You must have witnessed that Digital transformation trends, modern technologies, and techniques have impacted every single industry that exists.
Even the technical-natured Financial sector is also seeing a great revamp in its working.
However, to make things a bit easier and faster in the financial domain, transformation, technologies, techniques together have given birth to a new term and process called “Fintech”. And the major revamp in this sector took place with the help of Artificial Intelligence and machine learning (AI-ML development).
If we talk about the role of AI in business industry, it is no stranger to the banking and financial companies. We all must have seen forms of AI technology, such as automated check processing debuted in the 1950s. In addition to it, we have seen the arrival of Automated teller machines (ATM) entering the scene in the 1960s.
Since then, a lot has changed. AI is evolving dramatically from the last decade. A few of its examples are Cloud app development, machine-learning algorithms, advances in software, and processing speeds. And these technologies together have given special support and opportunity to the global financial services industry to fight cybercrime while improving productivity and reducing costs.
Meanwhile, for some Artificial Intelligence is still a theory and for some, it is the biggest tool meant for simplifying the most complex tasks. Due to no or partial knowledge about AI, people believe AI is rocket science.
Before moving to the complex task of how AI is revolutionizing the Financial sector in great depth, let us first start with the definition and basic understanding of AI and Fintech to make things a bit more clear and precise.
What is Artificial Intelligence
In simpler terms, Artificial Intelligence refers to the cloning of human intellect, brain power in machines. Machines are programmed and developed to think like humans while mimicking their actions to perform various tasks. Moreover, the term is also apt for machines that exhibit traits related to a human mind like problem-solving and learning.
Apart from artificial intelligence in retail industry, it is taking place in domains like-
- Medical Sciences
- Heavy industries
- Air transport
- Gaming zone
- Financial sector
Being in many different domains, the technology does hold its own sets of advantages and disadvantages like-
What is FinTech?
FinTech refers to Financial Technology that seeks to improve and automate the delivery and use of financial services. In addition to it, FinTech helps companies, consumers, business owners, etc to manage their financial processes, operations, and lives by using software and algorithms which are used on smartphones and computers.
Benefits of Fintech for Consumers-
- Better payment systems
- Approval rate
- Efficient advice
- Greater convenience
- Advanced security
- More personalized service
- Lower cost
There are plenty of FinTech app ideas for start-ups as well as well-grown companies, looking to establish a stable foot in the following niches:
- Blockchain development and Cryptocurrency
- Crowdfunding Platforms
- Mobile Payments
- Robo-Advising and Stock-Trading Apps
- Budgeting Apps
- Fintech Stocks
Who uses Fintech?
- B2C (Business to Client)
- B2B (Business to Business)
Challenges Associated with Fintech
Though there are technologies affecting the future of FinTech, the industry has created a wave of newness while disrupting many business verticals, it does not stumble upon its own set of challenges. Those FinTech challenges are-
- Credibility– There are many economic benefits of Fintech coming up, but for now, the concept is still not able to let users use it fully to simplify their financial-based operations.
Because you are accepting FinTech does not mean that other tech giants are not. Due to stiff competition and constant need for FinTech, it is quite challenging to let you show your product to a large number of users along with competing with other tech giants.
Creating effective customer relationships expand the business. Similar is the situation with FinTech, to let people keep coming to your service or to engage them in your product, it is important to build great customer relationships. Using the real-time financial reporting dashboard, companies are ensuring more constructive relations.
As we are done with the basic understanding of both AI and Fintech, it is the right time to see how Artificial Intelligence is revolutionizing the FinTech industry in a more productive way-
According to the report by CB insights, companies on the AI Fintech market map fall into a few main categories, offering services for all- front, middle and back-office.
Those categories are-
- General Purpose/ Predictive AnalyticsCredit scoring/ Direct Lending
- Quantitative & Asset Management
- Market Research / Sentiment Analysis
- Debt Collection
- Assistants / Personal Finance
- Business Finance & Expense Reporting
- Regulatory, Compliance, & Fraud Detection
These are the categories and then there are companies who are using AI in quality assurance for their financial operations, let’s know their name-
Companies Using AI for Financial Operations
Without further ado, let us see how Artificial Intelligence is shaping Fintech in a major way-
Artificial intelligence for FinTech
Accurate Decision- Making
According to the PwC Global Fintech Report, seeing the growing impact of AI in financial services, 30% of large financial institutions invest in AI application development. The percentage itself is showing the potential of AI in FinTech Domain greatly-
With the help of the Artificial Intelligence and IoT banking sector and financial sector, it will become easy for insurance agents and banking agents to ask the right question to machines instead of asking human experts.
After the process of asking questions, machines will analyze the data and will come up with apt recommended results to help bankers for taking appropriate decisions.
Detection of Fraud
Artificial Intelligence with the help of data collected by the Analytics tools learns and monitors user’s behavioral patterns to identify signs of fraud and other incidences.
This is how it will become easier for the banks to detect the fraud early along with taking precautions or setting standards to fight fraud and forgery incidences from the next time.
Claim Handling Mechanism
Management required for claims can be built with the help of Machine Learning development techniques in various stages of the claim handling mechanism.
With Artificial Intelligence, fastening certain claims while reducing the processing time and enhancing customer experience will become easy and a way faster.
Artificial Intelligence in the form of voice systems or chatbot development solutions, text chats can deliver exact human-like experience customer service along with offering expert advice like experience that too at a lower cost.
Virtual Financial Assistants
Virtual financial assistants are among the popular digital transformation trends for companies. With these assistants, it becomes easier for users to make financial decisions more precisely. The decisions could be anything like monitoring stock, bond price trends, events, etc to get recommendations regarding bonds and stocks for buying and selling.
Meanwhile, on the other hand, we have “Robo-Advisor”, often used by both Financial companies and FinTech startups. These are the class of financial advisors offering financial advice and investment management-related things online with moderate to minimal human intervention. In short, we can say that AI-based bot development solutions are actually making the whole process of finance more predictable, better, and smooth.
Under the sky of Financial services, predictive analytics works wonder in terms of overall business strategy, revenue generation, resource optimization, and many more ways.
It can become a game-changer by enhancing business operations along with refining internal processes and surpassing competitors in the market. Furthermore, predictive analytics helps finance in many ways like- calculating credit scores while preventing bad loans.
Results and insights taken from the predictive analysis data can reveal the next market happening prior to the actual one like changes in the customer’s demand or how long the employee in your office will last and many more.
When it comes to managing financial risk, it is foolishness to underestimate the potential of AI.
Processing allows data to be handled in a short time whereas cognitive computing helps in managing structured and unstructured data, that will otherwise turn out to be a tedious task for humans to do. Thus, algorithms analyze the history of risk and detect the early signs of future issues.
These were the ways through which AI in Fintech is taking a step ahead to make the domain a bit better, smarter and faster.
But does it hold a great future?
Taking the same thought ahead, let’s check out-
Will AI in Fintech Determine its Future
When opportunities grow, competition becomes fierce.
For instance, Pioneers like PayPal see themselves being taken on by other giants like Apple and Google, and also by niche-oriented ventures like Venmo and also by traditional FIs. Just because of such fierce competition in the market, many ventures are shifting towards local and regional markets where conditions are still favorable.
Meanwhile, in China, it was easier for people to use mobile and web-based financial services like Alibaba’s Ant Financial and Tencent since phones are way more convenient to access as compared to traditional financial instruments.
Offering convenience is the best selling point and there are a number of ventures which have scored zero in on delivering a better user experience. It’s quite impressive how technology has transformed the payment industry related to banking, budgeting, and even loan applications.
This is the reason e-commerce giant Amazon has given attention to mobile as users shift their computing habits towards phones and tablets. In addition, AI in Fintech might bring a major impact due to insights that can be derived from data that humans are generating.
Fintech is basically aiming at empowering smaller organizations and consumers and the dose of AI is expected to make its advantages accessible to a wider audience.
This is the end of how AI in FinTech is bringing a wave of change, and in addition to this, there is a wide variety of AI-based consumer-level applications available for a faster, better, and error-free user experience. Hence, if you are also willing to develop such an app for your business, it is a must to hire the best finance mobile app development company.
In the end, we can conclude that there is stiff competition in Fintech and be it ventures, organizations, startups or anyone who is willing to go ahead with this concept have to deliver a truly amazing product and services in order to stand out in the market.
Just like Charles Darwin’s “Survival of the Fittest”, ventures who will provide the best user experience will win but finding that X factor is quite challenging.
If you are also feeling stuck, let us guide you…!
Co-Founder and VP Mobile Architect at Appventurez. An expert programmer who is passionate and loves to explore emerging mobile technologies. As a leader, he is a perfect match as he is always there for the team to help and guide them to learn and implement smartly and effectively.
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