How AI, chatbots, and robo-advisors can enhance financial literacy
In this article, Dr. Ali Coskun, Associate Professor of Accounting at Bogazici University & Board Member at CARF, and Meral Karageyim, Senior Researcher at CARF, explore how AI-powered tools could move beyond providing financial services to playing a more active role in financial education—making financial knowledge more accessible, personalized, and interactive.
Currently, artificial intelligence and digital assets dominate the financial industry, and artificial intelligence-powered social robots provide personalization and customization at scale. In addition, artificial intelligence is expected to transform services and financial services. The aim of this paper by Dr. Ali Coskun, Associate Professor of Accounting at Bogazici University & Board Member at CARF, and Meral Karageyim, Senior Researcher at CARF, is to analyze and understand the potential impact of AI on financial literacy. We aim to answer one specific question: How can chatbots and robo-advisors enhance and support financial literacy?
AI, chatbots, and robo-advisors in financial services
According to Statista, generative AI in financial services is forecasted to grow at a compound annual growth rate of 28.1% between 2022 and 2032, and the market size of generative AI may exceed US$9.4 billion (Statista Research Department, 2024). Artificial intelligence has long been used in banking in different technical areas, such as credit evaluation, robo-advisory, fraud detection, cybersecurity, risk management, scoring, and financial control, as well as in relationships with customers. In addition, artificial intelligence is used by various segments and functions in banking, such as capital markets and investment banking, asset management, corporate banking, wealth management, retail banking, risk and legal, IT, finance, talent, and organization.
Chatbots and robo-advisors create value by providing autonomy, interactivity, and personalization. They are also associated with availability, democratization of financial services, and low-cost financial advisory. However, their capabilities are limited because of their current knowledge and ability to parse customer queries, making them unable to handle all customer inquiries or complex problems without human assistance. In addition, the majority of investors prefer human advisors due to security concerns, biases, and personal factors.
Despite these limitations, chatbots have significant potential for learning and improvement. Chatbots and robo-advisors are currently in their infancy, showing great potential by providing useful customer service by answering simple questions, as demonstrated by multiple large financial institutions. Moreover, they are efficient in enhancing loyalty and customer experience because of their availability and interactivity.
These artificial intelligence-supported social robots may have an impact on sound decision-making processes for investment. They have the potential to alter investment patterns by introducing algorithm-driven, data-based investment insights.
From financial services to financial education
On the other hand, their impact on financial literacy remains limited. The actual contribution to investor knowledge and financial decisions remains questionable for several reasons.
A widely accepted comprehensive definition of financial literacy by the Organisation for Economic Co-operation and Development (OECD) is “knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life” (OECD, 2014).
Financial literacy as a concept may have a profound effect on social and economic problems. Financial literacy is not only important for better economic decisions; it is also critical for better retirement planning, financial well-being, and poverty reduction. It may provide the necessary tools to better evaluate financial risks. In addition, financial knowledge may lower cognitive and emotional biases and may support rational investment decisions. Financial literacy seems to be more important for younger generations.
In light of these findings, chatbots and robo-advisors should not be evaluated only as investment tools but also as potential mechanisms for financial education. They are generally discussed in terms of investment automation and cost efficiency, but they may play a significant role in financial literacy if they are designed accordingly.
First of all, they should be designed to explain financial knowledge and market conditions in simple language. Second, personalization, autonomy, and transparency of algorithms are critical factors for financial decision-making. Personalized guidance may improve customers’ financial understanding.
Another solution could be the integration of clear learning features into chatbots and robo-advisors. Interactive learning modules, scenario-based simulations, and real-time nudges as core components could be effective in improving the evaluation of financial risks. Risks should also be explained in detail, with alternative losses and potential scenarios.
Considering these findings, the integration should actively engage customers in the learning process through games and educational dialogue. The basic idea here is to embed education into the investment process.
The future of AI-powered financial literacy
In today’s complex and interconnected world, accessing accurate information is often perceived as a significant challenge. Research indicates that integrating creative technological solutions into chatbots and robo-advisors can enhance financial knowledge.
Such solutions, which provide accessible information, personalized guidance, interactivity, and clear explanations, have the potential to bridge the gap between financial information and investment actions.
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