Top 5 ways Artificial Intelligence is Changing Traditional Finance

by | Mar 25, 2019 | Financial Featured

For many decades, the International financial service sector remained static, resistant to change or adaptation of how it does things, becoming very inefficient as a result. However, the arrival of computing and Artificial Intelligence in the early 1980s led to a revolution that led to considerable changes in the sector that are still happening today.

With large, intricate worldwide markets and massive data sets, the financial service industry has a huge growth potential especially with the adoption of Artificial Intelligence.

As consumers demand more transparency, efficiency and better experiences, financial services have been compelled to adopt Artificial Intelligence in their sector.

Here are 5 ways A.I is transforming the Finance Sector:

1. Improvements in efficiency

Historically, making decisions in traditional trading was based on years of experience in the markets and pure intuition. It was obviously clear that the process could be made much more effective. Automation was therefore adopted in the Finacial sector in the form of bots which are algorithmic programs that will automatically execute trades based on the set of rules that the bot will follow.


The bots are generally based on the earliest rule systems where both fundamental and market data like information on traded assets and price and volume data is analyzed. Bots have completely changed the financial markets, bringing in improved efficiency, by allowing many more trades to be made faster than ever before.

2. Commodity Trading

Extra efforts to improve on the original bots and increase their effectiveness in trading has led to the financial industry heavily investing in machine learning programs and Artificial Intelligence. By utilizing the sector’s professional expertise, as well as building trading systems that allow A.I to play a more significant role throughout the process, the financial industry is experiencing one of the most significant shifts since computers were introduced.

The trading of commodities is one of the best examples of these shifts. Whether it’s metals, food or energy, trading commodities is a great way of diversifying a portfolio past common securities to improve profits. Artificial Intelligence algorithms can analyze vast sets of data, both historical and environmental, and are strategically implemented, developed, and fine-tuned to trade commodities to increase gains.

Although bots vary in range and specializations, they collectively build a comprehensive and reliable approach, which was impossible when only human traders were involved.

3. Democratize access

For many years, Artificial Intelligence and machine learning, as well as other complex tech, were only used in the hedge funds and large investment banks sector. We are, however, beginning to see a democratization of Artificial Intelligence technology, which has enabled everyday customers to utilize this great technology for themselves. An increase in open source projects has also made these program readily available for everyone.

Trading commodities were, for example, not available for the average investor as a form of investment because it required a lot of money, time and expertise. But now, thanks to the democratization of Artificial Intelligence technology and machine learning algorithms, trading commodities is easier and more available to more people than ever before.

4. Open up cryptocurrency trading

Algorithms that are based on Artificial Intelligence have successfully allowed trading in growing and disorganized markets like cryptocurrencies. Notably less predictable than conventional markets, the cryptocurrency market does not have a defined value, and as such, it is likely to be very volatile.

In this fiercely volatile market, Artificial Intelligence and data analysis can take advantage of the ever-changing dynamics. While human traders are exposed to a lot of emotions clouding their judgments, algorithms don’t have that problem. As reported by Admiral markets, algorithms can work rationally for virtually unlimited amounts of time. Furthermore, algorithms can detect trading patterns that humans cannot identify, particularly in markets that are filled with irrational pessimism like the cryptocurrency market.

5. Reduce risks in trading

Algorithms that are based on A.I are also capable of avoiding high-risk margins and sloppiness that regularly occur when humans influence trading, particularly in volatile markets. Furthermore, they can identify, analyze and respond on any irregularities in the market just when they are happening in order to counteract market manipulations. This reduces the chances of making the wrong call while investing.

Utilizing A.I also eliminates the chances of human error. Plans that would need about 200 financial analysts to build can be done by one A.I in two days. By substituting the gut feeling with facts and logic, the whole trading process is efficient especially when in young and volatile trading markets.

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