By Chrisleen Herard
Special to the AFRO
As the finance world takes hold of artificial intelligence, the question arises of how it will continue to influence an industry that manages money across the globe.
The idea of artificial intelligence (AI) came from the pages of a children’s book and a German novel from the 1900s. Tin Man’s quest for a heart in the classic “The Wizard of Oz” story and a humanoid robot named Maria in “Metropolis” were early depictions of what AI could be–machines that were able to carry out the human functions of thinking and problem solving.
Soon after, rooms full of scientists, mathematics and philosophers challenged the prospect of AI until it made its way from theory to near omnipresence, being utilized by millions of users in products such as digital assistant software to self-driving cars.
“The beauty about AI is it will make our lives more efficient,” said David West, an AI instructor at School at Night, which is a program administered by The Black upStart – a national training initiative serving African-American innovators interested in starting successful and scaling small businesses. “It’ll allow us
to streamline things and it’ll allow us to automate things that, in all this time, were not able to be automated.”
He added, “I think we’re seeing it in real time. Amongst many things, we’re seeing AI disrupt all industries, causing them to evolve.” The financial industry is just one of many that have made use of AI to conduct business more efficiently.
Financial institutions are utilizing AI to perform functions such as looking up accounts and banking information and identifying fraudulent credit charges based on the amount or the transaction’s location. AI can also assist different banks with money management, market research and credit background
checks of potential borrowers. “AI has many uses in the financial industry,” Amit Umre, an AI project manager, told the AFRO. “Some of the key current areas of where AI is or can be used are risk management, algorithmic trading, fraud detection, customer profiling and forecasting.”
“The explosion of AI is a game-changer for the financial industry,” said Almendra Olmos, an executive specializing in product management and digital transformation. “It’s not just about automating routine tasks; it’s about fundamentally transforming how we understand risk, customer behavior and even market movements. From automating customer service to providing real-time analytics and fraud detection, AI is becoming an integral part of the financial ecosystem.”
For reasons such as these, AI in the finance world has been on the rise, according to Global Market Insights. Investments made to the financial technology sector, or fintech sector, have increased by over 68 percent from 2020 to 2021. Additionally, in the banking, financial services and insurance market, AI was valued at over $20 billion in 2022 and is expected to reach a compound annual growth rate of 20 percent in 2023, which will increase both investments and AI implementations in the finance industry.
Despite growing reliance on AI, however, some financial businesses remain wary of the consequences of having it process a monumental amount of sensitive banking information.
“The benefits are numerous: efficiency, cost reduction, enhanced customer experience and fraud detection, to name a few,” Olmos said. “However, the risks are not to be taken lightly. Data privacy is a significant concern, and there’s also the issue of algorithmic bias, which can lead to unfair practices.”
“Key risks of using AI in the industry are data privacy issues, lack of decision explainability and bias,” Umre said. “The speed and efficiency brought about by AI will keep (the financial industry) competitive. At the same time, if clients lose trust in the ability of companies to handle their personal data, it can be very damaging to the business and industry as a whole.”
A 2021 study conducted by the International Monetary Fund concluded that using AI poses potential threats to cybersecurity, which can allow attackers to manipulate data or access private documentation. There are also risks of embedded bias in financial AI software that may discriminate against certain individuals or groups and cause differentiation in pricing and service quality.
“If you’re not familiar with Midjourney, it’s a software that we teach in School at Night,” West said. “What’s interesting about Midjourney is that if you try to generate a picture of a Black person with kinky hair and use keywords like ‘kinky’ or ‘dreadlocks,’ sometimes they might ban you.
“So the best thing we can do is familiarize ourselves with these tools. It’s going to improve in time, but I think just giving people exposure to these platforms is the best way to do it.”
“The risk of embedded bias in AI systems is a real concern. This can lead to discriminatory practices that can affect pricing, loan approvals and even customer service,” Olmos said. “To avoid this, it’s crucial for financial institutions to use diverse training data and to have regular audits for biases in AI systems.
Business leaders, ethicists and social scientists should be part of the AI development process to ensure ethical considerations are not overlooked.”
While it is advised that financial institutions should adapt and advance with both the advantages and risks that come with operating AI, experts in the field are confident that the booming technology will remain in the economic sector’s future.
“I believe that AI is no longer optional for financial institutions–it’s a must,” Olmos said. “The financial landscape is becoming increasingly complex, and traditional methods are no longer sufficient to meet the evolving needs of customers and the market.
“However, it’s crucial to note that adopting AI comes with its own set of responsibilities, including ethical considerations and data security. … AI can revolutionize the financial industry, and it must be done in a way that is secure, fair, and transparent.”
“We’re at a cutting edge moment,” West added. “A lot of people are comparing this – what’s happening right now with AI – to the Internet first being introduced. … We, as consumers, have to see that and understand that we have to adapt or we will get left behind.”