Artificial Intelligence has fingerprinted the world after becoming a cornerstone for technological advancement, transforming industries from marketing to manufacturing. Much like the protagonist of Back to the Future envisioned, AI is making its path bigger by automating tasks and making complex duties like finances an easy game. 

The digital transformation era has enabled individuals to empower their lives and face any challenge with a simple click. That is why Generative AI is not out of the corner, and it becomes a game-winning opportunity to create new data and content for financial firms to innovate and enhance their service, but how is this possible? 

In this article, we'll explore how tech-driven firms in the finance sector can leverage Generative AI to gain a competitive edge and deliver superior value to their customers. Let's dive in! 

What is GenAI?

Generative AI, often referred to as GenAI, is a technology capable of creating original content, from poems to videos, by mimicking human creative processes. Unlike other AI that analyze existing data, generative AI produces new content. However, you may have already encountered GenAI in platforms like Midjourney, Sora, and the recently launched LumaLabs, but probably you did not notice its presence. 

GenAI is a relatively recent development, not unlike the common belief that it emerged in the 1960s with early chatbots. While chatbots have always had the potential to do some tasks that Gen AI does nowadays, it wasn't until the introduction of generative adversarial networks (GANs) in 2014 that it truly revolutionized the field. 

In today's world, there is no doubt about the potential of GenAI models, meaning they can handle different data prompts and formats. This idea is what allows users to perform tasks like generating text with various intents, describing images, translating languages, and creating content. 

What is Fintech?

Once Generative AI has been introduced, it's time to explain that Fintech refers to the use of technology to improve and optimize financial operations.

The term first arose as a way to describe specifically financial institutions’ tech systems, like banks. Yet, over the last few years, Fintech's scope has extended to enclose all customer-oriented financial services.

We can see Financial Technology applied in a wide array of fields and industries today, such as retail e-commerce and fundraising. Likewise, the term also currently includes cryptocurrencies and other digital assets.

What is GenAI in Finance?

More likely these old movies specified, the Fintech world has gained more presence over the last years, but what does GenAI represent to it? Well, the thing is that GenAI has already taken the scene by transforming Fintech into a tech-driven field, in which there is a growing and latent desire for more companies to use it.

Coming from a survey released by EY in Dec. 2023, “77% of the worldwide business owners expect to benefit from GenAI in the next 5–10 years.” However, as a surprise, EY states that over 30% of the interviewed experts argue if their business will actually get benefits from it.

At the same time, this survey explains how companies face challenges nowadays in the financial sector, such as the lack of data infrastructure (40% of the business leaders) or unclear governance framework (33%). This is a current concern that makes these business owners doubt if AI will be that beneficial for them. So, based on that, how can business leaders apply GenAI?

The number of applications of GenAI in the financial sector are unlimited, since business owners can go from detecting patterns, analyzing big  amounts of data, to organizing and structuring robust pieces of important information in record time. This means that automating operations is not strange for AI, and it gains more and more presence as time passes by. Then, let's explore some of it most common applications:

• Risk Assessment

One of the most powerful applications of GenAI in finance is risk assessment. Banks can leverage GenAI to evaluate loan eligibility, considering factors like financial transactions, credit history, and other relevant data.

JPMorgan Chase, a leading U.S. bank, combines data science and industry expertise to make more informed lending decisions. They even share their AI knowledge and practices through their AI Research Publications division.

• Fraud Detection

GenAI can also play a crucial role in fraud detection. By analyzing user patterns such as behavior, location, and spending habits, GenAI can identify suspicious activity and trigger alerts. This is particularly valuable in the context of e-commerce and online retail, where fraud risks are higher. Additionally, Gen AI-based solutions have been shown to reduce the investigative workload associated with money laundering, as demonstrated by a study from Ayasdi.

• Cyber Attack Prevention

While customer satisfaction is a priority in the financial sector, cyberattack prevention is equally essential for long-term user loyalty. Given that over 70% of data breaches are human-caused, GenAI can be a valuable tool in identifying and mitigating cyber threats. By analyzing data patterns, GenAI can alert companies to potential breaches, ensuring the safety of customer data and assets.

Benefits of GenAI in Finance

Going beyond these simple applications, you might be wondering: Which benefits should I gain if I apply it? As mentioned, applications are unlimited and benefits are countless. That is why when considering the benefits of GenAI in finance, automation is a key advantage. Generative AI can streamline workflows, automate tasks, and enhance decision-making.

In cybersecurity, GenAI can continuously monitor network traffic and automate safety measures. Similarly, GenAI powers Conversational AI and chatbots, providing users with round-the-clock assistance.

Beyond automation, GenAI can also improve operational efficiency. AI can reduce the time and errors associated with data and document processing. By freeing team members from repetitive tasks, GenAI can boost productivity. A study by MIT students found a 37% increase in productivity among workers using GenAI compared to those without.

GenAI also offers speed and availability advantages. AI can process information, identify trends, and uncover data connections more quickly than humans. This enables faster data-driven decision-making across various tasks, from compliance management to risk modeling. By being readily available to users, companies can gain a competitive edge and provide superior service.

What Is the Future of GenAI in Finances?

At Renaiss, we are redefining industries through GenAI, and that is why we firmly believe that Generative Artificial Intelligence has already begun to remodel the financial world like no other type of technology. This has made us think about how its latent potential is far from exhausted, and we can expect a lot from it in the future.

One of the most exciting prospects for its future is all the personalized advice business owners can have by using it. It can help them to analyze big amounts of data to tailor recommendations to see the latent potential some investing have and see the risk tolerance. Even if you don't consider it as a benefit, this could democratize financial guidance with easy accessibility for any company. 

Likewise, while the future of GenAI in finance rises and looks promising, it is important to consider that there are risks of multiple challenges and considerations as time passes by. One of these concerns is the potential for Bias in AI models. They could lead to unfair or discriminatory outcomes. On the other hand, ethical considerations in the decision-making process are something that scares more than one business owner. 

That said, only time can tell how it will perform in the future and see if it will truly benefit as expected or if these concerns will become a reality. 

Conclusion

Even if things only get clearer for AI experts, it is a fact that Gen AI has the potential to change the financial industry game by making financial tasks such as data analysis easier for anyone. 

Saying that its future is promising is just a part of the puzzle, since its potential for business or enterprises goes beyond simple personalized financial advice. It could be an essential tool to address challenges and make finances accessible for any user worldwide.

By applying GenAI responsibly, financial institutions can position themselves for long-term success in an increasingly competitive and complex market. Then we hope you are more interested in Gen AI now. If so, do not hesitate to take a look at our latest articles or contact us to discuss this exciting topic!