Modern markets are fast-moving, complex networks with numerous participants carrying out various functions. Effective oversight supports strong, well-working markets. As a market regulator, BTC could leverage AI to:

• “Read” a complex marketplace and distinguish salient activity.
• Use data to develop market models and identify risk factors.
• Apply the models to conduct ongoing market and risk surveillance.
• Help identify market manipulation, abusive trading, and fraud.

Challenges

AI presents opportunity, but also certain risks. Addressing the challenges will facilitate AI’s ongoing growth and help enable its value to be fully realized.

• Operational Risk: To be effective, AI systems must operate as intended. What approaches can help ensure that they do?
• Economic Risk: AI systems have economic impact. How can less desirable impacts on workers or other aspects of the economy be mitigated?
• Trust: To provide value, AI systems interact with vast amounts of data, including personal information. What can be done to maintain public trust?
• Accountability: AI systems raise novel questions about accountability. If something goes awry, who is responsible and for what? Regarding data, what rules apply?
• Security Risk: AI systems are subject to various types of attack and must be resilient. What safeguards can mitigate this risk?

Responding to AI

While AI has the potential to enhance human capabilities and experiences, in their use of AI, financial market participants should work to ensure:

• AI systems are working as intended.
• AI systems are safe and do not generate or exacerbate systemic risk.
• AI systems serve the needs of all relevant stakeholders and operate fairly.
• AI systems protect privacy appropriately and as required. Further development of AI can benefit from collaboration and the open exchange of ideas between market participants, regulators, and other stakeholders. Key elements of a response include:
• Development Standards.
• Governance and Oversight.
• Security and Resiliency.

AI drives cost savings for investors by being more effective 

AI as a tool for humans has the potential to make the markets more efficient, tighten the bid-ask spread, decrease processing times for transactions, more accurately monitor systems and behavior, and provide business analysis that is based on a greater depth of data — all at a cost savings to investors. It has the potential to dramatically lower operating costs for a firm, thus lowering fees to consumers.

AI and machine-learning are essential for improving market surveillance, cyber security, and fraud detection

AI’s important potential applications in the cybersecurity sphere, both in designing and operating secure systems based on data, can supplement the time and attention of human experts. Automating market surveillance has the potential to yield greater security for financial transactions at decreased costs, as well as a more rapid response time.

AI and Credit Decisions

Artificial Intelligence provides a faster, more accurate assessment of a potential borrower, at less cost, and accounts for a wider variety of factors, which leads to a better-informed, data-backed decision. Credit scoring provided by AI is based on more complex and sophisticated rules compared to those used in traditional credit scoring systems. It helps lenders distinguish between high default risk applicants and those who are credit-worthy but lack an extensive credit history.

AI and Risk Management

It’s difficult to overestimate the impact of AI in financial services when it comes to risk management. Enormous processing power allows vast amounts of data to be handled in a short time, and cognitive computing helps to manage both structured and unstructured data, a task that would take far too much time for a human to do. Algorithms analyze the history of risk cases and identify early signs of potential future issues.

AI and Trading

Data-driven investments have been rising steadily over the last 5 years and closed in on a trillion dollars in 2018. It’s also called algorithmic, quantitative or high-frequency trading.

This kind of trading has been expanding rapidly across the world’s stock markets, and for good reason: artificial intelligence offers multiple significant benefits.

Intelligent Trading Systems monitor both structured (databases, spreadsheets, etc.) and unstructured (social media, news, etc.) data in a fraction of the time it would take for people to process it. And nowhere is the saying “time is money” truer than in trading: faster processing means faster decisions, which in turn mean faster transactions.

AI and Personalized Banking

Artificial intelligence truly shines when it comes to exploring new ways to provide additional benefits and comfort to individual users.

In the banking sector, AI powers the smart chatbots that provide clients with comprehensive self-help solutions while reducing the call-centers’ workload. Voice-controlled virtual assistants powered by smart tech like Amazon’s Alexa are also gaining traction fast, which is no surprise: boasting a self-education feature, they get smarter every day, so you should expect tremendous improvements here. Both tools can check balances, schedule payments, look up account activity and more.

AI and Personalized Banking

Artificial intelligence truly shines when it comes to exploring new ways to provide additional benefits and comfort to individual users.

In the banking sector, AI powers the smart chatbots that provide clients with comprehensive self-help solutions while reducing the call-centers’ workload. Voice-controlled virtual assistants powered by smart tech like Amazon’s Alexa are also gaining traction fast, which is no surprise: boasting a self-education feature, they get smarter every day, so you should expect tremendous improvements here. Both tools can check balances, schedule payments, look up account activity and more.

AI and Process Automation

Forward-thinking industry leaders look to robotic process automation when they want to cut operational costs and boost productivity.

Intelligent character recognition makes it possible to automate a variety of mundane, time-consuming tasks that used to take thousands of work hours and inflate payrolls. Artificial intelligence-enabled software verifies data and generates reports according to the given parameters, reviews documents, and extracts information from forms (applications, agreements, etc.).

Inclusion is an important factor to consider as AI evolves

From a workforce perspective, it seems inevitable that as society shifts toward greater automation that there will be a growth in jobs in the coding/technology industries. It is obligatory on the private sector, educators, and lawmakers to drive initiatives that attract diverse candidates to the workforce, so they too may benefit from the economic opportunities of AI and machine learning.

There are reasons for optimism that AI will enable financial institutions to broaden access to banking and credit to traditionally underserved communities. There are new innovative business models evolving using responsible innovation including alternative data to, for example, replace credit scores with other data points to give the unbanked or underbanked communities access to credit. Further, data science can enhance “getting to know you” customer experiences to serve a broader array of communities.

 

What to Expect in The Future From AI in the Financial Market

Predictions for the soon-to-come AI applications in financial services are a hot topic these days but one thing is for sure: AI is rapidly reshaping the business landscape of the financial industry.

There are high hopes for increased transactional and account security, especially as the adoption of blockchains and cryptocurrency expands. In turn, this might drastically reduce or eliminate transaction fees due to the lack of an intermediary.