We’ve discussed automation and digitization of personal finance and lifestyle a number of times, in both the Cabot Wealth Daily, and Cabot Money Club Magazine.
We’ve covered a range of topics including digital banking, smartphone apps, and even the best ways to find deals when shopping online.
In each of those sectors, evolving technology has continued to bring amazing innovations—in the form of financial apps and software.
And now, we are experiencing a light-year’s worth of technological developments created by the rapidly growing field of artificial intelligence (AI).
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Here are just a few of the promising ways that AI is changing personal finance.
11 Ways Artificial Intelligence (AI) Will Impact Your Finances
Smart Budgeting and Expense Tracking. Instead of just tracking your expenses and income, AI offers the ability to comprehensively view your entire financial picture, review and evaluate your spending habits, categorize expenses and offer insights into exactly where your money is going.
Tools for Automated Saving and Investing. For many years, we’ve had opportunities and tools to automatically save and invest, especially with the advent of 401k plans. But investors have had few automatic resources to determine if the offered investments truly fit their investing needs. With AI, your personal data and preferences will be evaluated to help you determine things like your risk tolerance and how much you can really afford to set aside, as well as offering ideas to boost your investment gains. And at the same time, AI will analyze market movements and news to help you decide if the time is right to invest in the market and maybe in particular sectors.
Of course, as the Chief Analyst for an investment newsletter, I will reserve my judgment as I’ve yet to see Robo-Advisors that can adequately take the place of a good money manager and financial advisor. In my opinion, beginning investors may find such tools helpful. And while I believe that some of these tools—such as determining risk tolerance—would be valuable for all investors, I can imagine a hybrid model which includes specific AI tools, accompanied by customized personal advice from a trusted source.
Wealth Management. No doubt, AI will help investors look at their financial health on a macro level and should be able to offer customized recommendations on debt management, retirement planning, estate planning, and insurance coverage. By looking at the complete picture, consumers can use these tools to optimize their wealth, based on their personal needs and desires.
Improved Fraud Detection and Security. If AI can strengthen fraud detection, we will all benefit. Cybersecurity Ventures forecasts that global cybercrime costs will grow to $10.5 trillion annually by 2025, up from $3 trillion in 2015, a remarkable increase in just a decade.
Most of you have probably been a victim of some type of hacking—in your credit cards, bank accounts, or payment processors. I just recently had to replace my bank debit card due to unauthorized charges; I’ve had to order new credit cards more than once in the past few years; and last year, even my PayPal account was hacked.
So, yay AI! The mega-computers sorting data will get much better at finding patterns of misbehavior by using biometric authentication, speech recognition, and behavior analysis.
Chatbots and Natural Language Processing. I know you’ve all had exposure to chatbots and virtual assistants on your bank, brokerage, credit card, and other financial platforms. For better or worse, they are here to stay. And as they become more entrenched in AI, they should see radical improvements in interpreting questions and matching them with the right answers.
Loan Approval and Credit Scoring Improvements. Loan approval is heavily dependent upon credit scores, which, to put it mildly, have never encompassed a person’s total financial picture. AI credit scoring algorithms are beginning to include utility payments, rent history, and even social media activity, in order to determine the trustworthiness and repayment ability of borrowers.
Emotional Well-Being and Behavioral Finance. AI experts say that AI will be used to analyze personal patterns and give feedback on how closely folks are meeting their financial goals. That means timely reminders to keep you on track in case you slack off.
Tax Preparation and Filing Features. No longer just data entry programs, the new AI-powered tax apps help taxpayers organize their documents, calculate deductions, and generate accurate tax returns. Hopefully, they can also help me find more deductions!
The Potential for Blockchain Integration in Finance Apps. In the ever-evolving crypto world, these applications are designed to strengthen security, streamline processes, and improve trust in financial interactions.
Digital Home Management from Purchase through Sale. Think of all the processes you go through during your home ownership period—house-hunting, buying, mortgaging, renovating, repairing, and eventually selling your home.
There are a zillion questions you will ask throughout these processes—of Realtors, lenders, insurance agents, home maintenance providers, home improvement retailers, contractors, utility companies, title companies, home inspectors, and others. Now imagine generative AI technology on a digital home management platform—a Q&A session that can provide most of your answers in a chatbot without human interaction.
While AI will certainly make huge inroads in this area, I think we still have a ways to go before this technology has the capabilities to totally replace humans in this arena.
Access for Underserved Populations. With more than eight billion people in the world, 1.5 billion of them do not have access to banks, according to the World Bank. With AI, these folks can gain access to certain banking and financial services, such as bill payments, lending and credit validation, which will aid them when they are ready to apply for a loan.
Even the AI pros don’t think that AI is going to be the be-all and end-all to managing personal finances. After all, we are human, and oftentimes, our decisions will need to be aided by human interaction—experts in the various fields that you will need—people who can help you assess your emotional requirements, motivations, financial goals, and preferences. But AI is certainly on track to revolutionize and improve the tools that we need for optimizing our financial health.
This post has been partially excerpted from the latest issue of Cabot Money Club Magazine, for the full story, including the best ways to put AI to work for your finances now, subscribe today.
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