The ever-evolving financial sector has been seemingly attracting cutting-edge technology over the last few years, with blockchain technology and digit
The ever-evolving financial sector has been seemingly attracting cutting-edge technology over the last few years, with blockchain technology and digital currencies trying to help traditional finance evolve for over a decade. Now, artificial intelligence (AI) is bringing in new tools.
AI tools like ChatGPT and Bing Chat have shown an impressive capability to help boost efficiency, to the point 7,800 jobs at IBM are at risk of being replaced by AI within years, according to the company’s CEO. This technology manages to boost efficiency by being able to churn through colossal data sets in little time and bring in valuable insights that humans would take hours or days to recover.
Machine learning, a subset of AI that helps computer systems learn from data and improve in a system that mimics human decision-making, has been in use for years by several high-profile financial institutions that are harnessing the power of AI.
In its 2022 annual report, trading platform Robinhood noted its machine learning models are “highly advanced and contribute to multiple capabilities across our business.”
Earlier this month, major cryptocurrency exchange Crypto.com announced the launch of “Amy,” a generative AI user assistant built to inform users about the crypto industry. Similarly, Binance launched an AI-powered nonfungible token (NFT) generator that minted over 10,000 tokens in less than three hours.
While these developments are exciting, AI-powered tools may not yet be ready for a retail audience, as they cannot fully support an individual during financially challenging times. On top of that, algorithmic bias is a legitimate concern that has been raised by various experts, as AI may unintentionally favor or disadvantage potential ideas based on bias carried from its model.
AI’s effects on the retail finance sector
Some basic AI financial tools are already being used in the retail finance sector, including the above-mentioned AI-powered NFT generator Binance launched and Crypto.com’s Amy chatbot.
Other tools meant to scrape financial social media for sentiment indicators and trends have also been launched, as have tools made to simplify analyses of financial reports.
Speaking to Cointelegraph, Robert Quartly-Janeiro, chief strategy officer of cryptocurrency exchange Bitrue, said that new AI tools are “part of the future far beyond” its current uses. He added that businesses will use these tools if they save money, although customers “prefer to deal with humans, be it in-branch, online or on the phone.”
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Asked about the potential for AI to transform the retail finance sector in the next few years, Quartly-Janeiro said he “hopes it doesn’t,” aside from creating “fairer lending decisions, more open-mindedness on consumer credit to increase access to finance, and better risk management parameters.”
He added that consumers and the billions of decisions they make “drive economies and their growth,” cautioning:
“If you replace humans on a large scale with a machine that doesn’t buy, sell, invest, lend, borrow, then you have a serious problem on your hands; temporary profitability isn’t worth the risk of mass employment displacement.”
Chris Ainsworth, CEO of investment service Pave Finance, which uses AI to monitor market conditions and personalize portfolios, told Cointelegraph he does not believe AI financial tools are currently ready to be used in the retail sector without oversight.
According to him, current AI tools can “deviate from their intent fairly quickly,” and it will “take much longer than people think to fully deploy AI without oversight.” Ainsworth added that oversight is needed to “ensure models are adjusting properly, given volatility, correlations and the dynamics of markets changing quickly.”
He said that, in the future, AI tools will help drive down costs for the retail finance sector, although without proper oversight AI-driven models will not account for markets that can be driven by human emotion.
Ahmed Ismail, CEO and founder of AI-powered crypto liquidity aggregator Fluid, told Cointelegraph that AI tools are “mature enough to assess and manage risk, detect and prevent fraud, make effective credit and trading decisions, offer round-the-clock interaction and communication services, automate recurrent processes and reduce the scope of human error.”
Ismail added there’s nevertheless always a chance to improve, especially when it comes to preventing cyberattacks and safeguarding private data. Per his words, AI will play a transformative role in shaping the retail finance industry and will “shift paradigms” in trading, personalized banking, underwriting, financial advisory and more.
According to Ismail, numbers suggest that more than half of financial organizations with over 5,000 employees have already adopted AI, citing Bank of America’s chatbot Erica and…
cointelegraph.com