The Future of Artificial Intelligence in Personal Finance
YouTube uses it to serve you more of the kind of videos you have watched in the past. Medium.com uses it to offer you articles based on your reading preference. Google uses it to suggest completion to your search terms. It’s known as machine learning – an application of Artificial Intelligence (AI) that is fast transforming the way we live.
From manufacturing to autonomous cars to smarter apps, the ability of software to progressively perform better at a specified task without further programming has found its way into a wide range of uses.
In finance, AI has been instrumental in the ongoing transformation of the industry. Banks have been harnessing the power of the ground-breaking technology to carry out some of its traditional functions. AI through Fintech is being used to automate processes, improve risk management, process credit, and optimize fraud prevention and detection strategies.
For individuals, Artificial intelligence is already being used in Personal Financial Management apps. However, it’s still at an infancy stage.
But experts say that the potentials for machine intervention in personal finance are huge: replacing human financial advisers with algorithm-driven chat-bots; completed automated investment services that can move your funds instantly through global markets in reaction to the current financial news; or the ability to access loans based on information you’ve been unknowingly sharing online.
In today’s world, where many people struggle to get a grip on their finances, using artificial intelligence in personal finance to analyze spending habits and provide tailored valuable advice can potentially transform lives and help place people on a solid financial base.
This is especially important in a place like America with its grim statistics: a national average savings rate of 5.5 percent; only 45 percent maintain a rainy day fund; and in fact, the average American would find it difficult to raise $1,000 in case of an emergency.
With artificial intelligence, you can begin to identify the points where your boat has begun to leak.
Based on that, several financial institutions, Fintech companies, and tech start-ups have cashed in on the idea and created financial apps and solutions that can help you manage your money better. Here are some ways artificial intelligence can help you avoid sinking.
AI can help you Save
It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you can keep it for
– Robert Kiyosaki
One practical application of Artificial intelligence is helping you save. There are several PFM (personal financial management) software that has been developed with the goal of helping you make better spending decisions.
- Wallet.AI: A San-Francisco based start-up which designs software to help people make better-informed decisions when out spending their money. Wallet.AI works by analyzing spending patterns based on data gathered from everyday activities: what you eat, where you shop, social media updates, and online purchases. While all this data gathering may be alarming to advocates of privacy, the start-up insists that it is a smarter way to organize your finances than using a piece of paper or a spreadsheet. Wallet.AI aims to keep an eye on the little decisions you make each day concerning spending and advice appropriately. It takes up ambient information when making those decisions and the context in which the decisions are made to teach you better ways of handling your finances.
- Acorns: A mobile app that links to your credit and debit cards and rounds up the value of every purchase you make, investing the extra or difference into a share portfolio. For instance, if you buy a pizza for $4.25, the app rounds it up to $5 and moves the difference of $0.75 to a share portfolio. Acorns app applies machine learning in its functions such as figuring out how financially savvy you are and classifying your spending habits. It then makes use of those insights to tailor advice that will assist you to reach your financial goals.
- Plum: An AI-powered savings assistant that deducts money from your income and places it in an interest-earning savings account. Plum makes use of algorithms that compares your income against your spending patterns, calculates how much is left over and transfers this amount into the savings account. It is said to save users an average of $200 without many being aware.
Once upon a time, if you were going to get a loan from me, I would have had to look at your file, and I would have to make a decision about whether you’re going to get a loan. Maybe we would meet and talk about it. There would be some level of human involvement and human interaction. Now, a lot of this is determined by an algorithm.
Artificial intelligence has been very useful to banks and lenders in loan underwriting and other aspects of loan processing and monitoring. Recently, there’s been an increase in the development of an AI-based platform that helps customers manage their debts.
The Credit Karma app lets you access your credit score and working with your credit profile, and it recommends the best loan products that will suit your needs. They get paid when your bank offers you the loan product they have recommended.
I’m not emotional about investments. Investing is something where you have to be purely rational and not let emotion affect your decision making – just the facts.
– Bill Ackman
Artificial Intelligence has also found use in helping people make better investment decisions.
Trade-Ideas is one of the leading software in this area. It uses AI to wangle tons of trading data to help individual investors, financial advisors, institutions, and hedge funds make the right investment decisions. Investment consultants say they use investment advice based on the analytical information from AI platforms like trade ideas to give their clients a distinct advantage in the stock markets.
Most of the concerns about the increasing role of Artificial intelligence in personal finance revolves around the loss of your privacy to third-party platforms. But you can’t afford to be in the back foot in a world that is rapidly embracing technology. So long as efforts are made to safeguard your information and data, giving up some of your personal space is a small price to pay for all the deep insight and assistance in your personal finance that Artificial Intelligence can offer.