It can be said that finance is racing toward digital transformation at the speed of a bullet train as the world's mobile and digitally-enabled consumers continue to grow by the day.
Studies showed the benefits of digital finance are too huge to ignore and one way to quickly realize such transformation is through Artificial Intelligence (AI).
The World Economic Forum reported last January that digitalization of the world’s financial systems will help advance the UN's vision of Sustainable Development Goals (SDGs). Mobile money alone contributes directly to 13 of the 17 SDGs by, for example, providing financial services to individuals and small businesses that would otherwise be financially excluded; enabling access to electricity, water and sanitation (e.g. via mobile pay-as-you-go solutions); by facilitating access to low-cost remittances; by providing means for parents to pay school fees; and by facilitating cash transfers during emergencies.
According to The Financial Brand, heightened interest in AI has occurred because of both capabilities and business needs. The explosive growth of structured and unstructured data, availability of new technologies such as cloud computing and machine learning algorithms, rising pressures brought by new competition, increased regulation and heightened consumer expectations have created a "perfect storm" for the expanded use of AI in financial services.
The report also indicated that benefits of AI in banks and credit unions are widespread, reaching back office operations, compliance, customer experience, product delivery, risk management, and marketing to name a few. Suddenly, banking organizations can work with large histories of data for every decision made.
Below are a few topics that provide insights on how AI accelerates the shift toward digital finance and the value that such transformation brings.
Shifting Toward Dynamic Reports
Less than three years ago since the financial reporting community in the US has been called upon to embrace digital revolution, the demand for financial reporting software has now become massive. Its global market accounted to over US$4 billion in 2018 and is expected to grow at a CAGR of +11% during the forecast period 2019 – 2025.
Among the top players that emerged in the report by The Research Insights were Zoho, Intacct, IBM, QuickBooks, Microsoft, Xero, SAP, NetSuite (Oracle), Sage, FreshBooks, KashFlow, Float, Workiva Inc, Qvinci, and Host Analytics.
The research firm elaborated that financial reporting software alludes to arrangements that are intended to enable clients to perform money related and bookkeeping assignments. This sort of programming fluctuates from essential single-passage frameworks like accounting and check to keep in touch with complex twofold section arrangements. Driving sellers offer propelled usefulness, for example, fixed resources and stock. Money related detailing programming can be gainful for your organization as it can keep your books exact and you can likewise get auspicious suggestions to stay away from late punishments.
According to software review platform FinancesOnline, several benefits of financial reporting software include simplified financial processes, real-time updates, scalability, workflow management, and easier number handling.
Most financial reporting tools involve essential features like estimate and quote creation, tax preparation, multiuser access, including several basic accounting tasks that can be done using software that offers basic features like invoicing (both by snail mail and email), client and vendor management, financial report generation, and income and expense tracking. Applying an automation software should also enable you to automate processes like recurring payments, automatic billing, and past-due notifications to save you time.
The review platform also listed different types of financial reporting software ranging from basic tool suites to ultra costly and accurate programs. Among these are on-premise, Software-as-a-service (SaaS), and cloud-hosted financial reporting systems.
Automated Wealth Managers
Forbes last January published that AI serves as one of the top seven digital transformation trends in financial services for 2019. Contributor Daniel Newman wrote AI is playing an increased role in smart (automated) wealth managers, wealth bots. Using complex algorithms, AI-driven bots can calculate the best investment opportunities, the best interest rates, the best loan providers—pretty much everything someone needs to stay on top of their investment prospects.
Stefano Maruzzi, Vice President for EMEA at GoDaddy, explained chatbots are artificially intelligent systems that can understand human conversations via text input and respond to people with useful information, presented in a natural way. It is possible to interact with chatbots via text message, websites and, most commonly, through social networks.
He said chatbots are getting more sophisticated as they’re now even capable of having full conversations regarding most customer concerns.
"In 2019 and beyond, chatbots are going to become cheaper, more capable, and more accepted by the general population," Maruzzi said. "As a small business owner, you probably cannot afford a 24/7 call-center or a large sales team to handle sales and support. But you can afford a chatbot that answers simple queries and helps customers get responses quickly or while they are actively considering your small business."
The Financial Brand projected that chatbots will save banks billions of dollars in the coming decade. It cited a report released by Juniper predicting chatbots will be responsible for over $8 billion annual cost savings by 2022. According to Gartner, by 2020 chatbots will be handling no less than 85% of all customer service interactions.
Finance Team as Business Partner
Amid all the advancements happening in the digital finance space, companies should focus on maximizing the value of the finance function -- and that is transforming the finance team as a "business partner".
"Digital finance is not just about technology. It is about the finance function holistically leveraging people, organization and technology to take on proactive roles and provide more value to the business in the digital age," wrote Business World columnist Bryan Christopher O. King Kay, who is also a manager with the Finance Consulting practice of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd., a Philippine member firm of the PwC network.
King Kay stressed with access to quality data, the finance function can provide valuable performance and predictive insights as well as collaborate with the business to assist in informed decision making and achieve favorable outcomes.
He said such finance function is now possible since timely and actionable information can now be easily generated backed by robust planning, budgeting, analysis and reporting processes, and tools.
Ash Noah, vice president of Chartered Global Management Accountant (CGMA) external relations for the Association of International Certified Professional Accountants, shared King Kay's sentiment, noting the focus of the CFO is shifting now to provide more effective business guidance.
"Really, what automation and digitization are doing is making finance a more effective business partner," Noah said.
Noah recalled there has been an era of transformation where CFOs have been paying attention to the efficiency factor. But now it's time to start addressing the effectiveness factor.
He said newer technologies such as robotic process automation (RPA) for example are further reducing the costs of the finance department's business processes. RPA addresses finance tasks that are repeatable and predictable.
"Finance is spending less time on assembling data, less time on producing reports and is actually getting more time to spend on analysis. And it's that business analysis which produces the business insights which really drives value for the organization," Noah said. "What you end up with is smart finance factories."