Artificial intelligence, financial risk management, and Islamic finance

Abstract

Artificial intelligence (AI) helps the human being get the services from the machine where the transformation of the human thinking ability into the machine works at the back end. It is believed that AI is the intelligence that is highly associated with human thinking capabilities in decision making and complex problem solving with an ability to reason, think, and improve like a human. Like other industries, AI also has the prospect in financial industries, including Islamic Financial Institutions (IFIs), in ensuring cost reduction alongside the improvement of the service quality with the efficient utilization of the resources. As the financial services sector undergoes groundbreaking journeys utilizing emerging technologies such as AI, IFIs need to be part of this stream. IFIs should build an AI strategy and concentrate on some AI technologies such as machine learning and some other popular technologies on their existing system to get under way. Many conventional banks are using AI on a large scale, so IFIs can take help from those firms. This would encourage IFIs to provide a personalized touch and improve customer service. To this end, this chapter develops a brief introduction to AI in connection with the financial industry and highlights the existing AI technologies used in both conventional financial institutions and IFIs. In doing so, this chapter identifies some of the prospects of using AI in IFIs and some challenges related to the implementation of AI in IFIs.