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Unleashing the Future: How Artificial Intelligence in Banking and Treasury is transforming our world

23rd Oct 2023

Artificial Intelligence (AI) is a buzzword that simply cannot be ignored.

From conferences to seminars, the discussion around AI is ever-present but what does AI in Banking and Treasury truly mean, and how does it impact these sectors?

In this article, we delve into the world of AI in Banking and Treasury to provide you with insights and understanding.

 

Artificial Intelligence: The sixth wave of innovation

What is meant by Artificial Intelligence or AI?

It refers to the simulation of human intelligence processes by machines, especially computer systems. It involves learning, reasoning, problem-solving, and adapting to new situations. In essence, AI enables computers to perform tasks that typically require human intelligence.

It also has the power to transform all aspects of life, including business. AI has the power to disrupt the foundations of the financial services industry, weakening the components of traditional financial institutions and enabling accessibility, transparency and operating models.

 

AI in the World of Banking and Treasury – It Isn’t New

AI has been quietly revolutionising banking and treasury operations for years.

Long before it was labelled as AI, machine learning algorithms were at work, identifying trends, making recommendations, and flagging unusual transactions.

AI has played a pivotal role in transaction monitoring, as it can swiftly analyse vast datasets to identify anomalies or suspicious activities, thereby safeguarding financial institutions from fraud and illicit activities.

Arguably the real magic of AI lies in its ability to learn and adapt. It continually improves its capabilities by analysing patterns and data. As AI algorithms evolve, transaction monitoring and matching learning go hand in hand.

The more data AI processes, the more accurately it can detect and prevent fraudulent transactions, making it a vital tool in the armoury of modern banking and treasury professionals.

 

AI Forecasting and Profiling in Treasury

In the world of treasury management, AI is a game-changer.

AI forecasting involves the use of advanced algorithms to predict future trends and optimise financial decisions. By analysing historical data and market trends, AI can assist treasury professionals in making informed choices about investments, cash management, and risk mitigation.

Moreover, AI profiling helps create a comprehensive picture of a client’s financial needs. It takes into account various factors, such as risk tolerance, investment goals, and market conditions, to tailor financial strategies that align with a client’s unique requirements. This personalisation and predictive ability can significantly enhance the services offered by treasury departments.

 

AI for the Standard Client-Facing Treasurer

One real-world example comes from our explorations at JTC. We are developing an AI solution to assist clients looking to optimise their cash. It’s about diversifying their funds intelligently to protect their assets and enhance yields. The role of AI in achieving this is undeniable.

However, the success of such AI applications depends on having robust data validation tools in place. Complacency is the biggest threat to AI adoption in the banking and treasury sector. We all share a responsibility to ensure that our clients’ portfolios, built on years of hard work, are understood and protected. Therefore, we are cautious and choose to validate AI-generated data with human expertise.

At JTC we are currently prototyping AI to understand our clients’ requirements better. In our latest model we use it to make recommendations based on our core banking relationships, cross-referencing data from multiple sources. This involves checking the latest ratings from agencies like S&P, Fitch, or Moody’s, analysing media news, and cross-referencing it against call and fixed deposit rates. While AI is exciting, we rely on the human touch to ensure data quality.

 

No fate but what we make

Learning how to harness AI effectively is crucial, but equally important is the ability to validate the data AI generates.

The challenge lies in distinguishing between truth, misinterpretation, and machine learning errors.

As an example, the challenges that face artificial intelligence, Chat GPT4’s prime number identification accuracy fell from 97.6% to 2.4% from March to June 2023 according to researchers from Stanford University and UC Berkeley.

To address this, AI data validators and tools are emerging across sectors. They act as gatekeepers, ensuring the quality and accuracy of AI-generated insights. Without effective data validation, the trust in AI’s capabilities is undermined, and that could lead to costly errors.

AI is poised to revolutionise the world of Banking and Treasury, offering unparalleled insights and automation capabilities. However, the success of AI implementation hinges on responsible data validation and human oversight. It’s an exciting journey, but we must remember that the red pen still has a role to play in ensuring the quality and accuracy of AI-generated insights.

 

How can JTC help?

JTC Treasury Services offers a transparent, proactively managed range of cash management, foreign exchange and lending services, supported by the expertise of our dedicated team of experienced market professionals.

 

By using JTC’s buying power, we negotiate highly competitive interest rates, foreign exchange pricing and lending rates, which ultimately means a better deal for clients.

To find out more about artificial intelligence, banking technology or treasury services, please contact Paul directly.

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