Smart Finance and Smart AI for new financial services solutions

Smart Finance represents the evolution of financial services, driven by rapid advancements in digital technology. This article offers a glimpse into the future, exploring how AI's capabilities can enhance the intelligence of the financial services sector and the potential advantages for financial institutions.

AI, Machine Learning, and Generative AI in a Nutshell

Artificial Intelligence (AI) is a technology inspired by human cognition, encompassing processes like thinking, reasoning, and learning. It equips computers with capabilities resembling human functions, such as visual and auditory perception, memory recall, data analysis, inference, reasoning, and decision-making.

Machine Learning (ML) is a branch of AI that enables computers to learn from data, solve problems, and make predictions. The resulting model should be able to accurately handle new and unfamiliar data. At the present time, these systems have been widely spread implemented in almost every industry, such as sales forecasts, customer segmentation, algorithms to recommend products, movies or songs, systems to memorize voices and faces, while there are even forecasts of energy usage, and assessments of changing weather. Machine Learning is at the roots of AI technology currently in service such as Deep Learning and Natural Language Processing.

Generative AI is a subset of AI that stems from Machine Learning. Its primary purpose is to generate new datasets that resemble their training data. This synthesized data can manifest as text, images, videos, music, spoken words, programming code, financial records, and more. For instance, Chat GPT and Llama generate text based on vast text datasets, while tools like MidJourney and Stable Diffusion produce images derived from extensive image datasets.

The Rise of Smart Finance with AI

Artificial intelligence is characterized by its ability to swiftly process extensive data, continuously learn, refine models with precision, and conduct in-depth analysis to extract insights. These characteristics are set to revolutionize financial services. With AI integration, these services won't just be quicker and more efficient; they'll evolve into 'Smart Finance.' This will lead to heightened personalization and an enhanced capacity to adapt to swift market movements in real-time. The defining features of Smart Finance powered by artificial intelligence include:

1. Insight-Driven Customer Experience

With AI ‘s ability to process large amounts of data, as well as the ability to adapt and build new models for itself, AI can rapidly discover insights or even whole new customer segments. This is achieved by relying on a vast amount of data from diverse sources. This can include product purchase preferences, lifestyles, risk appetite, short-, medium- and long-term goals, and online activities. Generative AI can also aid in envisioning potential futures, such as anticipating future skill demands, job shifts, or family planning. This equips smart finance systems with the ability to harness insights and refine financial product models. As a result, these models can more effectively address the unique requirements of each customer. For example, if the AI discerns that a customer is budget-conscious and heading to college, it might devise a product that merges short- to medium-term savings with a fixed-rate education loan. This product would be designed to maximize benefits over a 4-year span. The system could also incorporate projected income estimates based on pursuing a field anticipated to be in high demand in the future.

2. Intent-based & human-language Banking Interface

Present-day financial systems operate on an instruction-based approach. This means that to achieve a specific financial goal, users must break down their objectives into smaller tasks and then execute the necessary steps across multiple financial products. For example, determining the monthly savings amount for a transfer, followed by moving funds to another bank to buy mutual fund units via a broker's app, is not only intricate and cumbersome but also prone to mistakes.

with AI's integration into smart finance platforms, service providers can simplify this process. Users merely express their financial desires, and the system discerns and operationalizes their intent. For example, if someone aims to accumulate funds for an annual holiday, they won't need to compute their expected expenditures and then calculate average monthly savings. With intent-driven financial solutions, they'd merely tell their wish, like saving for a ski trip during the year end’s break. The AI-enabled system evaluates the trip's potential costs and strategizes savings and short-term investments. It might also offer discounted ski resort, travel insurance, suggest automated currency exchange at favorable rates, or collaborate on financial planning with fellow travelers. Interactions within this system will be in human language, making it more user-friendly. The system presents information tailored to the user's financial literacy, using visuals, charts, illustrations, analogies, infographics, or videos for clarity. If any aspect remains ambiguous, users can request repeated explanations until they grasp the concept. Moreover, they retain the flexibility to modify their plans anytime within the system.

3. Autonomous Finance

The future of Smart Finance envisions autonomous financial solutions for recurring customer needs. The system will autonomously gather data, adjust plans, and execute tasks without manual work by users. For example, every month, a customer might need to allocate their salary towards daily expenses, entertainment subscriptions, family remittances, upcoming holiday savings, mortgage dues, or diverse investments. Traditionally, this involves manual transfers and meticulous management of investments, such as deciding when to buy or sell stocks, evaluating new mutual fund opportunities, or assessing the viability of Bitcoin investments, among other recurring actions. However, with AI advancements, users can simply define their goals, and the AI takes over the routine activities. It can dynamically adjust investment strategies based on market fluctuations, proactively suggest refinancing when beneficial, introduce timely promotional offers with easy installment plans, and even autonomously oversee cash flow.

4. Automation in Corporate Finance

AI's integration isn't limited to enhancing retail financial services; it's poised to usher in a new era of smart finance for corporate clientele as well. This entails employing AI-driven capital allocation systems that proficiently handle an enterprise's cash flow – encompassing revenue, expenses, interest, taxes, dividend payouts, debt refinancing, short-term investment of spare cash, and currency risk hedging. Moreover, AI plays a pivotal role in financial forecasting by collating vast data sets to project future revenues, expenses, and interest rates.
Furthermore, AI can be harnessed for Comprehensive Expense Management. It delves deep into both historical and present-day expenses, facilitating swift and autonomous fund allocation. Such AI systems can also scenarize upcoming expenses, diminish human-induced errors, pinpoint any unusual expenditures, and derive insights to streamline costs and enhance efficiency.

Towards an AI Organization

In today's transition towards Smart Finance, integrating AI isn't merely an option—it's a foundational imperative for every organization. While its potential is vast, it's crucial to be aware of its challenges and advantages. AI isn't just an IT affair; it demands a company-wide commitment, encompassing business strategies, data infrastructure, operational workflows, and inter-departmental synergy. Furthermore, crafting guidelines for data governance and ethical considerations is essential. Central to those is the well-defined roadmap for AI. Organizations should have a meticulous strategy for AI deployment, starting from initial trials, gauging outcomes, to ensuring its broad-scale applicability. An all-encompassing approach ensures that the institution is primed for delivering genuine Smart Finance solutions.

Sathapon Patanakuha, CEO, Guardian GPT