Artificial Intelligence in Finance: Top Trends in 2023

Dec 6, 2022

Artificial Intelligence in Finance: Top Trends in 2023

Despite the global economic challenges, especially in the tech space, the Artificial Intelligence (AI) market continues to stand strong. In fact, the AI market is expected to be worth $1,394 billion by 2029. That’s a CAGR of20%. Proof that AI shows no signs of slowing down.

This growth extends to AI fintech solutions too. This niche is expected to be worth $22 billion alone by 2025. More and more industries are looking to integrate AI technologies, including healthcare, logistics, eCommerce, and more.

However, despite this continuous investment in the space, it’s estimated that around 80% of AI projects fail. If anything, this demonstrates a determination to get AI to work, but AI solutions need to focus on the end-user for success.

AI has the potential to help the financial sector through the next challenging few months, and throughout next year. But, how do ween sure that AI can reach its potential for investors?

AI in a Bear Market

Needless to say, 2022 has been a particularly challenging year for investors. Significant losses for some of the best investors have been the result of a global bear market. Inflation continues to increase, and financial institutions are working their way through challenges that haven’t been seen in around 30-40 years.

The processes and assumptions that have worked in the past, aren’t applicable to the current investment market.

In this type of economic environment, how can AI technologies help investors to gain an advantage and correct their performance?

Ultimately, the market will return to fundamentals overtime. So, the question becomes, which stocks and opportunities will improve from this point forward?

Investors that are willing to utilize the latest technologies for in-depth performance analysis are most likely to succeed in this future market. AI and Machine Learning (ML) technology have the capability to analyse more data than any human analyst, and this is going to be the key to truly understanding market performance.

With the right factor frameworks, ML and AI can understand the market at a much deeper level. That’s why 3AI’s investment solution delves into 326 factors for accurate predictions on over 20,000 stocks.

Explainable AI Will Increase Adoption

In the past, AI adoption hasn’t been as simple as it sounds. Predicting market performance using the volumes of data available seems like a fairly obvious progression. However, the AI market has faced a very simple hurdle in adoption: fear of AI.

Generally, in the finance market, this stems from a lack of trust in the unknown. Too many AI solutions are what is referred to as “Black Box AI”. Just as it sounds, this is AI technology that gathers data, processes it, and provides an answer. What happens inside the AI technology is a mystery to its users, hence the term“ black box”.

These solutions simply cannot work in the finance sector. Transparency is the key to successful forecasts and to increasing adoption in the space.

Explainable AI, or XAI, intends to break down the wall between investors and AI technology. Combined with a factor framework, XAI shows the individual elements or data used to reach a certain conclusion. For those in the investment industry, this means that you can assess the criteria and make decisions based on context, empowered by AI. XAI is an AI that you can trust.

AI to Increase Productivity and Cut Costs

Artificial Intelligence in finance doesn’t just mean AI-powered predictions and forecasts for improved accuracy and performance. Ultimately, attempting to translate big data is an extremely time-consuming task.

Investors are human, and they can only process so much and analyse a certain amount of information. It takes time to reach a conclusion on market performance.

AI hits a sweet spot in the finance world. Not only is it capable of handling more data than any human investor, but it can do so in a matter of seconds. This allows investors to take advantage of their own time, and focus on the tasks that really matter, including managing their portfolio overall.

Needless to say, the less time spent doing repetitive or time-consuming tasks, the more costs can be saved. Ideally, Artificial Intelligence in finance will increase returns while optimizing investor time.

AI Will Empower the New Winners After the Crisis

After economic crises like the one we are facing currently, there are always new winners that emerge. There will always be some that thrive and some that fall. Typically, those winners are the companies with innovative strategies. They are the companies that break the mould.

In the finance industry, this means that passive investing strategies and following the crowd aren’t the answer in the current market. Many investors have relied on this strategy for decades, and now is the time for change.

The smart adoption of AI technology will be the driving force behind company and investment growth as we push forward and out of these economic challenges. That’s why you need to find AI solutions that give you a competitive advantage now, rather than later.

AI-Powered Factor Investing

As mentioned, passive investing has been a popular strategy for investors in the past. However, this isn’t sustainable if you’re interested in real growth. The primary challenge here is that it has resulted in a homogenized market, where so many investors follow the same strategy.

In current passive factor investing strategies, there area limited number of factors to analyse and it’s challenging to be fast enough to make decisions based on those factors. Reduced numbers of factors limit the investor understanding of each stock.

AI solutions, like those offered by 3AI, unlock alpha by analysing according to a deep factor framework. Our AI technology is able to analyse 326 factors for over 20,000 stocks. Giving it the power to translate billions of data points into real, tenable insights.

3AI’s solution is trained on over 1 million years of cumulative data and has been proven to outperform some of the leading global indices.

Tools like ours allow you to outperform the competition, with a different approach for the modern market. The future winning investors will innovate and integrate technology like this. Those that follow the pack are likely to be swiftly left behind.

Let Us Help You Unlock Alpha

At 3AI, our intention was not to build an AI company. We sought to understand the modern market and how it works, and empower investors to perform despite its challenges.

We found that AI technology was the best way to reach our ambition. Artificial intelligence in finance is capable of managing the big data that is necessary to make smarter investment decisions in a data-saturated world.

Want to learn more about our AI solutions for investors? Get in touch with us today!