How AI & new tech is affecting your finances
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
Technology is changing remarkably fast in 2023 – perhaps at a faster pace than ever before. The arrival of artificial intelligence (AI), in particular, is opening new doors of possibility for creativity and productivity. Yet it also raises questions about job security, data privacy and discrimination. Another important question is how all of this change affects your finances.
There are still many unknowns with these constantly evolving technologies. However, below, our financial planners at Castlegate offer some reflections on how AI could impact key spheres of financial life such as banking, financial inclusion and literacy.
We hope these insights are helpful to you. To discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
AI & financial literacy
The arrival of ChatGPT and other “generative AI” tools in late 2022 has created a whirlwind of global excitement. The platform now has well over 100m users, with AI-related Google search queries now four times higher than in 2022. The majority of British people have heard of the likes of ChatGPT, although many do not know how to use it.
In simple terms, these platforms involve typing in a query (e.g. a question, such as “Why is the sun hot?”) and they deliver detailed, sophisticated answers which can sound very human-like. This advancement offers many benefits, such as helping people grow their own financial education.
For instance, a user could ask an AI chatbot a series of questions about the financial system (e.g. “Why do banks charge interest on loans?”) and get quick, interesting answers. However, there are drawbacks to these systems in 2023 which are important to be aware of.
Certain AI platforms are not always up-to-date with their information, possibly leading to incorrect “advice” about financial planning. One platform we recently tested stated that the Money Purchase Annual Allowance (MPAA) is £4,000, but this is not correct as of April 2023. It now stands at £10,000. Therefore, users should be careful not to completely rely on AI platforms for news and insights. Always cross-check information with other reliable sources.
AI & banking
Generative AI has so many possible applications it is hard to know where the limits are. Yet there are signs that banks are starting to experiment with it. Some are using AI-powered chatbots to provide customer services. Others are deploying it to aid with fraud detection.
These innovations hold out the potential for many banks to serve more customers who may have previously been excluded from the traditional banking system. For example, people in developing countries without a bank account (but with a smartphone) are now more able to send and receive money, access credit and engage in digital financial transactions.
However, the arrival of generative AI has also arguably escalated the game of “cat and mouse” between organisations (e.g. banks and governments) and cybercriminals. Voice cloning is now more powerful than ever due to AI tools which can simulate how someone talks using just 3 seconds of audio. This raises important questions about the reliability of banking security checks which use voice recognition in their verification processes.
Another key area of change is AI and credit scoring. Traditionally, banks have relied on large databanks containing records of customers’ past debts and bills – using these to predict what individuals might do in the future. AI is now taking this to a new level by enabling lenders to analyse vast amounts of data more accurately and more quickly.
This could open up more doors for people, such as small business owners, to access credit and loans on more favourable terms. However, there are concerns about possible embedded biases within AI algorithms used for credit decisions. If present, these could close more doors of opportunity for certain people than they open.
The importance of the human touch
Perhaps the best approach to AI within financial services is a slow, selective and careful integration with “low critical” tasks and processes as the reliability of different tools is proven over lots of testing, in many different environments. For example, if an AI chatbot can help a bank clerk work faster (e.g. sifting through research files and forms) and more efficiently, without compromising client data, this could be a very positive outcome for everyone.
However, AI still has a very long way to go before it can come close to emulating that “human touch” which is so treasured by clients in many financial services sectors – including financial planning. Indeed, we are all familiar with the experience of being on the phone, or on a website, and butting heads with a company chatbot which does not seem to understand our problem. Very quickly, we find ourselves shouting aloud: “I just want to talk to a real person!”
The way AI “learns” and talks to us is not the same as the human experience. To learn a language task, an AI neural net is presented with a sentence, one word at a time, helping it to predict the word(s) that will follow. This “supervised” learning model contrasts starkly with how children learn, for example, which is very unsupervised and matures via a complicated process of exposure to adult speech, imitation and feedback.
This all suggests that AI and humans are fundamentally very different (although we do not fully understand either, yet). Technology is certainly changing the world and your finances – albeit perhaps not as dramatically as some are suggesting.
Invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
