How AI is turbocharging finance

Financial institutions are already using it for everything - from making credit assessments to detecting fraud.

- Vikram Khanna

Some of the most transformational applications of artificial intelligence (AI) are in the financial sector, and they are being used, among other things, to broaden financial inclusion, enhance financial planning and detect fraud to a degree that banks could never do without AI.

Take credit assessment, for instance. The former managing director of the Monetary Authority of Singapore, Mr Ravi Menon, points to a revolution in this critical area of banking, led by Chinese banks.

He explains: "If you walk into any bank and ask for a $100 loan to tide you over two days, it will be perplexed - it won't know what to do. That's such a small amount so it's not worth doing any credit assessment."

But some Chinese banks are doing it. They can provide three-day loans and even overnight loans. "They use a huge amount of data in an AI model that covers a large portfolio of borrowers," says Mr Menon. "There will be some losses - some borrowers will not pay back - but the portfolio will do well. Across tens of millions of borrowers, it's a profitable business."

For example, MYBank and WEBank, which are affiliated with the Chinese tech giants Alibaba and Tencent, respectively, use AI and big data to assess creditworthiness, which enables them to extend microloans to small businesses and individuals, without requiring collateral.

Financial planning is another area that AI can significantly enhance.