Artificial Intelligence In Financial Decision Making: Opportunities And Risks

Abstract

Artificial Intelligence (AI) is revolutionizing financial decision-making by enhancing predictive accuracy, operational efficiency, and customer inclusion across banking, investment, and risk management sectors. This study analyzes the dual nature of AI’s impact its opportunities in improving credit scoring accuracy by up to 15%, boosting fraud detection efficiency by 20–25%, and reducing loan approval times by nearly 70% alongside the risks of bias, opacity, and systemic instability. Using a mixed-method research design, the study evaluates quantitative performance data from leading banks and fintech firms (2018–2024) and qualitative insights from regulatory frameworks such as the EU AI Act (2024) and RBI Digital Lending Guidelines (2023). Findings reveal that AI enhances financial performance and inclusiveness but necessitates robust governance, transparency, and fairness auditing. The paper concludes that sustainable AI adoption in finance requires a balance between innovation, ethical responsibility, and regulatory compliance.