7 Ways How AI Is Transforming the Fintech Industry

The global AI in the Fintech market has been rising significantly. By 2020, this market was estimated at $7.9 billion and is anticipated to reach $26.67 by the end of 2021. By adopting smart solutions, financial organizations get a major competitive advantage to cope with the ever-changing industry landscape.
5 min read
03/02/21
By Anna Serebryannikova
Senior Account Director at DataArt
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7 Ways How AI Is Transforming the Fintech Industry

Machine learning and artificial intelligence might be the future of everything in the Fintech sector. Generally, integration of AI improves results since the technology applies methods derived from common aspects of human intelligence but is beyond human scale. In this context, AI empowers business processes by providing a deeper understanding of customer needs.

Tech Trends Shaping Fintech Sector in 2021

The adoption of technology in this sector has substantially made banking easier. People can now carry out major bank-related tasks online, mainly from any device that has an internet connection. As identified in one of the studies conducted by Financial Express, the fintech industry has been following closely behind as technology keeps evolving.

Some technology trends that will shape the industry in 2021 and beyond include:

  • Robotic Process Automation (RPA), whereby advanced technology and robots will perform tasks that were previously performed by humans.
  • Integration of Blockchain to enhance transparency in financial transactions.
  • AI and ML. The sector will be highly characterized by machine learning (ML) and Artificial Intelligence (AI).
  • Adoption of Biometric Security Systems, enabling people to perform most banking tasks remotely.

How AI Is Transforming the Fintech Industry

Fintech is among the sectors that are getting stronger, even with the economic disruptions caused by the COVID-19. More than ever before, the financial sector is adapting to the world's new reality through the adoption of state-of-the-art HiTech, mainly the use of Artificial Intelligence.

The use of AI has meaningfully redefined how the financial sector operates. As noted in an article by Fintech News, most financial activities are now done via apps, opening up great opportunities for the customers.

Here are 7 ways in which AI is transforming the fintech industry:

1. Analysing the Customer's Credit Worthiness

AI is being used to examine credit accounts, cash accounts, and investment accounts to determine the client's overall financial health. It helps the banks keep up with real-time changes since AI creates customized advice based on any new incoming client data.

Unlike in the past, banking institutions can process huge amounts of information about their customers. This data is compared and analysed to determine if the client qualifies for the product or services they are requesting.

AI. Dawn of the Age

2. Process Control and Optimization

According to research by Mordor Intelligence, process automation was one of the most significant drivers of AI in financial organizations. Today, it is rapidly evolving to cognitive process automation, whereby AI systems can even perform complex automation processes.

The year 2020 witnessed the advanced application of artificial intelligence to perform complex tasks. For instance, Traydstream partnered with Infosys Finacle to create a blockchain technology that immensely automated trade finance. This technology enables scanning of documents, which not only enhances accuracy but also cuts down the time taken to check regulations and rules in trade finance.

As digitization becomes an inevitable reality, fintech players are using technology to streamline common business processes. They are doing away with manual work, and technology is rapidly taking over, making business processes more efficient.

Process optimization is being applied in a wide range of departments, including sales, call-centers, accounting, and training and development. Most processes are automated, increasing the institution's overall productivity.

3. Fraud Detection

Fraud has always been a persistent problem in the financial sector. However, with artificial intelligence, credit card companies are implementing predictive analytics into their fraud detection workflows, significantly reducing false positives.

AI's analytics tools collect and analyse data by learning and monitoring the user's behaviour patterns. This is then used to identify rarity and any warning signs of fraud incidences and attempts.

In 2020, for instance, MILIZE, a Japanese AI and fintech company, offered to provide state-of-the-art fraud detection and money laundering solutions to financial institutions worldwide. This solution is believed to detect fraudulent transactions with more than 90% accuracy, which might be a major boost for credit card companies.

4. Customer Support

One of the most famous AI applications is bots. Although they have been here for a short time, financial institutions are rapidly embracing them. Consequently, potent chatbots have been implemented to enhance interactions with customers.

Due to the Coronavirus pandemic, people have to learn to live with social distancing regulations throughout 2021. Due to lockdowns and travel restriction measures, financial institutions are taking advantage of AI chatbots to solve customer issues remotely.

5. Increased Use of Automated Virtual Financial Assistants

Those who take part in forex trade know the importance of automated virtual assistants. They can monitor stock and bond price trends and advise the traders accordingly. Their analysis can be customized to give financial advice based on the customer's personal portfolio and financial goals.

Currently, even those who are not experienced in the stock market can take part in it, thanks to Robo-Advisors. The virtual assistants and planners give recommendations regarding the stocks and bonds that one should sell or buy.

6. Precise Decision-Making

A decision is always informed if it is data-driven. Customers can utilize fintech apps that have data visualization tools. These tools can break down complex data into a simple form that even ordinary citizens can understand and digest insights. This improves their financial decision-making.

At the corporate level, data-driven decisions have substantially transformed how different issues are handled. Instead of recommendations of human experts, managers are basing their decisions on machine-generated information. These machines can analyse data and provide the most viable and practical recommendations.

7. Predictive Analysis

The success of many financial institutions depends on how well they can analyse current business trends and predict how tomorrow might look like. According to a recent study by the Entrepreneur, AI offers predictive analytics, affecting resource optimization, revenue generation, and sales nurturing.

Predictive analytics is a major game-changer since it enhances business operations and improves internal processes, giving financial organizations a competitive advantage. The use of leading edge algorithms helps to provide customized solutions that are unique for each customer.

Conclusion

As technology continues to rapidly advance, artificial intelligence and machine learning might be the future of the fintech industry. In the near future, the use of AI in the banking sector will be more adapted to business processes and technically-smart. It is, therefore, advisable to analyse your business processes and identify areas in which AI can be integrated. If you need assistance in creating custom software that improves your operations and opens new markets, please contact DataArt. We are a global software engineering firm that takes a uniquely human approach to solving problems.

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