In April, a new report showed North American banks could use AI technology to save over $70 billion within the next three years. This is just one of the many reasons that financial institutions are investing more heavily in artificial intelligence.
It is easy to see why. Artificial intelligence is shaping the future of the global economy in significant ways. Moreover, the changes it is creating are more crucial than ever since the world is currently in the midst of one of the worst recessions in decades.
One of the problems with the recent economic setback is that many people struggle to access financial capital. Fortunately, new advances in artificial intelligence are helping improve this problem. This is one of the best ways AI is improving the financial sector.
AI helps consumers and businesses access financial capital more easily during the current recession
New advances in AI are going to be essential for people looking for personal loans. This is going to be especially important as the economy continues to experience stagflation.
Financial exclusion has been one of the consequences of the recent economic downturn. Many financial institutions have been forced to limit financing opportunities due to the ensuing credit crunch.
Unfortunately, many potentially creditworthy customers have been unnecessarily affected. In their attempt to be more cautious with lending decisions, financial institutions have implemented actuarial standards that deny funding to people that might be able to repay it.
Banks use AI to be more inclusive
Artificial intelligence technology offered promising opportunities to improve funding inclusion despite the ongoing economic challenges. For example, in April, the U.S. Chamber of Commerce held a seminar on AI applications that can help improve access to capital markets.
The keynote speakers pointed out that financial institutions are more willing to lend money to consumers and businesses after getting a better understanding of their spending and financial management habits. In addition, they are collecting more information on consumers to make better decisions about financing. Big data is unquestionably valuable to the financial sector.
Chris Cartwright, the president and CEO of Transunion, has pointed out that big data and artificial intelligence are helping level the playing field for consumers and organizations that have been denied financing in the past. They can get more meaningful insights by accessing other data points, such as rent history, driving records, and insurance payments.
AI leads to smart banking in cities
We have talked in detail about the sudden popularity of smart cities in recent years. Most of the discussions center around using smart technology to improve transportation and make buildings more efficiently run.
However, there are other important applications of artificial intelligence in smart cities. For example, one of the most important ways companies can use AI is by creating smart banking opportunities.
A recent symposium hosted in Korea talked about the benefits of using AI to make smart banking possible. One of the most significant opportunities is helping people use financial institutions without compromising their privacy. The CEO of one blockchain advisory group pointed out that 70% of the world does not trust their governments or banks, so this new banking approach will make things easier.
As more people take advantage of smart banking as an alternative to their traditional financial institutions, they will have an easier time qualifying for loans. Many of these people previously did not have any credit history due to their reluctance to use thanks. This change will help improve their access to financial capital.
AI creates opportunities with nontraditional lenders
Artificial intelligence is also helping consumers and businesses secure funding through nontraditional financial channels. A growing number of Fintech companies are making it easier for people to find lenders that will give them access to funding.
Many nontraditional lenders are able to provide loans that would otherwise be rejected because they have fewer expenses. However, they obviously couldn’t simply give loans to every person that applied. Therefore, they use sophisticated AI algorithms to assess the financial risks of potential borrowers. As a result, these fintech companies have found that AI has made their lending practices far more efficient and cost-effective.
As a result, many consumers have been able to get loans from them that they would not have received from traditional banks. This is helping improve financial inclusion.
Consumers and businesses should be optimistic about getting funding access during this recession as AI becomes more promising.
The recent economic downturn has put a damper on the economy. As a result, many consumers are frightened about their financial situations and seeking funding. Banks and other traditional financial institutions have been forced to taper back on financing opportunities.
However, they are coming up with new solutions. For example, artificial intelligence has made it easier to ensure consumers can get the financing they need. These changes should help make it easier to get loans or other capital.