“A critical review on the use of Artificial Intelligence in Finance: The future of financial services and the outburst of Financial Intelligence”

Abstract

In our dynamic capital market, Artificial intelligence (AI) is considered one of the most significant technologies which lead to revamping the finance industry as it is one of the core technologies of the fourth industrial revolution and one of the key reasons for the technological transformation that happened in the last decade. In today's current world, we have witnessed major development and rapid expansion of the Artificial Intelligence (AI) applications as well as the dependence on machine learning (ML) algorithms which have been beneficial in every sphere in our lives especially in the broad range of the finance industry. AI contributed in unexpectedly revamping the finance industry as their convergence allow the finance industry to automate all of their business processes, introduce new and innovative products, services and processes, ensure the users' information security, improve the quality of its services as well as enhance the customers' experience by bringing digitalization towards many sectors such as in investment, trading and in banking sector (e.g., mobile banking, e-banking and virtual networks) (Arslanian and Fischer, 2019). Moreover, the use of AI has contributed positively in increasing the revenue and profits of the majority of the financial institutions as well as helps in decrease the costs through optimization of the business operations, and use the ML and AI in targeting the target customers, in identifying and selecting a better location for their branches (Alfaro et al. 2019). The finance sector is witnessing radical transformation especially after the Global Financial Crisis in 2008; AI helps in creating innovative financial solutions (e.g., intelligent customer services, intelligent lending and consulting). It also embraced the Fintech development, machine learning, data mining techniques and Fintech technologies, Internet of things (IoT), precision marketing tools, predictive analytics, algorithmic analytics, process automation, task automation, Voice recognition and Eye Print-ID technology in payment transactions, Blockchain and cryptocurrency technologies and Robo-advisory and bionic advisory technologies in the financial market which made colossal and tremendous changes in many different aspects of the financial field (Ashton, 2009; Zetzsche et al., 2020). Further AI-powered technologies can adopt Artificial Neural Networks (ANN) and CARDWATCH tools which have a crucial role in detecting any fraudulent activities through using deep learning technology which guarantees the accounts' security and to protect the uses' information, especially in today’s era because of the rapid growth of the e-commerce and online banking especially after the adoption of blockchain and cryptocurrency (Arslanian and Fischer, 2019). However, there are a number of advantages and disadvantages which accompanied with the usage of AI in the financial sector; Firstly, no one can deny the benefits of AI within the financial industry as they are numerous and hard to ignore. AI had transformed how people interact with cash, it automates the manual work and the majority of the financial services tasks, using Artificial Intelligence (AI) in finance contributed in cultivating the long-term relationships with the investors and their customers as it transforms the overall customer service through maximizing the customers’ lifetime value (Chen and Huang, 2011). The key benefit of Artificial Intelligence (AI) and Machine Learning (ML) is they can process a large amount of data and analyse millions of transactions in just a few seconds accurately and much quicker than humans. AI enable the financial institutions to adopt intelligent algorithms and smart data mining models to evaluate the customers’ creditworthiness which will minimize the default risk. Additionally, they can help the financial advisors to recommend personalized o