Transforming Finances: Money Management with Artificial Intelligence
The infusion of Artificial Intelligence in the traditional methods of financing has changed the scenario of money management in every aspect. People generally consider Artificial Intelligence and advanced computers as synonyms but reality is different, rather machines can copy human behavior and intelligence. Artificial intelligence is a combination of all technologies that make machines typically perform human-related behavior and includes regular learning of copying human behavior, reasoning, and re-assessments.
The huge availability of various investment alternatives in the Indian market creates complex situations for investors while making investment decisions. Artificial intelligence uses its technology Machine learning to read past financial data, analyse, interpret, and help investors in arriving at final decision-making. The combination of finance and AI has transformed the field. AI technologies make money management simpler, more intelligent, and more effective. The world of financial management is changing rapidly, with everything from sophisticated investing platforms to automated budgeting software.
In this blog, let us discuss how artificial intelligence helps investors in making final investment decisions.
AI Assistance in Personal Finance Management
1- Automated Budgeting and Expense Tracking
AI is revolutionizing personal finance in two key areas: cost tracking and budgeting. Programs driven by artificial intelligence are able to classify expenses, assess users' spending patterns, and offer financial insights. These applications have the ability to automatically monitor transactions from numerous accounts and offer a thorough picture of an individual's financial situation.
Artificial intelligence offers personalized advice for making budget spending patterns and also to save using Machine learning algorithms, making the consumers highly informed about their spending and savings patterns.
2- Smart Investment Management
Artificial Intelligence through algorithmic trading, sentiment analysis, portfolio optimization, risk management, and personalized investment advice helps the retail investor in managing their investments.
Algorithm trading is a method in which investors use computer programs to automatically open and close deals with predefined rules. When the predefined rules are met, orders are immediately placed at a speed and frequency that is impossible for human traders. Algorithm trading is the most direct and highly used technique in investment management. Investors, especially traders use AI algorithms to evaluate big datasets that trade at high speeds, making trading on current market patterns and trends.
Sentiment analysis refers to identifying human psychology resulting in market movements, whether the sentiment is bullish (positively), bearish(negative), or neutral. Evaluating data helps to decode the sentiments and make better decisions. How the various factors like climatic conditions, geopolitical developments, and corporate news affect the psyche of individual human beings.
3- Improving Credit Score-
Earlier Credit Score models mostly rely on credit history for calculating credit scores, but individuals like young adults and immigrants having limited or no credit history are generally excluded while calculating credit history. On the other hand, AI Credit score models integrate data from all possible sources like social media activity, UPI payments, and online rental payments to identify a holistic view of individual financial behavior which helps in accessing and increasing respective individual’s credit scores. AI tools like Plat.AI, Tribe.AI, ZBrain, Credit Karma, and Experian Boost help in calculating real-time credit scores. Real-time data analytics keeps track of individuals’ financial behavior and regularly updates credit assessments which are reflected in their credit scores, which represent their existing financial situation.
Also, with the help of Predictive analysis, AI forecasts individual’s financial behavior based on their historical data. AI identifies the likelihood of individuals defaulting on loans or making timely payments, which makes the lenders informed about the credit scores of individuals.
AI Assistance in Banking and Financial Services
AI is making significant changes for both institutions as well as consumers in the banking and financial services industries that are extremely advantageous too.
1. Personalized Customer Service: -
By applying advanced data analytics and machine learning algorithms AI has improved customer services. Chatbots and virtual assistants driven by AI are revolutionizing consumer interactions with banks. These virtual assistants are available 24*7 and assist with a variety of tasks, such as in financial transfers and checking account balances. Offering prompt, dependable assistance, not only cuts down on wait times but also raises customer satisfaction. These chatbots are getting smarter and more effective over time as a result of interactions.
2. Easy and faster Loan approval process
With the help of Artificial Intelligence loan approval procedure has been made simplified and faster. Conventional loan approvals can be drawn out and difficult, frequently including a lot of paperwork and manual verifications. To evaluate creditworthiness more thoroughly and effectively, AI-driven systems can examine a range of data points, including income, spending trends, and credit history. In addition to lowering risk for lenders, this results in quicker loan approvals and a more streamlined consumer experience.
3. Personalised Financial Advice
AI tools like Mint, Personal Capital, Moneyfit, WiserAdvisor, Tendi, and Finchat.io can examine spending trends, saving patterns, long long-term financial goals and make recommendations for investments or budget enhancements based on a customer's financial objectives. By providing this degree of customisation, AI helps investors in making more informed and smarter decisions aligning with their personal needs and preferences.
Money management is changing as a result of artificial intelligence, which presents previously unheard-of possibilities for accuracy, efficiency, and customization. AI is changing the financial environment, from managing personal finances to providing more comprehensive banking and financial services. Even if there are obstacles to overcome, artificial intelligence (AI) in finance has a promising future and might lead to a more effective, efficient, and inclusive financial system. Adopting AI in money management aims to improve everyone's financial future, not merely make use of technology.
Mr. Aman Shukla
Assistant Professor
School of Management
SAGE University Bhopal