Implementation of Artificial Intelligence in the Financial Sector
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Implementation of Artificial Intelligence in the Financial Sector

By Capital Markets CIO Outlook | Wednesday, February 06, 2019

Artificial intelligence (AI) is a widely used technology in multiple sectors. It also has various uses in the financial space such as fraud detection, risk-reward analysis, and advisory services. This transformative technology can also be used in exchange-traded funds (ETFs). Experts believe that the impact of AI on the investing sector will be the same as the impact of technology in the last decade. There are two ways AI can impact ETFs — the first being the innovations by tech giants like Google and Amazon and the second one being the implementation of AI in daily activities concerning portfolio management.

The financial industry cannot use AI optimally if they are stuck to the old tried-and-true ways. Adopting this technology will be more of an evolution rather than revolution. Investors can use AI tools and their capabilities in their research and find out new opportunities. Portfolio managers and advisors use financial products incorporated with AI technology to gain insights from complex data to make better decisions. These tools exhibit the power of systematic investing.

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Portfolio managers and investors can achieve greater efficiency by expediting the investment decision-making process. One area witnessing innovation is machine learning. It is learning the investment process of humans, their habits and changes them according to need. This helps in removing investment biases the stop the investor from making better decisions. The idea behind this investment process is systemizing it and taking the human emotion aspect out of the day-to-day decision-making process.

Large financial institutions have witnessed the benefits of AI after implementing it in their processes. One of the methods is through their quantitative and arbitrage teams that make sense of heaps of data and find opportunities for mergers and acquisitions. These financial institutions benefit from AI in their broader asset management areas. In its entirety, these big financial institutions and the financial sector as a whole are just scratching the surface of AI. As technology develops, mass adoption is possible.    

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