The role of AI in fintech

Artificial intelligence and machine learning (AI and ML) have been around since the 1950s. From Claude Shannon to Alan Turing, mathematicians and developers have placed high bets on a machine’s ability to be as intelligent as a human. AI has come a long way since then!

Innovation has always been a strong pillar of the fintech ecosystem. It is not surprising that in recent years they have relied on AI and ML to make strategic business decisions and improve the overall experience for everyone involved.

The role of AI in fintech cannot be overstated. Let’s understand the benefits from this AI-powered innovation:

Better security and fraud management

For the financial industry, the processing of sensitive financial data is of the utmost importance.

Cyber ​​attacks are now becoming increasingly sophisticated and the types of attacks include identity theft, fraud, phishing, spoofing and so on. AI acts as a defender here by helping the security team to be alert at all times. With AI’s diagnostic capabilities and analysis of massive amounts of data at any given time, fraudulent transactions and activities can be flagged better than ever; and thus saves companies large amounts of money.

Improved customer experience

Chatbots are AI-powered and can deal with routine user issues while giving staff more bandwidth to focus on important activities. AI also enables fintech to offer customized apps that help users track expenses and income and reach their financial goals. A dynamic system making waves in the market is the “Robo-advisors” that help users with their financial and investment decisions. Such virtual assistants and chatbots support fintech firms in reducing costs and saving time. By the year 2023, they are expected to help banks save up to $7.3 billion!

Asset and wealth management

AI in wealth management helps advisors better understand their clients. It gives them an insight into the customer’s current and future financial needs. In this way, customers receive personal recommendations. Managing wealth seemed like a tedious task before, but now, with AI and ML, investors can at least start somewhere and be in charge of their wealth. This contributes to the increase in financial literacy in the country.

Regulatory Technology (RegTech)

Compliance is a pain point for most fintechs, and once again AI comes to the rescue. With AI algorithms, compliance can be easily managed. Regulatory Technology is about managing regulatory processes using technology and is used for monitoring, reporting and compliance. It is a community of technology companies that use automation to solve challenges and help with compliance efficiently and cost effectively. With RegTechs, compliance staff have more bandwidth for productive tasks, and much faster processes lead to overall organizational growth with fewer fixed costs. The possibility of inaccurate data entry is minimized and the possibility of error is potentially reduced.

Predictive analytics

By analyzing massive amounts of data, predictive analytics can find patterns and predict insights. AI and ML can facilitate the calculation of credit scores based on risk profiles, transaction analysis, credit history, total income, etc., and help financial firms reduce their bad debts in the future. Predictive analytics is great for converting revenue, nurturing leads and marketing campaigns. In the long term, this can increase operational efficiency and improve internal processes.

AI will continue to disrupt fintech

Industry data suggests that by 2026, the global market size for AI in fintech will be an astonishing USD 26.67 billion! AI-driven innovation will continue to be a big part of fintech’s future. This is just the beginning – AI and ML are no longer just sci-fi fascinations, they are important drivers of the fintech revolution!

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