This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign
Many individuals don’t have access to a personal financial adviser. However, AI services are emerging as a solution by providing tools to track spending habits and offer advice on money management.
According to Fabian Stephany, a research lecturer in AI and work at the Oxford Internet Institute, AI is now commonly used for “wallet management” and allows apps to analyze users’ spending patterns and offer customized guidance on a variety of financial topics.
For instance, apps like Wally can track finances across various accounts and predict upcoming expenses, while Cleo can automatically set aside savings and fine users for excessive luxury purchases. Plum helps users manage debts and overdrafts by allocating an affordable amount from their income.
Wallet. AI, a San Francisco-based start-up, takes personalization a step further. It offers insights into users’ spending habits, including which days they are most likely to overspend and where they tend to overspend based on location data.
Lenders like Salad Money use AI to offer small loans to borrowers who may not qualify under traditional underwriting criteria. By utilizing open banking data and machine learning to understand spending habits, Salad Money can make credit decisions more efficiently and offer lower interest rates.
While AI-powered personal finance apps have their benefits, there are concerns about potential risks. One concern is whether behavioral insights derived from transaction data and AI could be used to encourage excessive spending. Additionally, Mick McAteer from The Financial Inclusion Centre warns that apps with commercial relationships with lenders and insurance providers may provide biased advice to promote their own services.
Companies in the industry need to ensure transparency and consider data privacy measures to address these concerns. The Financial Conduct Authority (FCA) is currently exploring ways to regulate AI in finance to promote safe and responsible use. The FCA’s Consumer Duty framework is expected to address issues related to AI.
Digitally-savvy individuals may benefit from AI-powered financial services, but there is a risk of excluding those who are less familiar with technology. Chatbots used by banks can provide limited and predefined answers, which may be frustrating for customers seeking more personalized assistance with their finances.
While AI can handle factual questions, consumers may still prefer to receive substantive advice from human financial advisers. Holly Mackay, CEO of consumer website Boring Money, suggests that trust in AI is still developing and it may take time for individuals to be comfortable seeking financial guidance from machines.
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
