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What is artificial intelligence (AI)?
Artificial intelligence (AI) is a set of technologies that enable computers to simulate aspects of human intelligence and perform complex tasks. These include capabilities such as learning, pattern recognition, decision-making, and language processing. Traditional AI models have been used in finance for decades, primarily for predictive analytics and fraud detection. Since 2022, generative AI applications and advanced language models have been increasingly applied. AI enhances efficiency and accuracy in processes.
How does artificial intelligence work?
Modern AI systems in the financial sector operate by learning from vast amounts of financial and transactional data. Machine learning, which forms the foundation of most AI applications in banking and insurance, enables systems to identify patterns in transactions, customer behavior, and market movements without the need for explicit programming of each scenario.
Deep learning, a more advanced form of AI, utilizes multi-layered neural networks to analyze complex patterns, such as assessing credit risk or detecting suspicious transactions. These systems can process both structured data (such as transaction records and market data) and unstructured data (such as customer emails, documents, and media reports) simultaneously.
The latest generation of AI systems, based on large language models, can also understand context and meaning in documents, communications, and financial data. This enables financial institutions to automate cognitively demanding tasks that previously required human judgment.
To function reliably, AI systems in the financial sector require several key components: a high-quality data infrastructure for collecting and processing data, robust control mechanisms for verifying accuracy and reliability, and a system for regularly updating models to reflect changing financial realities.
Applications of artificial intelligence
AI is used in financial technology for the following purposes:
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Data analysis
AI can analyze vast amounts of financial data and identify patterns and trends that would otherwise go unnoticed. For example, banks can use AI to analyze transaction data to detect unusual behavior that may indicate fraud. Investment firms use AI to analyze market trends and predict price movements, helping them make better investment decisions. By analyzing thousands of variables simultaneously, AI can identify even subtle patterns in market or customer behavior.
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Automatization of processes
AI can be used to automate routine and repetitive tasks, reducing costs and increasing efficiency. For example, the identity verification process when opening bank accounts can be fully automated using technologies such as facial recognition or document analysis. Similarly, AI can automatically process payments and insurance claims, speeding up these processes and reducing the need for manual verification.
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Customer support
Chatbots and virtual assistants powered by AI provide continuous customer support. These chatbots can quickly respond to customer inquiries, provide relevant information, and resolve issues without requiring human intervention. If needed, they can seamlessly transfer the client to a human representative.
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Investment advisory
Robo-advisors use AI to create and optimize investment portfolios. These AI-driven platforms provide automated investment advice, optimizing portfolios for maximum returns with minimal risk. They often offer these services at lower fees compared to financial advisors who rely on direct client interactions.
Why is artificial intelligence important for the National Bank of Slovakia?
- Increasing efficiency: AI can significantly enhance the efficiency of financial institutions, reduce costs, and improve services.
- Predicting financial risks: AI can help identify and mitigate financial risks, contributing to the stability of the financial system.
- Risks and security: AI introduces new challenges in cybersecurity and data protection, which need to be regulated and monitored.
Regulation on artificial intelligence (AI)
The regulation establishing harmonized rules in the field of artificial intelligence, known as the AI Act, is a European Union regulation that sets clear guidelines for the use of AI. The goal is to ensure that AI systems operate transparently, fairly, and without discrimination.
The regulation prohibits the use of AI systems that manipulate client decision-making through subliminal or deceptive techniques. Special emphasis is placed on protecting vulnerable groups, meaning that AI cannot be used to target clients in poor economic conditions, senior citizens, or individuals with disabilities.
The regulation also bans the creation of social scoring systems that assess clients based on their behavior or personal characteristics outside of a relevant financial context. Financial institutions are not allowed to use AI for emotion recognition in their clients, except in cases related to health and safety.
The AI Act defines high-risk AI systems. In the financial sector, this mainly includes systems designed for assessing the creditworthiness of individuals or determining their credit score, except for systems used to detect financial fraud. It also includes systems used for risk assessment and pricing in relation to life and health insurance for individuals.
Deployers and users of these high-risk AI systems must ensure compliance with risk management requirements, implement data management systems that guarantee the quality, integrity, and security of data used for training and operating AI systems, provide transparent and understandable information for users, ensure human oversight of AI system activities, and conduct regular monitoring and performance assessments of the system.
Documents from international standardization institutions
European Supervisory Authorities
International organizations in financial market regulation
Last updated on 14 Feb 2025