ChatGPT & Co.: How Will Artificial Intelligence Change the Financial Industry?

ChatGPT, a chatbot powered by artificial intelligence, is generating a public response that is off the charts at the moment. ChatGPT has gained over 100 million users in the span of two months, an achievement unmatched by any other app. TikTok, by comparison, took nine months to break the 100 million mark.

ChatGPT is a speech- and text-based chatbot. With the help of advanced deep learning technologies, the bot was trained to comprehend and generate language. It, for example, is able to carry on a conversation, is capable of explaining complicated subjects in a simple manner, and has the ability to write poetry and essays. Conversing with ChatGPT is a bit like speaking with a highly intelligent person who knows everything, or at least almost everything. If ChatGPT, for instance, is asked which team won the FIFA World Cup trophy in Qatar, it doesn’t spit out a usable answer because the data that was fed to the chatbot extends only to the year 2021.

The technology nevertheless is impressive. ChatGPT makes artificial intelligence truly tangible for everyone for the first time. There accordingly has been a lot of speculation about how this novel technology will change the world. What processes can it automate? What jobs will be taken over in the future by artificial intelligence? And what are its limitations? These questions aren’t new, but they are more topical than ever today.

These questions, of course, can also be broken down to individual industries, including the financial sector. Where does the scope of artificial intelligence applications lie for financial institutions?

There are numerous deployment possibilities for technologies like ChatGPT. Below is an attempt to classify them:

This arguably is the most obvious application area. Artificial intelligence can take over handling simple customer queries. The consultation then is conducted via chatbot instead of over the telephone or at the teller window. This allows staff to concentrate on more complicated queries.

This is nothing new. For years now, more and more processes have been automated with the help of technology. Artificial intelligence can further accelerate the pace of automation. Routine tasks – such as onboarding new customers or executing transactions – that currently are still carried out by humans could be done by machines in the future.

Roboadvisors already exist today. They ascertain a client’s investment objectives, risk appetite, and financial situation and provide investment recommendations based on those parameters. With a large language model of the kind that ChatGPT employs, digital investment advisors could become much more personal and could address a client’s unique investment needs in much greater detail.

Algorithms based on artificial intelligence can analyze enormous amounts of data and spot patterns and anomalies in it. Artificial intelligence thus can effectively help to detect money laundering or fraud.

This, too, has to do with the ability of artificial intelligence to analyze huge sets of data. In the process of trawling through data sets, algorithms could flag potential vulnerabilities and risks, thus enabling financial institutions to mitigate them. This would lead to better decision-making and would help to avert financial losses.

Language-based artificial intelligence has enormous potential in the field of marketing. From short texts to entire blog posts, ChatGPT is already able today to produce all kinds of content – content that can be tailored to a specific financial institution and its target audiences with the help of simple commands. Artificial intelligence can also automate or optimize processes in other areas of marketing such as in e-mail marketing or search engine optimization.

Overall, ChatGPT and other similar technologies have the potential to revolutionize the financial industry by improving customer service, increasing efficiency, reducing risk, and providing personalized financial advice. However, it is important to note that these technologies are not without their risks and limitations, and proper regulations and oversight will be necessary to ensure their safe and ethical use.

By the way, the paragraph you just read was written not by the author of this article, but by ChatGPT. Would you have noticed that on your own?

If machines take over tasks performed by humans, one question that always resonates is whether that will render certain jobs obsolete. The quick and simple answer to that question is “yes.” But history has shown that technological innovations also always open new possibilities. In other words, it’s very probable that some jobs will become superfluous, but at the same time technological advancements will create new ones. Workers therefore must possess one quality most of all: flexibility.

It will likely take some time before technologies like ChatGPT can be reliably deployed in a wide range of areas. ChatGPT is awing the masses at the moment, but the chatbot also has its shortcomings. Many users, for example, have reported receiving some erroneous information from ChatGPT. Moreover, the financial industry in particular processes highly sensitive data. Before feeding such data into a tool like ChatGPT, one would first have to ensure that the data are ironclad secure at all times.

Even Sam Altman, the CEO of OpenAI (the company behind ChatGPT), warned against misplaced euphoria in a Twitter post last December, saying: “ChatGPT is incredibly limited, but good enough at some things to create a misleading impression of greatness. It’s a mistake to be relying on it for anything important right now. It’s a preview of progress; we have lots of work to do on robustness and truthfulness.”