Finance is so important in modern life and it can’t go ignored. Even a priest needs to finance the building of a church. And considering the breathtaking rise of countries such as India and China with their incredible GDP, it is also reasonable to conclude that finance plays a pivotal role in developing a country.
But this era is different. It is not like the Silk Road era when Far East empires could only trade in silk and gold. The milestone of this modern era is technology. Modern technology advancement is creeping into every part of our daily activities, including trade and finance. One area of fascinating area of technological advancement is machine learning and artificial intelligence. Even in India, Technology has enabled Finance more accessible and the result is Reserve Bank of India is finalising draft for Peer to Peer Lending License in India.
Let’s evaluate some future financial areas that can really benefit from machine learning
Evaluating credit score of clients
It is becoming extremely hard to correctly determine the eligibility of a loan borrower. Even after careful evaluation of all available parameters, some successful companies and individuals still default their bank loan. This is not a nice trend.
Loan eligibility evaluation tasks will be taken over by the smart machine learning technology. To determine the credit score of a client, machine learning can apply regression algorithms which are accurate.
Regression algorithms simply use statistical processes to estimate an array of relationships between two or more variables. Regression analysis is especially critical in understanding how values related to dependent variables changes on slight variation or if the variables remain fixed. In the field of machine learning, this technique has been useful in predicting and forecasting situations and is expected to be pivotal in future financial institutions.
Detecting fraudulent activities.
As the financial world transition to digital currencies and digital transactions, there is going to be no physical theft because the money is virtually held. For this reason, thieves are starting to change tact and are now switching to digital means of stealing money. Since the internet is a sea of personal information and anonymity, such fraudsters find their escapades easy and they are hard to trace.
But machine learning might be the remedy. When put in place, machine learning begins by gathering and segmenting data into at least three segments to create models which eventually amounts to datasets. These datasets can be obtained from historical information. The machine learning models and datasets can then be used to predict the possibility of fraud occurring in financial transactions.
Some people such Warren Buffett made enormous fortunes from stock markets. But it requires skill to be successful in stock markets.
With the use machine learning, getting rich in stock markets no longer requires skill. Using sophisticated algorithms, machine learning analyses historical data of a company such as profits, balance sheets and loss statements to predict its future.
As personal assistants
Human secretaries and personal assistants at times get overwhelmed by the workload of jobs they need to process. Not everyone is lucky enough to have a competent personal assistant either. Such situations have necessitated procurement of other means.
Chat bots have proved to be a better alternative to secretaries and assistants. Bots are slowly creeping into the financial world to offer services 24 hours, cheaper and efficiently.
To conclude, Future of Machine Learning is bright in finance industry.