Machine Learning

Holy algorithms, machine learning is shaking up the world of finance. Machine learning is actually a subset of artificial intelligence (AI) for all of you that have just discovered blockchain and bitcoin. Well, you are not alone since it seems 'The Economist' has just "discovered this new" field too and writes a good article on it. Oh, and unlike robots, machine learning IS NOT about machines learning to take your job. ML is here to help you.

(Bill Taylor/CEO)

"Machine-learning is already much used for tasks such as compliance, risk management and fraud prevention. Intelligent Voice, a British firm, sells its machine-learning-driven speech-transcription tool to large banks to monitor traders’ phone calls for signs of wrongdoing, such as insider trading. Other specialists, like Xcelerit or Kinetica, offer banks and investment firms near-real-time tracking of their risk exposures, allowing them to monitor their capital requirements at all times.

Machine-learning excels in spotting unusual patterns of transactions, which can indicate fraud. Firms ranging from startups such as Feedzai (for payments) or Shift Technology (for insurance) to behemoths such as IBM are offering such services.

Some are developing the skills in-house. Monzo, a British banking startup, built a model quick enough to stop would-be fraudsters from completing a transaction, bringing the fraud rate on its pre-paid cards down from 0.85% in June 2016 to less than 0.1% by January 2017.

Natural-language processing, where AI-based systems are unleashed on text, is starting to have a big impact in document-heavy parts of finance. In June 2016 JPMorgan Chase deployed software that can sift through 12,000 commercial-loan contracts in seconds, compared with the 360,000 hours it used to take lawyers and loan officers to review the contracts.

Machine-learning is also good at automating financial decisions, whether assessing creditworthiness or eligibility for an insurance policy. Zest Finance has been in the business of automated credit-scoring since its founding in 2009. Earlier this year it rolled out a machine-learning underwriting tool to help lenders make credit decisions, even for people with little conventional credit-scoring information. It sifts through vast amounts of data, such as people’s payment history or how they interact with a lender’s website. Lemonade, a tech-savvy insurance startup, is using machine-learning both to sell insurance policies and to manage claims..."

Source: Economist.com