How Did AI Help Fintech Develop Over Time?
What is Fintech?
Fintech is a combination of two words: Financial Technology and when it first emerged in the 21st Century, its primary aim was to help financial institutions with the back end systems. Over the years, however, the main focus of fintech has become the customer and the customers satisfaction. According to EY’s 2017 Fintech Adoption Index, one-third of consumers utilize at least two or more fintech services and those consumers are also increasingly aware of fintech as a part of their daily lives.
Broadly speaking, financial technology applies to any kind of business innovation. From money transactions to the invention of cryptocurrency, they fall under fintech.
AI’s main purpose in Fintech is to automate all those processes that require a lot of time and mundane tasks to complete. By doing so, the process becomes shorter, more efficient and it allows humans to focus on more important tasks and decisions that can only be made by humans.
The impact of AI on Fintech
Artificial intelligence has completely transformed financial services in the past years and its impact is expected to only grow even more. Because of its ability to analyze a huge sum of data in a matter of seconds and to derive important insights and information, AI is used to recognize patterns that can improve decision-making. This could have a number of advantages, including assisting the financial industry in better decision making, providing improved client experiences, and fighting fraud.
With the help of data, professionals are able to make better financial decisions. However, going through every single piece of data takes a lot of time and errors are bound to be made.
Instead of asking for advice from human experts and going through every detail meticulously, a process that takes time, effort and is plausible for error, machines offer us a much faster data-driven decision-making process that eliminates human error and speeds up the process.
In recent years, the popularity of Robo-advisors, AI-powered financial planning services that don’t require human supervision, has had a tremendous increase. AI-powered Robo-advisors consider a wide range of elements in addition to an algorithm-based approach to investing. To find the proper asset allocations or automatically rebalance portfolios, these factors include the customer’s personal financial goals, risk tolerance, financial position, budgeting, and spending patterns, present and expected market conditions, time period, and more. This not only speeds up the process but also reassures us about its validity and correctness.
Automated Customer Support
Finance Chatbot is a perfect example of automated customer support which was made possible thanks to Fintech. These chatbots deliver human-like customer service and expert advice at a very low cost and timely manner.
Chatbots are software programs that are present in our messaging apps to perform different tasks such as managing multiple accounts, directly checking bank balances and expenses on particular things.
According to a study done by Statista, in 2020, as many as 1.9 billion individuals worldwide actively used online banking services with that number forecast to reach 2.5 billion by 2024. This data shows that the convenience of online banking is preferred amongst a wide range of individuals worldwide and its popularity is expected to only increase.
Many financial institutions are increasingly implementing artificial intelligence (AI) to better detect and prevent fraud in online banking channels. According to research conducted by Forbes, due to the difficulty of fully validating and authenticating persons in digital channels, account takeover, and identity fraud, cost financial institutions $16.9 billion in 2019. Because so much personally identifiable information (PII) has been dumped into the dark web, fraudsters now have all of the information they need to open a new bank account or line of credit in someone else’s name, or to take over an existing account.
Thanks to AI, banks can now identify suspicious activity and estimate risk levels in real-time using AI to evaluate data, allowing them to spot fraud as it occurs. In the past, banks could only look back at a transaction after it had occurred, they’d mark it as fraudulent and deduct the loss.
These are just a few examples of how artificial intelligence is revolutionizing financial services. In the coming years, as the world gets even more digitized, you’ll certainly see even more unique examples emerge.
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- How financial institutions can build a … – assets.ey.com. (n.d.). https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/banking-and-capital-markets/ey-taking-a-strategic-view.pdf?
- Published by F. Norrestad, & 11, J. (2022, January 11). Online banking users worldwide by region 2020. Statista. Retrieved March 21, 2022, from https://www.statista.com/statistics/1228757/online-banking-users-worldwide/
- Solis, E. (2021, June 23). Council post: Three areas of impact for AI in Fintech. Forbes. Retrieved March 21, 2022, from https://www.forbes.com/sites/forbesfinancecouncil/2021/06/23/three-areas-of-impact-for-ai-in-fintech/?sh=7062a22238a6