MWANGI: Benefits of using Artificial Intelligence in capital markets

While Artificial Intelligence (AI) is quite disruptive to businesses in sectors such as transport with the introduction of self-drive cars, it has the potential of enhancing efficiency and transforming the capital markets.

Artificial intelligence (AI) is an area of computer science that focuses on creation of intelligent machines that work and react like humans with traits such as learning and solving problems. What makes AI so transformative is its ability to learn, perform beyond human capabilities and also evolve and develop new capabilities just like human beings.

The key driver of AI is the ability of computers to analyse data and form predictive patterns which enable them support activities such as delivery of services. AI can process both structured and unstructured data. This is facilitated by the interpretation of content in documents such as legal agreements and converting this unstructured data into structured data more quickly and accurately than human beings.

This frees up the capacity of professionals to be devoted to other assignments where human involvement adds optimum value as opposed to routine and repetitive tasks.

Historically, the capital-raising process has been highly intermediated, making it inefficient due to the dependence on the knowledge/capacity of professionals in the intermediaries, resulting in sub-optimal matching of investors and investments. This reduces the efficiency of capital markets and performance, both for investors and corporates. However, using AI capital market intermediaries can mine data, analyze it quickly and efficiently, ultimately delivering insights to customers that give them a competitive edge, while offering their customers enhanced value.

According to a recent report by the World Economic Forum (WEF), AI has the potential to democratize access to capital across the global economy by unlocking greater efficiency, safety, and performance of capital markets.

The rise of AI is expected to help create digital tools that will rapidly transform the capital markets value chain by introducing aspects such as automating deal matching, investor matching processes, automated trade reconciliation, fraud detection and improve the accuracy of financial models.

In the capital markets industry, AI has the power to; simplify the deal-making process using predictive analytics and automation; improve investment performance through smarter, contextual, AI-driven insights; and deploy advanced capital and risk management solutions by leveraging AI-powered solutions.

AI can also improve capital market operations, especially when it comes to automating repetitive tasks such as number entering and reporting. The WEF’s study found that AI can perform administrative tasks faster and better than humans, enabling the latter to focus on higher-value activities. In today’s world, capital markets intermediaries perform a large number of repetitive tasks such as prospectus’ preparation. However, automating these tasks using AI can not only save hundreds of thousands of man-hours and funds but also ensure that investors are more satisfied, being able to analyse transactions and deals — by themselves, in real time.