Finance and Accounting

The role of artificial intelligence in personal finance management

According to Statista, the percentage of mobile banking users in the US is at 63% in 2023. This is a 5% rise from the numbers in 2019. In India, 83% of citizens in metro cities regularly use mobile apps. [1] In absolute numbers, the number of mobile banking and digital payment app users in India is much higher.

So, what fuels this growth in users managing personal finance on mobile apps rather than through bank visits or agents? It is the power of artificial intelligence (AI) in finance that gives a highly personalised experience with the right recommendations over a mobile app.

This article explores how AI has revolutionised personal finance management, including income, debts, expenses, savings, and investments.

Ways AI is shaping the future of personal finance

From personalised advice and complaint resolution to providing inputs on managing finances, AI is already giving a more accessible financial experience in personal finance. That said, let us dive deep into how chatbots and personal finance managers are shaping the future of personal finance.

Chatbots

An AI chatbot is as helpful to the business as it is to the user. Its purpose is to answer the customers' questions with personalisation. Some of the sample tasks a user can do using an AI chatbot are scheduling and automating transactions, fetching past transaction details, and diverting to a live agent if required.

Personal finance managers

Personal finance managers (PFMs) work behind the scenes in banking applications and digital wallets. It analyses your transactions and generates insights about your spending and saving habits. It also provides smart suggestions about where you can spend more and where you should save. PFM is a bird’s eye view of your day-to-day financial transactions.

Benefits of AI in personal finance

An increasing number of personal banking account holders use mobile apps for transactions. This is because AI has made their experience easy. AI has also enabled banks to give personalised investment and savings recommendations that have higher chances of uptake. Here are some of the direct benefits of AI in personal finance –

Transforming digital banking

AI-enabled digital banking gives advanced tools to users to manage personal finance. They no longer depend on spreadsheets to track their expenses. Technology is helping people track finances and make better spending decisions.

Algo trading

In recent years, new-age tech startups have disrupted the market by giving direct access to the stock market to retail investors through their mobile phones. This easy access has spurred the interest of the masses, out of which many are using AI-powered algorithmic trading.

By gathering information from millions of data points and applying pre-selected parameters, the AI algorithm can make buying and selling decisions at a speed that is not possible for humans.

Smart investing

Those who do not day trade but are long-term investors can also benefit from AI-based investment recommendations. The algorithm gathers its information from the stock’s risk exposure, historical performance data, and financial health. AI can analyse different investment scenarios and optimise the portfolio by doing the right asset allocation.

Budgeting and expense tracking

AI can analyse your past financial data and create personalised financial plans and budgets considering income, expenses, investments, and financial goals.

Compartmentalise and track your expenses automatically using AI. Identify recurring payments and classify the expenses into different categories through which you can easily identify areas that need optimisation.

Credit management and debt reduction

Without the right information, it is difficult to know which financial decisions take your credit score up or down. AI provides personalised recommendations to pay debt easily and improve the credit score faster.

Create a customised loan repayment plan that helps you pay the debt faster and save on the interest.

While this is just the beginning, in the future, one can expect to see AI-driven personal financial coaches that help you manage finances better. We can also see more secure transactions over mobile apps using blockchain technology. This will make the financial industry increasingly transparent and trustworthy.

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How can Infosys BPM help?

The digital finance ecosystem at Infosys BPM combines best-in-class technology with analytics to deliver top-quartile results. Some of the technologies that digital finance uses are point solutions, automation, artificial intelligence, blockchain, robotic automation, and digital operations.

Read more about AI-powered digital financial service at Infosys BPM.