Personal finance refers to the practice of overseeing your income, expenses, debts, savings and investments as a whole. It includes devising strategies that ensure that you do not spend more than what is earned each month.
Due to the COVID-19 pandemic, more Americans than ever before have been closely monitoring their finances. Therefore, many new personal finance apps aim at helping people better manage their funds.
Artificial Intelligence (AI)
AI can be an indispensable asset to personal financial management, automating operations and offering personalized insights. Generative AI learns from data to produce financial advice - making the task of budgeting or portfolio management less tedious. Robo-advisors powered by AI can also analyse individual investor preferences to suggest investments aligning with risk tolerance; additionally, AI platforms may implement savings programs or rounding processes automatically saving people money and helping them to meet financial goals while avoiding debt.
AI can offer an inclusive approach to credit scoring and loan approval, using alternative data sources to gauge an applicant's trustworthiness more fairly and inclusively. Furthermore, voice recognition systems embedded into smart speakers enable individuals to gain real-time information and conduct transactions hands-free; furthermore AI-powered security measures detect suspicious activities in real time and alert individuals right away; thus improving personal finance security by limiting fraudulent transactions and identity theft risks.
Chatbots
Chatbots are artificial intelligence (AI) programs that use automated rules, natural language processing and machine learning technologies to process user requests. Leveraging these technologies, chatbots can interact with their users to answer their inquiries while learning from these interactions to increase accuracy over time.
There are various kinds of chatbots, with scripted ones using decision trees to answer specific queries with pre-written responses being the most prevalent form. They are typically found on websites belonging to large companies to provide basic customer support.
ALICE, one of the more sophisticated chatbots available today, can recognize nuances of human speech such as slang or sarcasm; however, they still struggle with more complex queries that require higher-level abstraction or knowledge - this lack of empathy and personalization leads consumers to call or email in when they have complex issues that need addressing.
DeFi
DeFi uses blockchain technology to provide financial services without middlemen. Users can send money anywhere around the world instantly and at low costs; trade cryptocurrencies like Bitcoin; save them at higher interest rates than banks; invest in crypto funds, stocks or non-fungible tokens (NFTs); buy insurance coverage; and more.
Contrary to conventional financial systems, DeFi is built upon open-source code which can be scrutinized by anyone interested. This makes any app built upon DeFi platforms more likely to be trustworthy and secure.
Experts generally acknowledge that DeFi is unlikely to replace the current financial system wholesale; rather it will serve to upgrade rather than completely alter it. This is because traditional systems are so ingrained into many aspects of modern economies; furthermore it would be impossible to upend trillion-dollar balance sheets of major banks without losing control. Instead DeFi will serve as a way of providing banking services for billions who don't currently have access.
CeFi
CeFi organizations provide individuals with additional ways to generate returns on their investments, such as lending platforms, yield farms and decentralized exchanges. Most have standard sign-up processes with email verification and KYC/AML requirements before charging an annual membership fee for services rendered.
Centralized finance companies differ from deFi in that they are subject to regulation and have implemented systems for user protection, which makes them more reliable; however, security and scalability issues could still present themselves as challenges.
Notable examples of centralized financial services include banks, credit unions and investment firms. Other notables include insurance companies and stock exchanges. Although these organizations are known for providing superior customer support services, their security can still be breached through hacking or other illicit means. Furthermore, their liquidity levels tend to be less than what DeFi offers as well as lower levels of transparency relying on central authorities for verification or authentication processes that increase fraud risks and theft risks.
