Harnessing power of AI to transform financial markets

The use of AI in financial markets has revolutionised the investment and trading landscape. PHOTO | SHUTTERSTOCK

In the dynamic world of finance, where fortunes can be made or lost with a single click, innovation is not a choice — it’s a necessity for survival. The financial industry has always been a breeding ground for technological advancements.

However, some companies have learned the hard way that ignoring innovation can lead to obsolescence. The list of such companies is long, from Motorola to Nokia, Kodak to Compaq, and Yahoo to BlackBerry.

These companies hesitated while the rest of the world embraced the digital age, clinging to tried-and-tested methods. They viewed technological advancements sceptically, believing their legacy and size would safeguard their position. Little did they realise that the tides of change were relentless.

On the flipside, embracing innovation has brought many positive developments. For instance, in Kenya, we’ve witnessed increased literacy levels through online learning portals, deepened financial inclusion through mobile money, and an enhanced retail market through e-commerce.

Amid this growth, there has been a surge of interest in artificial intelligence (AI), the simulation of human intelligence processes by machines, particularly computer systems. With this surge, vendors have been scrambling to promote how their products and services incorporate AI.

Finance and investment experts urge investors to embrace AI-based investment systems, fostering innovation and efficiency boldly.

This initiative seeks to usher in a new era of personalised growth, enabling investors to harness the power of AI to enhance their decision-making processes, adapt to market trends, and stay ahead of the curve.

Recently, at the Old Mutual Investment Group 2023 Conference, attendees were urged to embrace the transformative potential of AI-based investment systems.

This call reflects a resolute commitment from the host to pioneer innovation and redefines industry norms.

Findings from the conference have revealed that the use of AI in financial markets has revolutionised the investment and trading landscape. AI’s ability to analyse vast amounts of data and adapt to market trends makes AI-based investment strategies increasingly relevant to investors.

Moreover, the real-time decision-making capability rooted in investment objectives provides a comprehensive perspective of investment possibilities and helps pinpoint and control risks while adhering to regulatory requirements.

For the investment industry stakeholders, AI can significantly boost efficiency, lower costs through automation, manage risks effectively and personalise investment strategies.

AI-based systems can identify successful trading strategies, automate trading processes, and ultimately lead to increased profits and lower transaction costs.

By evaluating performance based on metrics like return on investment vis-à-vis risk, market players can fine-tune their investment strategies for optimal results.

Therefore, adopting AI-driven technologies in the financial realm offers trustees the ability to navigate complex market fluctuations with greater proficiency. This translates to improved outcomes, not only for market players but also for their clients.

As the investment landscape continues to evolve rapidly, AI equips market players with the tools to address emerging challenges and seize new opportunities effectively.

Moreover, it’s crucial to note that integrating AI into investment practices necessitates a collaborative effort involving financial regulators, policymakers, and industry players.

Establishing ethical frameworks, monitoring compliance, and ensuring transparency in AI-based financial decisions are paramount to safeguarding clients’ interests.

In Kenya, AI is already subject to existing regulations such as the Data Protection Act, GDPR, MiFID II rules, and the eIDAS Regulation, reflecting the industry’s commitment to upholding ethical standards.

However, the use of AI-driven technologies is not without its challenges, which may include data quality and biases, the need to fine-tune regulations on AI, and the increased need for human expertise to develop and monitor AI-based systems.

With these insights, it’s evident that market players embracing AI-based investment systems align with the evolution of the financial industry.

The writer is the Head of Alternative Investments at the Old Mutual Investment Group.