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Alan Turing first spoke about AI in 1950, asking, can machines think?. In todays era, I would define Artificial Intelligence as the science and engineering of making intelligent machines and computer programs that understand the intelligence of humans. AI may be one of the biggest technological leaps in history, and is poised to unlock new business models, transform industries, reshape peoples jobs, and boost economic productivity, thereby ushering in a modern-day industrial revolution. It is essentially a statistical technique that leverages Machine Learning and data mining to predict and forecast future outcomes through analysis of current and historical data.

Using AI in investment decision-making offers a significant advantage. It can quickly analyze vast amounts of data as against the traditional methodology where some key numbers could be overlooked by human analysts. With its capability in identifying patterns and trends, AI algorithms can analyse various data types, such as social media sentiment, news articles, and financial statements, to identify signals and make predictions about a companys future performance.

Assisting investors in making more informed decisions, reducing risks, optimising investment portfolios and order flow, executing large orders, improving efficiency in financial markets, can be enhanced by AI. AI is in fact transforming the lending industry, streamlining data processing for more efficient creditworthiness evaluations of potential borrowers, optimising underwriting processes, and enabling more effective management of lending portfolios.

The power of AI and Predictive Modeling also allows companies to rely less on human intervention and reduce overheads. The phase of neoclassic economy is long over, wherein it was assumed that only humans could make well-defined preferences and on the basis of it, reach well-informed decisions. It is evident in the current scenario that the instinct of humans is to follow behavioral economics, combining concepts of psychology and economics to get an understanding about how humans follow a certain kind of behavior in the real world.

However, though AI analyzes behaviors of people as well as quantities of data, it is not a substitute asset. Together, AI and Humans can make decision making more precise, management teams define accountability, support investments with accurate data, as AI focuses on monitoring markets whilst humans consider potential shocks such us war or pandemics.

Over 10 years ago, I developed the algorithm of trading securities. This was nothing more than an AI system analyzing large amounts of data, including historical market trends, news articles, financial reports, and more. We could identify patterns, trends and make investment decisions based on a wider range of data that was not possible for a trader alone. We predicted more accurately the future of market trends and price movements. Our technology enabled us to decide if we should buy, hold or sell a security.

Our traders accessed a better picture of risks supported by our technology providing a full risk assessment of market volatility or even geopolitical risks. We could achieve maximum returns with an efficient portfolio.

For onboarding clients to be financed, we are standardizing credit profiles via AI technology. Our credit team can use tools minimizing time, analyzing more data to decide about investing. In compliance, we assess the humans behind the business and conduct risk management, including security, regulatory compliance, fraud, AML and KYC guidelines.

To survive in the financial industry, you need to champion digital transformation. AI will bring multiple positive effects such as accuracy, precision in predicting future needs; optimization of capital investment decisions; reduction of manual data entry and analysis. We also cannot ignore the risks that this transition process brings, e.g., regulatory, data protection, consolidation between machines and humans. Our daily decision-making processes must guarantee a full alignment between humans and machines.

Views expressed above are the author's own.

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The power of AI and predictive modeling in investment decision making - Times of India