According to a 2016 research by Mckinsey, it was revealed that the total annual external investment in AI ranged between $8billion to $12billion in. Statistically, this is a clear sign that AI is making a great impact in the global industries especially the financial sector. In other words, it’s a revolutionary impact in the financial industry can not be underestimated.
Blockchain, on the other hand, has also shown its immense potential in so many industries especially in the finance industry. In fact, it’s digital disruption is greatly impacting how so many businesses operate in our contemporary world. While so many industries are beginning to embrace the amazing options these technologies – Artificial intelligence and Blockchain technology offer – helping them to create more value, boosting sales, and so on, it’s interesting to know that the combination of both will positively revolutionize the future of the fintech industry.
Already, users of financial services (especially the tech-savvy ones) are awaiting their banks to step up their games to meet up with the present trend. Amazingly, to stay on top and maintain competitiveness, many financial institutions are already investing in these ever-evolving technologies to restructure their businesses and satisfy their customers better.
Could the Convergence of Blockchain and Artificial Intelligence Mean a Better Future for the Financial Industry?
Bearing in mind that the widespread adoption of artificial intelligence and blockchain technology across so many industries is on the increase due to their superb benefits, combining both would be more logical and yield bewildering results across all industries especially with the financial sector. Obviously, artificial intelligence is pretty powerful on its own, but when it is coupled with blockchain technology, it takes an entirely new level. Amazing features and underlying capabilities that come to play are as follows :
A Secured Payment Network
One of the underlying benefits of blockchain technology is its unique ability to operate as a borderless payment network. While traditional banking institutions are faced with challenges like – compromised payment network, slow processing of transactions, high cost of the transaction, and so on, blockchains decentralized solution facilitates a frictionless payment with low cost and at a faster pace compared to the traditional methods. Unfortunately, there are still some existing security concerns affecting its widespread adoption. Theft and scamsters are increasing and getting more sophisticated daily since it requires a set of public and private keys to run a blockchain transaction.
Nevertheless, by leveraging the power of AI and ML, any irregular activities on your blockchain account can be identified thereby alerting the account owner about some human involvement. More so, with AI, the implementation of behavioral analysis and biometrics can further aid in eliminating any security susceptibility in payment networks.
Controlled Automation for Financial Activities
Considering the present technological advancement in the way we run our financial activities, there is no doubt that finance is moving towards automation. On the other hand, there are pending issues that could pose threats to the finance sector if ‘calculated restrictions’ aren’t placed on automated processes. Meanwhile, to run a smooth automation financial system, it must occur synchronically with built-in checks and balances. In this case, smart contracts facilitate automatic processes while AI and ML can look for irregularities at the same time. So, by merging blockchain-powered smart contracts with AI –which helps to verify the smart contracts and predict its vulnerability that can be exploited by theft, the resulting infrastructure would facilitate a completely secure, transparent, and efficient financial transaction.
An Efficient Financial Service
According to the 2019 Deloitte’s Global Blockchain Survey, it was reported that 57% of organizations see cost savings as the primary benefits of participating in a consortia blockchain network. From this research, it’s glaring that one of the main reasons why financial institutions are implementing both AI and blockchain-based solutions is to improve their service speed and service quality. While this is true, combining both technologies to run your business processes will enhance cost savings and maximize your returns while you provide great value to customers.
A Unique and Financial Trust system
Yes, AI has been in existence for a while now. According to DAVE Dickson — the senior manager of mobile and emerging technologies at Adobe, he said: “Companies with advanced mobile capabilities are differentiating themselves in the market over those who have less built-out strategies.” Furthermore, the research also revealed that about 47% of advanced-tech organizations have a defined AI strategy. While blockchain is considered as a newer technology, the technology has so many promising features across many industries around the world. In 2017, after the dramatic drop in the price value of Bitcoin, and failing of so many ICO projects in which many investors around the world have invested heavily in, so many enthusiasts started losing trust in cryptocurrencies which are backed by blockchain. Interestingly, According to a recent post on Entrepreneur.com, there is a new blockchain-based solution – a crowdfunding model designed to offer a guarantee of refunds and protection upon any investment made on any blockchain project. It’s called DYCO( Dynamic Coin Offerings). This model will help potential investors to scrutinize project whitepapers and help them choose ICOs with the highest profit potential. More so, it helps eradicate any chances of losing your entire invested fund.
Inherently, blockchain is perfect for storing highly sensitive information because of its immutability features – that is it can’t be altered. And the use of Artificial intelligence on the other hand will help financial companies to boost their income, efficiency, provide detailed insight about data and manage risk as well. Therefore, by combining the unique features of both AI and blockchain, it’s logical to say that there is going to be a much promising trust system in the financial industry.
Simplifying and Understanding AI Decisions
One of the factors that hinder the mass adoption of artificial intelligence is its complexity in interpretation — AI is capable of evaluating a large number of variables unaided; but there is existing proof that human could tamper with the recorded data set for analysis — which is one of the main reasons why people are still in doubt when it comes to it processing financial transaction.
Yes, AI is a great revolutionary technology, but many people won’t implement it if they can’t clearly explain the decisions made by computers, especially when it comes to financial transactions that require thorough investigation.
However, combining blockchain technology with it untangles the complexity people see in it by making the way computers think more transparent. Blockchain is an underlying technology that is known for transparency and immutability. Blockchain can store every decision made by AI and still make them available for analysis, so people can be sure that any financial record or information from entry to examination/audit is tamper-proof.
The Likable Challenges Company Developers Might Experience Upon the Integration of AI and Blockchain
The Shift from Decentralization:
Many see blockchain as a decentralized technology capable of bringing solutions to centralized institutions e.g banking. However, some people view it as a threat to the original will of decentralization when it’s being merged with artificial intelligence/ machine learning — which is one of the possible challenges developers might encounter. But some developers are tirelessly working on solving this challenge.
Generally, AI requires access to a pool of data, and bad data can ruin the integrity and effectiveness of both machine learning blockchain technology. While there are ways to combat bad data, it’s still an ongoing hurdle to solve.: