27 February 2018

Fintech and AI could help us make better financial decisions

Artificial intelligence once seemed like a far-fetched idea, interesting but wholly unrealistic. Yet in 2018, AI is everywhere. Machines are diagnosing disease, driving cars, and flying planes. Indeed, AI is even making its way into our wallets — in more ways than one.

Financial technology and AI naturally complement one another

AI works best when it has access to lots of data, and we generate a ready supply of information every minute. Each time we order a coffee from our smartphones, purchase an audiobook through an app, or book a taxi via our mobile devices, we're making financial transactions.

We're often not very happy with those transactions. Looking at our monthly spending, we discover that we've blown 50 quid on morning coffees and an embarrassing sum on takeaways. Perhaps we were overly generous while out drinking with friends or made one too many impulse purchases while late-night shopping. Now we're left with scant money to funnel into savings, and the old cycle of financial anxiety sets in.

Budgeting can be tedious and challenging

Try though we might, our financial resolutions often fall to the wayside soon after we make them. Budgeting can be tedious and challenging, and changing ingrained spending habits is harder still. We know our willpower is finite, so it's inevitable that we'll overspend or make decisions against our better judgement.

That's where AI could help us out

Imagine a virtual angel on your shoulder, guiding you away from impulse buys and strengthening your financial resolve. Whenever you're tempted to spring for another round of drinks or to take advantage of a Topshop sale, your AI buddy might ping you to ask whether you really want to do that.

Perhaps it will remind you that you're still a few thousand pounds away from having the down payment for a mortgage, or that you're two grand over budget for your wedding. The decision to spend or not spend would still be yours. But AI could serve as a wise counsellor when you most need the help of one.

If this sounds like the plot of a sci-fi sitcom, think again

Companies are now testing ways to use artificial intelligence to improve financial behaviours. The real power of AI finance tools will be their ability to make recommendations and decisions based on behavioural context.

Investing apps are already able to analyse your income and expenses to determine how much you can afford to invest each month. Eventually, fintech platforms may be able to use your digital spending habits and your social media activity to determine your creditworthiness.

They could also level the playing field for ordinary people who want financial advice but can't afford a formal adviser. By drawing on your financial data, an AI platform could provide recommendations for maximising your savings and investments. Over time, machine learning algorithms could increasingly tailor recommendations based on the growing body of information they gather about your circumstances.

The idea of a virtual money monitor may make some people squirm, especially when considering data security concerns. However, AI apps need not be miserly overlords to help us improve our financial habits.

Taking financial control to the next level

We all want to save more, invest for the future, and generally manage our money more effectively. AI-powered fintech platforms can help us achieve those goals by offering insights from our own behaviour.

Already, fintech apps are helping us track our spending and stay on top of our financial obligations. Artificial intelligence will take those services to the next level and will give us more control over our financial futures, because the more clearly we see our own patterns, the better equipped we are to change them.

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About the author

Casey Hynes

Casey Hynes is a freelance journalist writing about fintech, AI, economic development and personal finance. She's written for the Wall Street Journal and the Washington Post.

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