancies so clients can rest assured not only of the safety of their data and assets but also of the quick course of action institutions can take if they detect unusual activity.
Benefits of GenAI in Finance
When discussing the benefits of GenAI in Finance, a great start is to discuss automation. Generative AI has the power to streamline and automate workflows independently and reliably to ease decision-making and upgrade service delivery.
In the priorly-named application regarding cybersecurity, GenAI can monitor and analyze data such as network traffic to continuously automate safety-driven measures. Likewise, the benefits can also be seen in Conversational AI and chatbots, where users can get answers in a user-friendly way at all times of the day.
What’s more, GenAI can also help companies achieve operational efficiency. Artificial Intelligence is key in reducing both data and document processing and its potential human-made mistakes.
While it’s always safe to pay attention to automated procedures, freeing team members from repetitive tasks leads to a more productive workforce. In fact, a study posted in March 2023 and made by students of MIT shows an increase of 37% in productivity of workers supporting their work with GenAI versus those who didn’t.
Efficiency can also be seen in both the speed and availability GenAI has to offer in finance. There’s no denying that AI is able to process information, find trends, and uncover data connections more quickly than humans.
As a result of harnessing this speed, companies can enhance faster data-driven decision-making in a wide range of tasks, from compliance management to risk modeling. Further, firms can gain a competitive advantage by presenting themselves as ever-available for users to complete finance-related routine tasks in as many scenarios as possible.
Conclusion
As you can see, the future of finance with GenAI holds great potential for users and businesses alike! For users, Generative Artificial Intelligence allows, among other benefits, customized, 24/7 interactions with products that solve everyday problems while also ensuring all procedures are being taken care of with cybersecurity as a priority. For firms, it guarantees smarter decision-making procedures to ensure streamlined, data-driven operations. Are you craving more info about GenAI for Finance? Register now for our webinar on Unlocking the Future of Finance with GenAI!
