This paper seeks to study the relationship between the rapid evolution of artificial intelligence (AI) and its multifaceted impact on the financial sector during the period 2020 - 2025. In recent years, AI has emerged as a transformative force, revolutionizing how financial institutions operate by enhancing decision-making processes, refining risk assessment, augmenting fraud detection capabilities, and redefining algorithmic trading practices. Though the impact and adoption of AI in finance in the last 5 years has been growing at a fast pace, the ethical considerations of use of AI can’t be ignored. This literature review synthesizes findings from multiple contemporary studies to provide a comprehensive analysis of both the opportunities and challenges introduced by AI in finance. The study not only highlights the remarkable performance improvements associated with AI-driven tools but also critically examines the ethical, regulatory, and implementation challenges that accompany their adoption.