Artificial intelligence – AI – is grabbing headlines at the moment, with some commentators assessing its likely impact on daily life as being on the same scale as the Industrial Revolution or the development of the internet.
Still in its relative infancy, AI is already transforming areas such as education and entertainment, answering study questions and serving up music and programmes according to an assessment of an individual’s previous preferences.
It is hard to think of an area where it won’t have a major impact. The Forbes Advisor team has taken a look at how it will affect your financial situation across a range of products and services.
What does AI mean for your…
Investments
AI will doubtless be another landmark step in the evolution of the investment industry in the same way that electronic trading and the rise of the internet. Smartphone users now effectively carry a full-blown dealing room in their pocket, writes Andrew Michael.
AI will likely provide new opportunities beyond achieving cost reductions and efficiencies. For example, it can equip firms with the tools to shore up compliance and risk management functions, augment and automate data analysis, and anticipate events.
Computer algorithms are already responsible for managing trillions of pounds of investors’ cash worldwide. But Investors seeking outperformance, will now be able to adopt AI-driven datasets to achieve their aims.
The customer experience, meanwhile, will be a new battleground as AI helps advisors to generate more insights and customise their content more effectively.
From the private investor’s perspective, AI can also provide knowledge that was once limited only to the privileged and disseminate it to consumers globally.
At the coalface, AI can analyse a share’s economic history and assess what factors influence its performance. It can also work out an investment’s riskiness and potentially prevent investors acting impulsively.
Robo-advisors already provide a halfway house between DIY investing and full-blown financial advice. Throw a dose of AI into the mix and tailored advice will likely become the norm for many more people.
With technology of this magnitude to hand, AI has the capacity to help even more people build their wealth and achieve their financial goals.
Insurance policies
AI won’t change the basic principles of insurance, but it will change the way insurance companies work, writes Kevin Pratt.
You’ll still need to provide information and pay a premium to get your car, home, travel and other forms of cover. But a lot of the decisions about how much you’ll pay will be determined by an AI assessment of how risky you are, not by a human underwriter.
This already happens to a certain extent, but the growing sophistication of AI will mean algorithms will play a bigger role in calculating how much you’ll pay – or, in some instances, whether you’ll be refused cover for being too much of a risk.
A lot of the claims process will also be automated, and it’s likely you’ll communicate with an AI bot in most instances, rather than a human. All this could lead to cost savings that, hopefully, will cut our premiums.
That’s the theory, at least – we’ll have to wait and see if it becomes reality. Premiums generally are rising swiftly during the widespread cost-of-living crisis, and even the might of AI is not an automatic panacea for that problem as far as insurance is concerned.
We’re also likely to see insurance-oriented AI interact with the so-called Internet of Things – the smart technology increasingly present in our homes and cars – to further refine the insurer’s knowledge of our risk profiles.
This raises possible issues of privacy and security. Tell an AI machine it’s got a job in insurance, and it will acquire an insatiable appetite for information about potential policyholders. Where the line will be drawn remains to be seen.
Credit cards
By using vast amounts of financial data – much of which is already available via the open banking network – AI could identify a consumer’s credit card spending patterns within milliseconds, writes Laura Howard.
It could also more quickly and accurately predict future financial behaviour, such as a major purchase or even financial difficulty.
Rolling data like this could be used to inform everything from the best type of credit card for a consumer (rewards, interest-free or credit builder, for example) to the most relevant offers and discounts which could be presented in real time ‘as you shop’, catering to spending patterns and preferences.
AI could also determine a consumer’s eligibility for a credit card more accurately than the current system, which relies on credit reports held by third party credit reference agencies.
Customer service at credit card providers may or may not improve under AI, with experts predicting that it will be impossible to tell if you are talking to a bot or a human by 2030.
A spokesperson from trade body, UK Finance commented: “We are likely to see financial services firms adopt more advanced analytical techniques over the coming years. This may include applications that better protect credit card users from fraud or that can deliver more accurate credit checks.”
Broadband & home entertainment
AI could be used to improve broadband speeds, writes Mark Hooson.
Technology already exists which employs AI to study images of roadside telephone cabinets and identify and fix misrouted cables. There are also AI solutions designed to sense vibrations in fibre optic cables that indicate abnormalities.
And while AI is likely to help make using the internet faster, it’s also poised to completely alter the way in which we use the web. It’s hard not to imagine search engines losing significance or completely reimagining the way they work in response to AI muscling in on their territory.
For instance, AI fed by data from your surroundings, location, web history and so forth could be used to anticipate what information you’ll eventually request from the internet and serve it up to you proactively.
We already see streaming platforms making suggestions for music, film and television content based on user preferences – and AI advancements could make those processes more personalised and more relevant.
Mobile phone
While there’s a lot of future gazing about how AI will affect our daily lives in the future, it’s actually already happening, writes Mark Hooson.
Smartphones have already adopted AI and machine learning technology in some subtle and not-so-subtle ways. One of the most common applications is in smartphone photography.
Check your phone’s photo gallery and you may find it has automatically created folders based on categories such as people, nature, buildings, pets and so forth. This is made possible with AI that recognises the subject of your photos and tags them accordingly.
If you use a voice assistant like Siri on iPhone or Google Assistant on Android, AI plays a part in parsing your speech so that the software can understand your words and respond accordingly.
Add to that biometric security that allows you to unlock your device by looking at it, battery optimisation that extends standby time by understanding how you use your phone, and call screening that will listen to incoming calls to flag them for spam.
AI has clearly become an important part of smartphone technology, and with perhaps only the surface so far scratched, we’re sure to see many more innovations in this space.
Energy & utilities
AI, along with smart technology, presents a number of ways for energy and water companies to monitor the amounts their customers are consuming, writes Candiece Cyrus.
Using this data, they could offer tailored services and advice to help households improve their energy efficiency, and save money on their bills.
According to the Energy Saving Trust, over 40% of households and small businesses have smart meters, which are designed to show users how much energy they are using in almost real-time, so they can find ways to reduce their energy consumption. The target is for all properties to be offered a smart meter by the end of 2025.
Using remote technology, smart meters also send regular readings to energy firms so they can provide more accurate billing.
AI would build on this technology, enabling utility companies to use data from meters and other devices to find out which appliances a household uses the most and, crucially, when.
The firms could then use this data to help find customers the most suitable tariff – energy firms are already testing ‘time of use’ billing, which rewards customers for using appliances outside peak demand period, when wholesale energy prices are lower.
It is also likely that AI will be used to improve the management of energy supply. Last winter, National Grid used its Demand Flexibility Service to encourage consumers to limit usage in times of peak demand.
This will become more important as more people move to electric vehicles, placing ever great strain on electricity supply.
Savings
AI has the potential to change the way we save, writes Bethany Garner.
Users could ask an AI to scan the market in order to find the best rates available, or ask a chatbot questions about an account they’re considering.
By analysing your saving habits over time, AI could improve the suggestions it makes. For instance, if you’ve opened an easy access account but only make withdrawals once or twice a year, an AI bot might recommend you move the cash to a limited access account offering a better rate of interest.
Another use-case could see AI automatically move savers’ money from one account to another whenever better rates become available with the same withdrawal terms, helping them maximise interest earnings with minimal input.
However, since rates change quickly, there may be a way to go before AI can replace human input.
ChatGPT, for instance, says the system has ‘limited knowledge’ of events that took place after 2021, which means savers may not see the most up-to-date options when they ask for a recommendation.
Current accounts & banking
AI has already changed how we carry out everyday banking tasks, writes Bethany Garner.
A number of banks and building societies now use chatbots to answer customer queries online or through an app. In theory, this frees up human workers to handle more complex issues, resulting in better customer service.
A more sophisticated chatbot may be able to carry out tasks on your behalf when given prompts, such as ‘Move £100 into my savings account,’ ‘Help me open an ISA’ or ‘Change my overdraft limit.’
Elsewhere, AI may be able to sort through different bank accounts, and recommend one that fits your needs, taking much of the leg work out of switching current accounts.
Another use case is budgeting. By allowing an AI to analyse your spending habits, it could make suggestions about where you can cut back, and create a dynamic budget that changes with your goals and circumstances.
Open Banking – the government-backed system that allows you to securely share account information with trusted apps and websites – will play an important role as money management apps develop to help people make the most of their cash.
Mortgage
AI has the potential to make getting a mortgage quicker as brokers and lenders use the technology to automate processes, such as data gathering about the customer, and reduce manual errors, writes Jo Thornhill.
But it will mean borrowers are more likely to be interacting with an AI bot than a real person during their mortgage application.
AI tools are also likely to be used by lenders to improve risk analysis. This could benefit some customers, particularly those who are viewed by lenders as being ‘non standard’ borrowers, such as the self-employed and those with an irregular income.
If AI can be used to scour greater amounts of data about non standard borrowers, this should lead to more accurate and fairer lending decisions.
But some mortgage underwriting experts have expressed concerns about using AI for assessing a customer’s creditworthiness. The AI algorithm solely focuses on data in its decision-making – it cannot use judgment as a human would. This could potentially lead to flawed lending decisions.
