Cast your mind back to the alternative existence that was our life during covid. Were you one of the millions of consumers who had a credit card payment rejected in the Spring of 2020, for no apparent reason? You probably weren’t affected too much, as most of the rejected payments were then approved, so the toilet paper you were frantically ordering in the shadow of the threatened shortage as covid shut down most of the world, was happily processed and delivered. This instance highlights an unexpected flaw in AI in personal finance, as artificial intelligence systems played a role in those rejected transactions.
However, the reason behind those credit card rejections is slightly more ominous. As covid caused lockdowns, there was naturally an upsurge in online buying. The artificial intelligence (AI) systems within FICO, one of the world’s largest data analytics rating companies, concluded that the surge was due to massive criminal activity, and as a safeguard blocked those millions of transactions made by ordinary people buying essential items. This error was rectified when the human analysts noticed the pattern and rectified it. All’s well that ends well – in that particular case at least. However, that is just one small example of how artificial intelligence, which is making increasingly larger imprints in our lives, can – in non-technological terms – really mess things up.
This article is not my attempt to sound the alarm regarding AI, and warn people against using it. We are way beyond that, as traditional AI and now generative AI (deep-learning models that can generate high-quality text, images, and other content based on the data they were trained on) have become ubiquitous in all elements of lives. It has democratized the availability of information and is streamlining work processes that will eliminate some jobs and improve efficiency that will be, and is already, transformative in so many ways.
AI as a tool for personal finance
Banks and financial institutions are among the countless users of AI in some shape or form. That means we can access and benefit from information that is way above our processing capabilities, and its growth and integration into existing systems has been exponential. It has allowed for the automation of many repetitive tasks including risk management, credit assessments and document verification to name but a few examples.
On a personal finance level, there are many budgeting apps which help people take control of their finances and start their journey towards financial stability. These budgeting tools use algorithms to analyse income, expenses and spending habits. They make our budget less overwhelming, by categorizing transactions automatically, identifying trends in spending behavior and forecasting financial needs based on historical data, to list just a few functions. They help us stay on track, without the effort that our pre-AI existence required. They can take some time to train and personalize to your needs so one solution does not fit all. But be careful and don’t overly rely on every response that you receive from AI systems. Sometimes it makes sense to use AI to help you solve specific problems, but always ensure that you are running your larger plan by a person who knows you and your specific circumstances. There are other considerations like the intangible social interactions and reassurances that interacting with real people can provide to help motivate you and keep you on track with your plan.
At Labinsky Financial, we’ve proudly supported thousands of Olim in managing their assets and navigating their financial journeys. With a personal, human-centered approach – not reliant on AI – we provide tailored advice and strategies to help you achieve your financial goals. Reach out to us today to benefit from our expertise and dedication to your success!
AI and investing
AI has impacted investing with the rise of robo-advisors, which individuals can use to provide automated portfolio management based on their risk tolerance and goals. Robo advisors can help generate ideas and even propose portfolio allocations that can make a lot of sense. But be careful if you are relying on them without verifying that not only is the information they are using accurate, but also that their suggestions are indeed appropriate for your circumstances. It won’t be a simple step to sue the AI company if recommendations do not work out as you expect.
Although this is a huge potential limitation, it should not necessarily put you off using AI. I often mention the importance of financial education, and the benefits of the internet as a resource to teach yourself. There is so much accessible information, it is a shame not to use it to inform and empower ourselves. However, we simultaneously must be aware of its limitations, such as trusting unverified information, to name just one.
Think of how AI has impacted the medical field, as a comparison. AI is being used in a variety of ways, from analysing medical images with high accuracy, to personalized medicine, robotic surgeries and virtual health assistants. These and many more advances have led, and continue to lead us, to improved health care. However, we still consult a human doctor who uses these tools to help us. In a similar way, we should learn about and benefit from the many ways AI features within the financial services world. However, they should be a complement to the trusted financial professional you consult who will work with you to assess your needs and help grow your finances to meet your goals.
Final Thoughts
Artificial intelligence is here to stay. No one, not even those creating the behemoth, can foresee how it will continue to evolve, and the increasing impact it will have on all parts of our lives. There is literally a world of information out there waiting for us to learn from – we just need to know how to use it. It might be called artificial, but it is real, and really here. Behatzlacha raba to us all!
With continued prayers for the safe return of all of our hostages, the safety of our soldiers in all their missions, and the security of our nation.