How is artificial intelligence revolutionizing the Fintech landscape?

Recently, the FinTech industry has witnessed a significant transformation due to the rise of artificial intelligence (AI). This ground-breaking technology has opened up new avenues, streamlined and refined operations, strengthened security measures and increased customer service. While AI has many benefits, it also presents challenges that are relevant to both current users and aspiring users. Therefore, the question arises: exactly how is AI revolutionizing the FinTech industry today, what are its benefits, and what does the future hold?

According to research, 2/3 of FinTech companies today use AI technology in their operations to a greater or lesser extent. Its influence will increase. Last year, the worldwide market for AI solutions in the FinTech industry was valued at approximately USD 9 billion; This amount is projected to triple over the next five years and exceed US$31 billion by 2027.

Four areas where AI simply flourishes.

The use of AI in the FinTech sector has many benefits. One of the main advantages is the greater efficiency and productivity that can be achieved by automating or optimizing various processes such as credit granting, financial management, detection of illegal activities or risk assessment. AI also helps to reduce the risk of errors, speed up decisions and improve the customer experience.

Mid-sized and large FinTech companies are using AI to improve the quality of their services, adapt to changing customer needs and compete more successfully with traditional players in the financial sector.

AI and machine learning algorithms are largely effective in four areas:

1. Investment: The better you train the algorithm, the more accurately 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 controlled by itself; so you should always check and find out exactly why it made that decision. There’s no doubt it’s working – it’s estimated that over $4.6 trillion in assets have been entrusted to digital tools, and AI is being used to create new products such as investment platform Vinovest.

2. Safety: Banks suffer in the form of billions of dollars in losses every year due to fraud. According to a 2022 PriceWaterhouseCoopers survey, almost one in two organizations (46%) had faced fraud, corruption and other financial crime in the past two years. Not only can AI detect and prevent suspicious activity faster and more effectively – it can also discover new fraud tactics, loopholes that humans haven’t thought of, or dishonest behavior by 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 office tasks and accounting. This helps to save 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 from thousands to millions of dollars every month.

4. Customer service. Chatbots are used in many areas of business and financial services. They improve the user experience by helping users find the information they need faster, while saving money by reducing the burden on customer service personnel as well. Another advantage of chatbots is that they can work regardless 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 USD 7 billion this year.

What about challenges?

Of course, this list is not exhaustive, and FinTech companies are constantly looking for new opportunities to use AI to make their operations more efficient. Despite many benefits, there are also challenges associated with the use of AI in the Finch sector.

One of the main challenges is “data quality”. AI does what the code tells it to do and follows the data it receives. If this data is 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-making process can be complex and difficult to understand; so FinTech companies should ensure that the decisions taken are transparent and clear to help users understand the principles and logic behind AI technology.

AI and machine learning algorithms learn over time: the more data they process, the more they learn and the more accurate decisions they can make. Therefore, as the amount and variety of data provided by AI grows, it is also very important to ensure data security as well as compliance with the requirements of regulatory authorities and government bodies so that the use of AI does not pose any risk can use this technology to promote users’ rights and privacy.

A bright future

Higher productivity, better quality of work and a better user experience. This is what artificial intelligence provides today, and the 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-making 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 clients 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 used. This also helps to solve the problem of shortage of AML specialists which is a major problem worldwide.

Thus, AI offers great opportunities for FinTech companies and their customers, but also requires being accurate, attentive and consistent. Considering these criteria, AI can help FinTech companies build stronger customer relationships, increase their competitive advantage and generate more profits.

Ekmel Cilingir, head of the supervisory board of European Merchant Bank