Digital Business And New Technologies Assignment Sample

Introduction Of Digital Business And New Technologies

Section 1

Importance of Artificial Intelligence in the Financial Sector

The topic of this report is quite relevant because it will discuss the importance of Artificial Intelligence in finance industry for an effective decisional making approach. It is found in recent periods there is great importance of Artificial intelligence in every sector all over the world and this is not different for the financial sector. Additionally, there is a huge scope for Artificial Intelligence in upcoming years. Concerning this, it is reported that after post-pandemic there is a huge demand for technologies and innovation, so this topic will focus on explaining importance of Artificial Intelligence in the finance sector for effective decision-making. Moreover, this topic is quite a rationale, because, in today's competitive market, no professional sector will going to survive without the implementation of technologies regarding decision-making.

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This topic is also rationale because it will discuss the way the financial sector reduces its overhead cost, effective allocation of budget and utilisation of resources with the help of Artificial Intelligence (AI). It is found that discussion will be quite a rationale for further elaboration of the importance of AI, as it is reported that AI can rapidly analyze huge volumes of data towards identifying trends along with helping in forecasting future performance. Therefore, selection of this topic is quite feasible as from the above discussion it can be concluded that AI fosters effective decisional making approaches for financial sector.

Discussion on Artificial Intelligence Concerning Financial Sector

Under this section, a discussion will be on Artificial intelligence by elaborating on its chief components and aspects in developing the professionalism of the world. AI is considered a simulation of human intelligence approaches with help of machines such as computer systems. Therefore, main applications of Artificial Intelligence consist of natural language processing, machine vision along with expert systems. A computer system is a main highlight feature of AI, which helps in increasing the effectiveness of financial sector as systems are highly demanded for this sector. Concerning decision-making, it is found that AI can significantly make rapid decisions, which is quite a rationale one and it rectifies human errors if any.

For instance, in financial sector mammoth tasks are blessed for this sector, which contains huge errors and is required to get rectified. Therefore, errors mainly occur from human activities regarding handling journals and creating financial statements for the enterprise, which consists ample of errors and it's quite usual because humans can't rectify all the mistakes. Keeping this in mind AI is a blessed tool for this sector as it helps in making effective future decisions for financial enterprises. For instance, it is quite natural for this sector to make effective decisions for improving productivity. Therefore, algorithms and AI models are considered workhorses regarding decision-making. Additionally, this information is then utilised towards providing forecasts along with interpretations, which assist decision-making.

Additionally, AI is quite significant as it as its corporate finance by offering competent predicting along with assessing losses. Therefore, for organisations that are looking towards increasing value, AI can be the best option as it will assist in improving loan writing along with minimising financial risk, which automatically improves the decision-making policy of this sector. Along with these, AI also helps in proving financial assistance, such as in case of underwriting shares and debentures, allocating resources, database management, and allocating resources such as cost and budget, which are quite relevant for effective decision making.

Uses of Artificial Intelligence in the Finance Industry

Artificial Intelligence is significantly influencing this sector regarding innumerable benefits. This is all about enhancement of financial services along with improving all the relevant regulatory compliance. This section primarily argues the best possible way towards encouraging a sustainable future regarding innovation of AI mainly in financial sector. Moreover, it is for supporting a “proactive regulatory approach” before a financial issue takes place (Lui and Lamb, 2018). Therefore, utilisation of AI has developed in financial sector in several regions such as compliance, cyber security, investment and trading decisions along with credit and lending assessments. This innovation also gets utilised for “fraud and anti-money laundering (AML) decisions”.

Figure 1: Uses of AI in the financial sector

(Source: Self-created)

It is found that financial institutions often show interest in utilising AI for determining lending risks regarding a lending decision. AI assists financial institutions in assessing the creditworthiness primarily of applicants over a wide range of services. Artificial intelligence also provides investment and trading advice to financial sector. Concerning this financial institution makes utilization of AI towards making investment and trading decisions and predictions. Additionally, AI also provides great customer services for an enterprise and it is found that financial sectors are quite becoming customer-centric with assistance of Artificial Intelligence (Truby et al. 2020). For instance, financial sector is utilising AI for creating a great cutler experience, which is minimal sterile, highly personal and engaging. For example, several financial institutions such as Lloyds Banking Group are utilising “AI chat-bots” towards assist online customers regarding their queries along with responding to simple requests.

From the above discussion, it is concluded that AI offers wide scope to financial sector and not only for effective decision-making approach towards trading and investment but also delivers huge benefits in other segments of the financial sector too.

Effectiveness of Artificial Intelligence in the Finance Industry

This section is going to discuss effectiveness of AI in financial sector. Concerning effectiveness, it is found that an AI system is considered something that primarily learns from certain data that this tool has collected. Moreover, AI is an interdisciplinary field, which is primarily designated as one of a strategic region and is also considered an important driver for developing an economy. Due to the competitive nature of AI systems along with its digitalisation tactics and “smarter with analytics”, a financial institution is considered an early adopter of Artificial Intelligence (Goli?, 2019). It also significantly expects many benefits regarding its applications, which is one of the abilities towards providing effective strategic decision approaching a financial institution in shooter period along with ensuring lower cost.

Section 2

Implications of Artificial Intelligence in the Financial Sector

This section will be discussed with the help of “diffusion of innovation theory”, and utilisation of this theory is quite relevant because topic is all about technologies and their impact on professional sector such as in financial sector. This theory fosters effective strategies for business enterprises for increasing productivity of a business. Most importantly diffusion of innovation theory is quite relevant because it deals with innovation and in this task innovation in Artificial Intelligence (AI). Innovation in this task is introduction of Artificial Intelligence in the financial sector and the way this sector can improve its decision-making approach (Bredt, 2019). It is understood that AI is significantly providing a positive basis exclusively for “future technological innovation”. Therefore, financial sector can get transformed by Artificial Intelligence, as this tool will offer ample opportunity to this sector such as tailor-made services, reduction of cost along with establishment of brand new business models.

On another hand, theory significantly describes multiple patterns along with speeding up effective practices, and ideas via population. The main player of this theory are early adopters along with innovation and here in this task, the early adopters are financial sector and innovation is introduction of Artificial Intelligence (AI) (Murugesan and Manohar, 2019). Therefore, by leveraging Artificial Intelligence, it is quite feasible for financial sector to get equipped towards a transformed decision-making approach (corporatefinanceinstitute, 2023). For instance, decision-making process is required to be highly accurate, effective and successful. Furthermore, it is also reported that several financial institutions implement risks regarding underwriting decisions and allocation of capital. Therefore, it is important to foster AI in decision-making processes. Most importantly, Chatbot and robots are quite sophisticated and AI is significantly popular in financial sector. This tool has the ability for providing its customers with efficient, cheap and personalised services. Therefore, identification of such a tool is quite necessary for financial institutions concerning improving their business productivity. Financial sector is already making utilisation of AI for automating compliance efforts. Therefore, this is another reason that this tool is quite effective and is significantly essential for a professional sector like finance to adapt this tool as soon as possible. In addition, it is fostering other innovative strategies or compliance such as “RegTech compliance-assistive technologies”, which are significantly utilised such as block chain and smart contracts (Truby et al. 2020). Therefore, idea of Artificial Intelligence is “self-driving finance”, which significantly automates multiple roles regarding financial advisors, which is a kind of service that several financial sectors have significantly rolled out. It is also reported that customers from many jurisdictions significantly engage themselves with “AI agents”, that can assist in personalise, compare along with recommending financial services and products.

Figure 2: Positive Impacts of AI

(Source: Inspired by Brown et al. 2020)

For the above discussion, it is found that financial sector can effectively implement AI systems for improving experience of clients. Therefore, financial sector makes utilisation of AI towards improving experience of client in several ways such as utilising Chatbots for interacting with clients, personalisation of financial services and many more (Shum et al. 2018). This sector significantly understood the implications of AI in its workplace and they do it by enhancing clients' experience, minimization of costs, financial planning and analysis, increasing revenue and sales and many more (Brown et al. 2020). Financial companies like Fintech are significantly turning themselves towards Artificial Intelligence (AI) for many purposes. Firstly, AI will assist them in shifting huge amounts of data more rapidly and is quite efficient than humans (Mhlanga, 2021). This is quite essential because financial organisations like Fintech often require taking effective decisions, which are based on consistent altering and evolving data.

Secondly, AI assists financial institutions like Fintech towards personalizing their services for every customer. Therefore, by understanding every customer's unique preferences and needs financial institutions can deliver a higher customized experience, which would likely lead towards loyalty and customer satisfaction (Ofori et al. 2021). Third, a function of AI systems primarily in “Financial Service Industry: can assist them in staying ahead of cut-throat competition. Therefore, as more companies make entry into the Fintech space, those might utilise AI towards gaining a competitive edge, which is one that specifically succeeds in the long run (Agidi, 2019). For instance, AI systems can offer multiple benefits to businesses, especially in financial sector, that consist of increased efficiency, improved decision making along with enhancing security.

The emergence of brand-new Organizations and threats to old organizations regarding implementation of AI system

Fintech companies such as Revoult, Atom Bank, Monzo and many more have effectively made utilisation of AI, especially for their decision-making approach. The company makes utilisation of technology such as Chatbot for handling its customer service inquiries, which primarily frees human employees towards focusing on a more rigid task (Rabbani et al. 2020). It is found that since the Covid-19 pandemic many organizations have dissolved and some organizations' survived too due to the effective implementation of technologies such as Block Chain and AI. Concerning this it is reported that global Artificial Intelligence primarily in the market of Fintech has significantly generated whopping revenue of approximately $7, 703 million in 2020. Most importantly, it is expected to get advance a CAGR of approximately 19.9%, especially during 2020-2030 (market-research, 2023). Important factors assist growth of market, which consists of companies primarily focusing on reduction of cost along with improvement of efficiency and AI technologies all over the financial institution.

Research primarily indicates that approximately 51% of Fortune 500 companies have gone bankrupt or dissolved due to a lack of innovative strategies such as digital disruption. Many companies suffer huge business losses along with declination in productivity and such losses are attributed towards a lack of investment in research and development program (Monkiewicz and Monkiewicz, 2022). One of the reasons that such old companies get dissolved is due to missing components, which is a larger category primarily under the “component segment of AI” mainly in Fintech industry. For instance, it is quite significant for every enterprise to adopt an AI system in its business palace.

References:

• Agidi, R.C., 2019. Artificial intelligence in Nigeria financial sector. International Journal of Electronics and Information Engineering, 11(1), pp.40-47.
• Bredt, S., 2019. Artificial Intelligence (AI) in the financial sector—Potential and public strategies. Frontiers in Artificial Intelligence, 2, p.16.
• Brown, R., Truby, J. and Dahdal, A.M., 2020. Banking on AI: mandating a proactive approach to AI regulation in the financial sector.
• corporatefinanceinstitute , (2023), diffusion-of-innovation , Available at: https://corporatefinanceinstitute.com/resources/economics/diffusion-of-innovation [Accessed on: 4th May, 2023]
• Goli?, Z., 2019. Finance and artificial intelligence: The fifth industrial revolution and its impact on the financial sector. Zbornik radova Ekonomskog fakulteta u Isto?nom Sarajevu, (19), pp.67-81.
• Lui, A. and Lamb, G.W., 2018. Artificial intelligence and augmented intelligence collaboration: regaining trust and confidence in the financial sector. Information & Communications Technology Law, 27(3), pp.267-283.
• Mhlanga, D., 2021. Artificial intelligence in the industry 4.0, and its impact on poverty, innovation, infrastructure development, and the sustainable development goals: Lessons from emerging economies?. Sustainability, 13(11), p.5788.
• Monkiewicz, J. and Monkiewicz, M., 2022. Financial Sector Supervision in Digital Age: Transformation in Progress. Foundations of Management, 14(1), pp.25-36.
• Murugesan, R. and Manohar, V., 2019. AI in Financial Sector–A Driver to Financial Literacy. Shanlax International Journal of Commerce, 7(3), pp.66-70.
• Ofori, I.K., Quaidoo, C. and Ofori, P.E., 2021. What drives financial sector development in Africa? Insights from machine learning. Applied Artificial Intelligence, 35(15), pp.2124-2156.
• psmarketresearch , (2023), market-analysis , Available at: https://www.psmarketresearch.com/market-analysis/ai-in-fintech-market#:~:text=The%20global%20AI%20in%20fintech,19.8%25%20during%202020%E2%80%932030. [Accessed on: 4th May, 2023]
• Rabbani, M.R., Khan, S. and Thalassinos, E.I., 2020. FinTech, blockchain and Islamic finance: An extensive literature review.
• Shum, H.Y., He, X.D. and Li, D., 2018. From Eliza to XiaoIce: challenges and opportunities with social chatbots. Frontiers of Information Technology & Electronic Engineering, 19, pp.10-26.
• Truby, J., Brown, R. and Dahdal, A., 2020. Banking on AI: mandating a proactive approach to AI regulation in the financial sector. Law and Financial Markets Review, 14(2), pp.110-120.
• Truby, J., Brown, R. and Dahdal, A., 2020. Banking on AI: mandating a proactive approach to AI regulation in the financial sector. Law and Financial Markets Review, 14(2), pp.110-120.