The Good And Bad Of AI In Personal Finance

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Artificial intelligence (AI) is a common term in the present world. It finds use in important areas of our lives such as automated machines, search engines to locate information and medical diagnoses. Machines are a blessing to us in more ways than one. Just ten years ago, no one would have thought we would have an automated program that selects music into your playlist for you, helps you shop online with constant updates and even helps you plan your menus for the week.

Personal finance has undergone a tremendous transformation thanks to the emergence of AI, and is now quite promising. AI is able to perform a number of tasks in personal finance such as advanced data processing, intelligent decision-making, and personalization.

Before we explore some benefits and dangers of artificial intelligence, let us first look at how personal finance has been given a lift by AI.

  • The introduction of saving and budgeting apps: You must have come across some of the available apps that help you to save or budget your cash. Al is behind the creation of most of these, and they work by gathering information such as the amount of money you make, and your current needs and wants. It then recommends how best to allocate your money. People who are in the process of saving towards a big project like buying a home or starting a business benefit from this.

  • Personal assistants: AI has made the dream of having an online personal assistant a reality. Companies have totally embraced the idea of offering AI personal assistants to employees to assist them in some tasks such paying bills, taxes and taking care of managing their own online accounts. As opposed to a human being, AI increases convenience and ensures consistent recommendations are followed through.

  • Robo-advisors: More and more companies now enjoy “robo- advisory/robo trading” which is a feature that uses AI algorithms to make smart stock picks and rebalance your portfolio over a period of time.

Benefits of AI in personal finance

Al might be greatly helpful in personal finance but like other technological advances, it comes with a few dangers as well. Before we get into these dangers, take a look at some of the benefits AI has brought to this industry.

  • Better decisions: Human beings make decisions based on emotions and bias. The truth of the matter is that when we make good financial decisions, the richer and happier our lives will be, and what better way to achieve this than to employ emotionless algorithms to help us get there? AI algorithms can never be victims of such things like cost fallacy, which means you have no room to keep repeating habits because you are too weak to face them. This ensures long-term and impartial decision-making.

  • Fast and efficient data processing: the human brain is still ahead of AI when it comes to general intelligence, there are many things AI beats us at. This includes making mathematical calculations, and integrating millions of variables. Imagine if we had no calculators to do these for us - life would be a lot harder and messier. This feature of AI comes in handy when trying to understand the complex and enormous economic world. In addition to performing numerical calculations fast and accurately, AI can also collect, interpret and deduce data almost as much as a human would.

Potential Improvements: AI is constantly changing - actually faster than we can catch up. This means in the next few years the algorithm will have undergone great exponential improvements, perhaps without any limit. Who knows, in the future we may have AI programs that can actually have money dispensed via the smartphone so all you have to do is make a withdrawal request and your smartphone does everything for you, including dispensing real currency right into your hands!

  • Matches finance according to one’s individual needs: AI is a great technological advance that ensures all people access financial products tailored to their individual needs. AI can explain everything in a language that is well understood and if required, one can ask questions for further clarification. What’s more, AI programs can be available via any device such as smartphone, laptop, and tablet any time of the day.

  • Helps combat fraud: AI is used in most, if not all, financial organizations across the world. If you have ever used your universal card, such as MasterCard, and received an alert message talking about your activity, you have been a customer of an AI algorithm. Usually, the message asks you to go ahead and stop the transaction if you are not the one who swiped the card. This has helped reduce fraud immensely.

Dangers of AI in personal finance

  • Consumer overconfidence: When humans rely on programs and platforms to help them make decisions of a financial nature, the probability of them being overconfident in such flawed systems is high. Too much reliance on such platforms can make you overlook the importance of experience and instincts towards something with a good track record. Granted, many times, this will be perfectly fine but in others, either you or the platform may neglect some important variables that can bring you or your business down. Too much investment in artificial intelligence poses great risks to your personal finances.

  • Market manipulation: AI programs make objective decisions - and this is a great thing. These micro-decisions, however, do not care about the decisions of others; a feature that can impact heavily on financial markets (if you can recall “flash crash” incidences like Flash Crash 2010). Thankfully, software developers are working on correcting the algorithms to take care of this, but the risk it can pose remains great.

  • Corporate control: Unlike your own mind, AI brains are well understood only by the developers who created them. Most of the platforms are confidential and proprietary, so you have no way of knowing the happenings of their minds. The developers control every aspect of development, which means they can create problems somewhere in the future if they please or if something goes amiss. Sadly, if this happens, there’s no way of knowing how to mitigate the risk, except wait for the same developers to work their magic and get things running again.

  • Promotes laziness: Having machines perform all numerical calculations, gather and interpret information can pose the risk of raising a non-smart generation. You should be able to mention all the multiples of 5 and multiples of 4 under 200 off your fingertips without thinking too much. This way, you will still be good if the system fails and you need to perform certain actions by yourself.

When all’s said and done, the benefits of an AI algorithm outweigh the dangers so there’s no way out of using them. The trick is to let AI help you as much as you can, especially with numerical calculations, but do not throw away your own brains. Be sure you understand the complexities of AI platforms well, and use them the best way you can.

Did you find this article useful? Do you have any additional points about artificial intelligence you would like to share? We would love to hear from you so feel free to share in the comments section below.

Gönderildi 18 Kasım, 2017

LucyKarinsky

Software Developer

Lucy is the Development & Programming Correspondent for Freelancer.com. She is currently based in Sydney.

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