How Artificial Intelligence is Revolutionising the Fintech Landscapeby Ekmel Cilingir May 8, 2023
Lately, the Fintech industry has witnessed a significant transformation due to the emergence of artificial intelligence (AI).
This cutting-edge technology has opened up novel avenues, streamlined and refined operations, bolstered security measures and elevated customer service. While AI has numerous advantages, it also poses challenges that are pertinent to both current users and aspiring adopters. Therefore, the question arises: how exactly is AI revolutionizing the FinTech industry today, what are its benefits, and what does the future hold?
According to surveys, 2/3 of FitTech companies currently use AI technology in their activities to a greater or lesser extent. Its influence will increase. Last year, the worldwide market for AI solutions in the FinTech industry was assessed at roughly 9 billion USD; this amount is projected to triple in the next five years and surpass 31 billion USD by 2027.
Four areas where AI is simply thriving.
The use of AI in the Fintech sector has many advantages. One of the main advantages is the greater efficiency and productivity that can be achieved by the automation or optimisation of various processes such as credit granting, financial management, detection of illegal activities or risk assessment. AI also helps to reduce the risk of errors, increases the speed of decision-taking, and improves the customer experience.
Medium-sized and big FinTech companies are using AI to improve the quality of their services, adapt to change customer needs and compete more successfully with traditional players in the financial sector.
AI and machine learning algorithms are mostly effective in four areas:
1. Investment: The better you train the algorithm, the more accurate it will work and the more correct – and profitable – decisions it will make. The main difference is that -unlike humans- artificial intelligence has no intuition and is not guided by itself; so, you should always check and find out exactly why it made that decision. There is no doubt that it works – it is estimated that over 4.6 trillion USD in assets have been entrusted to digital tools and AI is being used to create new products like the Vinovest investment platform.
2. Security: Banks suffer in terms of billions of dollars losses each year due to fraud. According to a 2022 PriceWaterhouseCoopers survey, almost every second organisation (46%) had encountered fraud, corruption, and other economic crimes in the last two years. Not only can artificial intelligence detect and prevent suspicious activity faster and more efficiently – it can also detect new fraud tactics, loopholes that humans haven’t thought of, or dishonest behaviour on the part of the employees themselves.
3. Performance efficiency: AI-based solutions are used at FinTech companies in various areas of daily operations from data processing and analysis to clerical tasks and accounting. This helps saving the employees’ time and costs – depending on the size of the company and the nature of its activities; this will mean saving They improve the user experience thousands to millions of dollars each month.
4. Customer service. Chatbots are used in many areas of business and financial services. They improve the user experience by helping users to find the information they need faster while saving money by reducing the burden on customer service professionals as well. Another benefit of chatbots is that they can work independently of time. Chatbots, which can also serve on weekends and holidays, provide a system where customers can get support whenever they want. It is estimated that chatbots will save banks over 7 billion USD this year.
What about challenges?
Of course, this list is not exhaustive and the Fintech companies are constantly looking for new opportunities for using AI to help making their operations more efficient. Despite having many benefits, there are also challenges associated with the use of AI in the Finch sector.
One of the main challenges is the “data quality”. AI does what its code tells it to do and follows the data it receives. If these data are inaccurate or incomplete; it can have a negative impact on decision-making and quality. It is therefore important for fintech companies to find effective ways to ensure data quality.
Another challenge is the “clarity”. The AI decision-taking process can be complex and difficult to understand; so FinTech companies should ensure the decisions taken are transparent and clear to help users to understand the principles and logic behind AI tech.
AI and machine learning algorithms learn over time: The more data they process, the more they learn and the more accurate decisions they can take. Therefore, as the amount and variety of data provided by AI grows, it is also very significant to ensure data security as well as compliance with the requirements of regulatory authorities and state bodies so that the use of AI does not pose any risks can use this technology to further to the rights and privacy of users.
A bright future
Higher productivity, improved quality of work and a better user experience. This is what artificial intelligence provides today and its future prospects in the FinTech sector are very optimistic.
For example, FinTech companies can use this technology to develop innovations such as automation of decision processes, recommendation systems and even robo-advisors that help customers with financial problems or investment questions. All of these mean a lot to people – after all, a decade ago only wealthy customer could have a personal financial advisor but now just about anyone can get market analysis and learn about new investment opportunities.
The area of anti-money laundering (AML) deserves special mention where artificial intelligence and machine learning algorithms are increasingly being used. This also helps to solve the problem of the shortage of AML specialists which is a big issue worldwide.
Thus, AI presents great opportunities for FinTech companies and their customers but also requires to be accurate, attentive, and consistent. Considering these criteria in mind, AI can help FinTech companies building stronger customer relationships, to increase their competitive edge and to generate more profits.
Featured image credit: Edited from freepik