(source: Unsplash)
"Artificial intelligence is everywhere," we learn from the media, but is it actually everywhere? I get this question in my lectures practically all the time. For this reason, I decided to start a new blog series called "Applied Artificial Intelligence". In this series, I will show you industry by industry how artificial intelligence is already being used today. Let's get to it, starting with finance.
Fraud detection
Artificial intelligence can effectively detect fraud, such as misuse of your credit card. It records every card transaction and starts to build a payment profile about you based on these transactions. It knows when, where and how you use your payment card. Subsequently, if there is a transaction that is too far out of line with how you normally use your card, it will block it. Of course, this precautionary blocking can also be wrong, for example, if you have gone on an exotic holiday to Zanzibar and no other transactions indicate this. However, by simply contacting the bank you can explain the situation and use the card afterward in Zanzibar. As they say, better to hamstring than to ban.
Credit risk assessment
Financial institutions that lend money need to closely consider to whom they provide loans. It can easily happen that instead of the small percentage the client was supposed to pay them in interest, they could be a hundred percent in the red if the client is unable to repay the loan. For this reason, a credit risk assessment occurs for each client before a loan is given. Artificial intelligence can help a lot by identifying correlations between the client's parameters and their ability to repay the loan based on information from other clients. For example, it has been found that people who always ensure that their mobile phone has a charged battery have a higher ability to repay a loan than those who let it run out completely. These types of correlations would go unnoticed without the help of artificial intelligence.
Client segmentation
Artificial intelligence can effectively divide financial clients into groups, called client segmentation. Each group can then be treated individually and offered tailored financial services. Without segmentation, everyone would be treated in the same way, which would significantly reduce the efficiency and usefulness of the service for the customer.
Robo-adviser
Private banking is currently focused on more creditworthy clients. Each private banking client must be treated individually by the financial institution. It is financially and human resource-intensive and therefore only worthwhile for more affluent clients. Artificial intelligence changes this. It makes it possible to approach each customer individually without increased demands on human resources. The customer is assigned a robo-adviser who will continuously inform them about the state of their assets and advise them in a similar way to what real advisers have done up until now.
Martin Spano is the author of Artificial Intelligence in a Nutshell and the most-followed informatician in Slovakia.
