Usage Of Artificial Intelligence in

Banking and Personal Finance

SEPTEMBER 15, 2022

Abstract
This review will examine the implementation of AI in banking. There are many
opinions on artificial intelligence (AI) and its ability to make almost all industries
more efficient. This is due to its proficiency, convenience and speed. Therefore,
many researchers around the world have conducted many studies on the adoption
of electronic payments. It is on this basis that this research paper examines the
previous existing literature on the adoption of electronic payments globally, with
the aim of determining the scope, methodologies and models of information
systems "IS". The study conducted extensive literature research on e-payment
adoption, and finally, the article identifies and highlights patterns of previous
research related to these projects, and further recommends specific areas in which
research future should look.

Introduction
The revolution of information and communication technology has changed the
lives and operations of individuals and organizations respectively. The global
spread of the Internet and its rapid use over the years, have contributed greatly to
the big change of e-commerce in the global business environment. So, business
transactions between trading partners continue to be offered on e-commerce
platforms. Electronic payment solutions have also been developed. The importance
of this development in the global business environment has challenged most
organizations to automatically switch from traditional paper money transactions to
electronic forms that provide more convenient, fast and secured process of making
payments among individuals and organizations. With the introduction of electronic
payment systems, the annual rate of global non-cash transactions facilitated by
electronic and mobile payments (m-payments) have increased significantly in the
past years. (In Banking a Mini-Review, February 2020)
The focal point of business in many enterprises is productivity and stability and the
financial business is the same in such manner. This stability is undeniably based on
proper decision making and artificial intelligence is incomparable in this cycle as it
removes the probability of human error from decision making process. Reasonable
preparation and dynamic planning without a doubt will lead to a successful
development. As the financial business begins to understand this point there is a
need to automate decision making processes in order to reduce the margin of error.
Deep learning is a high-level approach of machine learning based on artificial
neural network algorithms as a promising branch of artificial intelligence, recently
has drawn in huge interest. (Huang et al. Frontiers 2020)

Overview of artificial intelligence in finance and

financial markets
As per some journal reports, private investment owners are in a race to change
similar firms into businesses that have been completely adjusted to advanced
technology that is ready to adapt artificial intelligence. Thus, in their strategy to
add value, they select these specific companies and help them to use these artificial
intelligence and data analytic technologies. This is not used only to replace humans
with machines but also to discover what services customers need and how to
deliver them better.
Models were used to understand the financial markets such as fat tails
and volatility clustering; to test the system properties such as predictability
and translucency; and to predict future results. Recently, techniques of AI are
being used along with agent-based models to predict stock price flow, market
impact, critical threshold for large market actions, and prices of financial contracts.
From these, commerce arrangements are also being concluded. Financial
businesses success may depend on their collaboration, collective efforts, and how
they design the information flows through language, technology networks, and
association with other organizations, suppliers and customers. Several financial
companies have transformed to digital technologies such as mobile technologies,
social media, cloud, internet‐of‐things, big data analytics, and artificial
intelligence. As a result, we have seen the growth of financial technology firms
that are now challenging the banks. (Milana and Ashta 2021).

E-PAYMENT SYSTEM
In the last twenty years, electronic payment system (EPS) has intrigued numerous
analysts and data framework experts due to their significant demonstration in
future electronic commerce. Thus, numerous profound and researches showed up
with various methodologies on electronic payment definitions and were basically
concentrated by gathering of information of academic reports from various
foundations like accounting and financial fields, business innovation to those in
data frameworks. For example, one specialist characterizes e-payment framework
as a type of commercial responsibility that includes the purchaser and the vender
worked with through the utilization of electronic correspondences. Likewise,
considers e-payments to be a type of connection between organizations and
individuals supported by banks and in-switch houses that empowers commercial
exchange electronically.
In another point of view, demonstrated e-payment system as any form of fund
transfer via the internet. Similarly, an electronic payment system refers to an
electronic purchase of products and services through online platforms or in
supermarkets and shopping malls. Moreover, electronic payments also defined as
payment by electronic transfer of credit card details, direct credit or other
electronic means other than payment by cheque and cash (Mohammad Auwal, Siti
Zabedah, Aidi Ahmi 2015).

Techniques
 Expert Systems
Some reports focused specifically on expert systems, looked at as typical artificial
intelligence. An expert knowledge is documented in a database called knowledge
base. This base is connected to an inference base that allows answering back user
queries. Depending on the system, the user uses a port that could be more or less
detailed and questions the system to give suggestions based on the expert's
experience uploaded in the knowledge base. (Carlo Milana, Arvind Ashta 2021)

 Machine learning
Machine Learning is characterized by mathematics, probability theory, and
statistics that consists of monitored readings, unendorsed readings, and enhanced
readings. Monitored readings uses tagged data and feedback if the outcome is
correct. In contrast, unendorsed readings must find its structure or patterns from
untagged data, and the system can learn on its own. Enhanced readings allow the
framework to learn for an online data, and credit assignment is based on positive
and negative messages. Enhanced readings could be beneficial in trading securities
that require a constant rebalancing of portfolios. (Carlo Milana, Arvind Ashta
2021)

 Algorithms
Algorithms are a group of commands and orders used in mathematics or computer
science to identify and fix an issue. Thus, beginning from an input, resulting with
an output. Normally, an issue is discovered, a set of rules are designed to solve it,
and the solution is examined over a wide range of examples. There are thousands
of algorithms and different ways of classifying them. Even within the research on
finance and financial markets, there are many kinds of algorithms being used. One
example of such an algorithm is Classification and Regression Tree (CART)
analysis, an induction model that discovers rules from incomplete data. (Carlo
Milana, Arvind Ashta 2021)

 Neural Networks
Neural networks (NNs) connect inputs with outputs but with hidden intermediate
layers of neurons in between. Each unit in each layer is connected to other units
and makes only one calculation. Each of these connections is given weights that
may be fixed or may evolve, and some networks even allow connections to be
dropped and new ones to be generated. (Carlo Milana, Arvind Ashta 2021)

Methods of AI in finance or financial markets

 Forecasting
We have used estimation, decision-making, bankruptcy prediction, credit
assessment, and fraud issues as the critical application areas based on our keyword
analysis. Three of these were already identified as main areas since the appearance
of academic researches on Neural Network technique. As these researches
mentioned funds management instead of decision-making is used. In this research
engineers took funds management as a sub-section of financial markets. Another
research appeared after this also proved that bankruptcy prediction, debt-risk
assessment, and security market applications are the three most researched areas.
(Carlo Milana, Arvind Ashta 2021)

 Decision making
Scientists complied that all organizations, particularly those in competing
enterprises, should take on artificial intelligence into their firms so they could have
to compete with other firms which are already artificial intelligence adopted, so
they will not face failure and enhance their decision-making process. For instance,
artificial intelligence will permit the business to follow a brand picture shift
utilizing proof from the web and online entertainment. It could likewise find proof
of the reasons for brand shift and loss of portion of the overall industry.
Temporarily, human-made intelligence based independent direction is probably
going to work better where choices are unmistakable. More broad choices will in
any case require a human component. On other hand the estimates are dependable,
rules can be contrived to permit the program to decide or ideas to help the chiefs'
choices by permitting joining of various guidelines into one meta-rule and
recognizing which rule is applied. (Carlo Milana, Arvind Ashta 2021)

 Bankruptcy
Bankruptcy forecasting is an important area of economic research because it is one
of interests to creditors, shareholder and governors. The most referred study in this
area has been the development of z-scores by Altman (1968) using characteristic
analysis. However, financial shareholder is interested bankruptcy predictions using
machine learning to enhance predictive ability. Initial research found that
transmitted algorithms were not as good as linear characteristic analysis in
detecting bankruptcy, despite of this findings still researchers confirms that
machine learning models scoring very good results in bankruptcy prediction.
(Carlo Milana, Arvind Ashta 2021)

 Credit scoring and rating

Banks and lenders use credit scores to assess a borrower's ability to repay. Banks
has been using this since his 1940s. Based on a small sample of training data, we
identify some variables that determine credit risk. It differs from a credit rating
based on the subjective experience of an appraiser. Credit scoring algorithms
include risk factors and their weightings. The relative importance of the risk factors
giving the subject bad credit. Microfinance institutions that use credit scoring can
improve their performance in terms of growth and efficiency, but with the
development of credit scoring tools and the potential screening of some good
borrowers, it costs. (Carlo Milana, Arvind Ashta 2021)
Finally, artificial intelligence in banking and finance has become an important and
safe role in the economic field, as explained in academic researches and technical
reports describing the economic tactics, laws, and impact. It is unapplicable to
define a combination of an enormous sources of studies that can prove or fully
determine that the direction of using artificial intelligence is the expert in
improving the finance world and will be 100 percent a successful approach, still
many studies developed a series of results of using technological approaches in
finance between high advertising results and failure and bad results. Researchers
are analyzing the different AI techniques, alone and in combination, and
comparing them with alternatives, to see what works and what is not worth the
effort. For now, AI have been found productive technology that affect the everyday
life of the average consumer with face and voice recognition systems, interacting
machines with human voices, data collection, and organization of market
information, natural language processing, financial advisory, fraud and risk
assessment, credit management, price setting, applications leading to fintech, and
integration with other emerging technologies including cryptocurrencies and
blockchain. AI poses formidable challenges to the maintenance of existing jobs
even though the creative disruption promises the creation of new jobs and new
occupations, possibly in the areas where AI cannot reach, at least in the present
time, in human capital-intensive industries such as education, arts and
entertainment, tourism, personal services, transport and communication, but also
financial services and microfinance, banking. Both academic and non-academic
literature continues to evolve in line with the vibrating development of AI and the
evolution of computational power in finance and financial market applications. The
limits to economic growth exposed in the aftermath of the financial crisis and the
recent outbreak of the pandemic that followed have created new challenges for AI-
related technologies. The researches address several outstanding issues regarding
efficiency improvements, new data, information, advisory and management
services, risk mitigation, and adverse effects on sustainable growth and increased
economic prosperity. In future can be done in deep learning applications
perspective. For a deep learning technique, see a deep learning model is effective
and can greatly improve the accuracy level by lowering error percentage. Most
functions can be simulated by many patterns in complex networks. One work
should focus on data preprocessing, data cleaning, reducing negativity Impact of
data noise on subsequent stages of data training. It is necessary to re-design the
structure of the network layer in the deep learning model, especially when looking
to mitigate the negative effects of overfitting and sub equipment. The deep learning
model does not rely on the same source of data. More tests related to orientation
deep learning models are important and beneficial to make future enhancement.
Finally, professional development Software companies and system platforms that
implement deep learning techniques are highly recommending the technique as the
future most effective approach for the digital transformation in finance and
banking systems. (Deep learning in finance and banking 2020)

References
 Artificial intelligence techniques in finance and financial markets
May 2021
https://www.researchgate.net/publication/351465873
 Artificial Intelligence: In Banking A Mini-Review
Feb 2020
https://www.researchgate.net/publication/339299131
 Adoption of e-Payment Systems: A Review of Literature
October 2015
https://www.researchgate.net/publication/303329794
 Deep learning in finance and banking: A literature review and classification
2020 http://creativecommons.org/licenses/by/4.0/