How AI helps the financial market make more assertive decisions

Bill Maris, a former executive at Google Ventures, Alphabet's venture capital investment arm, once said that when "you have access to the largest database in the world, it would be foolish to make investments based on intuition alone".

To test the veracity of this statement, researchers from various universities built an Artificial Intelligence investment algorithm and compared its performance and compared its performance with the rates of return on the investments of 255 angel investors.

Through Machine Learning - a branch of Artificial Intelligence that uses data and algorithms to imitate the way humans learn and gradually make more accurate decisions - the algorithm identified 623 investment opportunities in startups.

The test results left no doubt: the algorithm did much better than human investors, whether novice or experienced. While the algorithm obtained a rate of return on investment of 7.26%, the 255 angel investors had an average performance of 2.56%. In other words, the algorithm performed 184% better than the average human.

Naturally, such a powerful tool is not going unnoticed in the financial market. Morgan Stanley, for example, has been using Machine Learning since 2017 to identify the best investment for each clientsince the increase in the supply of financial products has made it impossible for the institution's financial advisors to trace and know all the opportunities on the market.

Examples of how Machine Learning is improving the performance of financial institutions also occur in Brazil. 4KST helped a bank significantly increase its sales after the institution adopted 4KST Machine Learning to predict which business opportunities were most likely to sell.

Faced with a wide range of opportunities, the financial institution's problem was knowing which businesses to focus on. Artificial Intelligence improved their stock management and identified how far they were from their goals. In other words, Machine Learning uses the bank's trading history and pinpoints the opportunities that are statistically most likely to turn into business, increasing the bank's sales results.

Benefits of AI in the financial market

As we saw earlier, Artificial Intelligence helps with decision-making, recommendations and predictions. Based on a large volume of data, the so-called big dataMachine Learning algorithms gradually learn and improve their performance through experience, without human interference.

The digitalization of the economy and the spread of AI in the financial sector, which have been on the rise for years, have been boosted by the Covid-19 pandemic. According to the Organization for Economic Cooperation and Development (OECD), investments in AI are expected to double by 2024, reaching 110 billion dollars worldwide. 

In finance, Artificial Intelligence can be used in asset management, trading operations, credit management or financial services based on the blockchain system. According to the OECD, growing computing power and the abundance of data are key to the development of this sector, which can benefit in two ways.

Efficiency and cost reduction 

Artificial Intelligence is considered a tool capable of increasing the efficiency of companies by reducing costs and boosting productivity, with the end result of increasing profitability.

These benefits are thanks to more assertive decision-making processes, automated execution of administrative tasks and improvements in risk management, reduced fraud and scamsamong other advantages. These are all examples of use cases that 4KST has already built and can implement with your financial institution.

More products on offer

AI knows how to better select which financial products and services to offer financial institutions' customers. In addition to the competitive advantage for the company, the customer benefits from having access to a greater variety and better quality products, including the possibility of customization. 

Would you like to learn more about the opportunities that 4KST's Artificial Intelligence can offer your company? Discover our customized solutions for analyzing your company's information and automating decisions. Click here!