Recent months have been challenging for many people’s financial wellbeing – with sharp increases in the cost of living and interest rate hikes affecting mortgages and other debt.

Could recent developments in artificial intelligence (AI) be used to improve financial wellbeing? I have set out key areas where I think AI could move the dial. I’ve also considered some of the potential risks and the role employers can play in mitigating these.

I think AI has a role to play in all four pillars of financial wellbeing: knowledge, confidence, capability and resilience.

Pillar 1: building financial knowledge and literacy

Finance can be a bit overwhelming: many people struggle to know where to go to find relevant and accurate answers to questions around key financial decisions.

ChatGPT has shaken things up and gained widespread attention for its ability to explain complex matters in layperson’s terms. It’s easy to see how this could be harnessed so people understand the basics of managing their money, using language that is tailored to their own degree of understanding and personal circumstances. I predict that we will see a range of products emerge to address this need over the coming months.

Pillar 2: financial confidence – smarter money management

Saving money and being smart with spending can also be a challenge, but AI can lend a helping hand here too. Tools and apps already exist which can analyse an individual’s income and spending patterns and help with budgeting.

Generative AI could supercharge these tools by 'learning' about patterns of behaviour and tailoring the advice accordingly, as well as by accessing data on eg savings or current account products across the market to proactively recommend the best solution for your financial circumstances.

Pillar 3: developing financial capability

AI can go further and support increased financial capability. I expect we start to see the emergence of AI-powered financial advice services. These may be automated or may be delivered by an AI-assisted human. This holds out the exciting prospect of making personalised financial guidance accessible to a broader audience and at a lower cost than before. However, it also raises significant questions about how such advice is regulated and how customers can be protected.

Pillar 4: building financial resilience

Financial resilience means having the right skills and protections in place to withstand financial shocks and make good decisions in difficult circumstances. For organisations, having a financially resilient workforce will help reduce stress and anxiety as well as improve productivity. AI already plays a role in eg flagging patterns indicative of fraudulent bank account activity. In the future AI may also have a role here in identifying patterns of behaviour which suggests vulnerable consumer status, enabling the financial institution to provide support meeting the customer’s specific needs.

What about the risks?

Much has been written about the potential use of AI by sophisticated scammers. There have already been instances of financial scams using AI, including a 'deepfake' video of the personal finance campaigner Martin Lewis supposedly selling speculative investments. All of this means that it may become very hard for consumers to tell the difference between genuine financial information and sophisticated, harmful fabrications.

Employers to the rescue

Employers could play a major role in combating the risks of financial harm to consumers in this post-truth world. They can do this by providing access to financial services and advice which have been through their own vetting process and in which employees can, therefore, place appropriate trust. Employees already trust their employers to pay their salary and provide a whole host of benefits, so it seems a natural extension for employers to play a role in providing a safe gateway to financial services and advice. For employers, this could also be a valuable tool for attracting and retaining staff.

This is just another example of how, in an AI-enabled world, the human connection (in this case the trusted relationship between employee and employer) will be more important than ever!

Where to hear more

To find out more, you can catch me on episode 4 of our ‘Beyond Curious with LCP’ podcast.