Of all disruptive technologies, none has had a greater impact than artificial intelligence. Its ability to offer intelligence to tasks and automate workflows radically altered the fabric of global business operations. Now, it has become a key piece in the emerging economies.
It’s not a surprise that financial institutions are the front-runners in AI adoption. After all, it holds much potential for analyzing vast amounts of financial data, reducing substantial costs, and improving risk management.
What’s surprising is that, despite the impact of AI on the finance sector and how easy it is to access information in this hyperconnected world, only 37% of the American population is financially literate.
By offering interactive, personalized learning, AI can transform financial education. Let’s explore its tools and benefits in promoting financial literacy.
How AI is promoting financial literacy
AI is a modern-day spectacle; you’ll find it even more intriguing due to its adaptive nature. It offers several innovative tools and solutions that can help you improve your financial education and personalize your training activities. Let’s see how it can impact the process.
AI tools for financial education
- Immersive learning platforms
If you want to offer your customers an interactive and engaging financial education, these learning platforms are your best bet. They operate on AI algorithms that help deliver personalized learning experiences.
For instance, some of these platforms use an AI video translator that can generate real-time transcriptions as subtitles for your video lessons and quizzes.
It doesn’t matter if your customers have different linguistic backgrounds; you can personalize their learning experiences using built-in multilingual features to generate videos and subtitles in your customers’ local language.
It saves the extra costs of making new videos in their native language and your customers will grasp financial concepts easily and more efficiently.
- Gamification in financial education
AI technologies can gamify financial learning processes to make them fun and interactive. These platforms have game design elements and features that simplify complex financial concepts and help learners retain information efficiently.
The gaming features may vary depending on which platforms you use. They may be presented as rewards and points, such that learners will have to take challenges or quizzes on financial topics to earn points and badges.
The features can also be in the form of challenges or missions. Here, AI will simulate real-world scenarios, and learners will be required to apply their knowledge of finance to solve the tasks and make decisions.
When you gamify learning processes and learners apply their financial skills and understanding in a fun and not-so-tense atmosphere, it instills confidence in them, especially on topics related to managing risks, investing, and navigating tax laws.
- Digital financial advisors
If you’ve ever visited a site and exchanged conversations with a chatbot, you’ll understand how swift and useful they can be in answering questions and providing guidance. Can you relate?
AI virtual assistants are readily available compared to traditional in-person advisors. With a few clicks, learners can access them anywhere and anytime without worrying about location and scheduling an appointment.
Again, we all can tell how uncomfortable it can get when discussing personal finances with an outsider. It can cause a great deal of discomfort, especially if you end up getting stigmatized for it. Nobody wants that.
With virtual advisors, you can rest assured that your financial discussions will be kept safe from third parties and not be met with the slightest disapproval.
Digital advisors are highly scalable. It doesn’t matter if you operate a small or large budget organization. They can cater to the needs of multiple people at the same time, which is not the case for in-person financial advisors.
Personalized financial advice through AI
- Robo-advisors
Unlike human advisors who focus on developing insights based on your client’s goals and financial situation, AI-powered robo-advisors use data-driven insights and automation to customize their advice. It does this in several ways.
- The first is by assessing your client’s risk tolerance. It poses a series of questions about your client’s investment experience, their financial goals, how long they intend to invest their money before requesting it, and how aggressive your client is when making investment decisions.
- With this information, robo-advisors will design a portfolio that aligns with your client’s financial goals. For instance, a higher-risk-tolerant client will have a bigger stock allocation in their portfolio compared to a risk-sensitive person.
Over time, robo-advisors will analyze market trends and ensure clients’ goals are still intact. If there appears to be any change, it automatically signals for adjustments to ensure the initial plan is back on track.
- Budget allocation and expense management
It takes a lot of discipline to keep track of your expenses and spending patterns. In fact, most people fail woefully in that regard. However, it gets easier if you’re utilizing an AI-powered budgeting software.
It can analyze the details of your transactions by using your bank account or credit card to make your spending pattern more evident to you. And there may be times where your spending approaches or goes beyond your allocated budget, budgeting tools can send you notifications to avoid overspending.
Aside from helping you to monitor your spending habits, budgeting apps can also manage your expenses effectively. It analyzes your spending patterns to identify the irrelevant and recurring expenses you do not need like digital media subscriptions and streaming services. Afterwards, it gives you the option of canceling the subscriptions to save money.
After a while, AI budgeting apps will completely adapt to your spending behavior. It will understand which category takes the lion’s share of your spending.
For instance, if you consistently overspend on shopping and entertainment, it can offer you financial coaching advice on how to stick to your budget and notify you in case you exceed it.
- Debt and credit control
Debts can negatively impact one’s state of mind. No one likes it but only a few succeed at staying debt-free. How skilled are you in credit and debit management?
Some AI tools can specifically analyze your financial status to understand your earning power, spending power, and existing debts to develop a personalized debt repayment plan for you.
These AI tools can create repayment schedules depending on your financial goals and offer financial advice about prioritizing paying off debts with high interest rates ahead of low and no-interest debts to avoid incurring extra costs.
In addition, AI tools can help you stay updated by sending reminders and notifications of payment deadlines, missed payments, and available balances, all of which can impact your credit score.
If your credit score drops intermittently, AI tools can offer suggestions that can improve your credit score, such as putting a limit on new credit applications, paying loans as and when due, and disputing any wrong information on your credit report.
Using AI for fraud detection and security enhancement
- Fraud alert and security enhancement
Fraudulent activities can cripple individuals and businesses alike so you can’t leave anything to chance. With AI algorithms, it becomes relatively easy to analyze chunks of financial data and business transactions in real time.
This helps you detect anomalies and irregularities in patterns that may exist in a customer’s account. Once an unusual activity is spotted, AI can instantly flag it as a potential fraudulent activity. As a countermeasure, AI typically protects financial data in two ways.
- First is through behavior profiling. It collects and builds a profile of your customer’s regular habits, like browsing patterns, login times, and transaction history. Once AI notices the slightest deviation from the regular patterns, it alerts you automatically.
- The second way AI can protect your customers’ financial data is through the enablement of Multi-factor authentication. MFA adds an extra layer of security to the already existing ones. It can be as passwords and pins, or biometric data like fingerprints and facial recognition.
- Anti-Money Laundering (AML) Compliance
As a financial institution, the integration of AI into your workflows can help automate the process of analyzing irregularities and patterns associated with money laundering.
A typical example is layering. Here, large transactions are broken into smaller bits to make them unnoticeable. Or if suddenly, a customer’s account that is known to receive small local transfers suddenly begins to receive huge sums from an international account. AI will instantly flag as suspicious.
As part of security enhancement, AI can streamline the entire process of Know Your Customer (KYC). From verifying customer data (like identity documents) to continuous tracking of customer profiles (should there be changes that indicate anomalies), and risk scores based on their profiles, AI will instantly send alerts in case of any inconsistencies.
And there’s more, since AI uses machine learning, it can adapt to new money laundering strategies and refer back to the historical transactions of a customer, analyze their behaviors and transaction patterns to predict possibilities of future money laundering.
These and many more are the ways AI is shaping and promoting the concept of financial literacy to help you and your customers understand the complexities associated with navigating the dynamic world of finance.
The future of AI in financial literacy
AI is a revolutionary tool capable of enhancing all aspects of financial education. It impacts how individuals and firms approach the concepts of finance. With so many AI tools in circulation, everyone can learn, understand, and apply their skills to make responsible and well-informed financial choices.
The world of finance is set to grow more complex with time, but with adequate financial skills, knowledge, and AI tools leading the way, everyone can be empowered to build a more financially literate society.
Rilwan Kazeem is a creative writer and art lover. He has worked in social media, content marketing, and SEO for four years. He has covered topics including digital marketing, HR, emerging technologies, and their intersection with business. At his leisure, he loves to meditate and spend time with his family.
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