Driving the growth of AI in Fintech

This article analyzes the role of AI in fintech by application.

The adoption rate of AI has skyrocketed across all industries. Fields with significant advantage from implementing AI technologies are looking at even higher growth rates. Global AI in the fintech market was valued at $7.91 billion in 2020. By 2026, the market will reach $26.67 billion, a CAGR of 23.17% from 2021. Today, the North American region has the largest share of the market, with 44% globally, and the Asia-Pacific region is expected to experience the highest growth rate in the forecast period (2021-2026).

An unprecedented influx of data has provided a fertile breeding environment for the development of AI technologies. In addition, fintech companies leveraging artificial intelligence can benefit from cost reduction, improved workflow efficiency and assessment accuracy. The applications of AI on fintech are constantly increasing and its increasing application is a vital driving force in the market. This article analyzes the role and impact of AI on fintech by application.

Decision

AI helps fintech companies automate the customer profiling process, resulting in improved AI-driven decision making when reviewing loans, investments and more. AI uses human methods, but it enables much better computational capabilities that humans cannot achieve. This feat allows AI to make accurate recommendations about investing, saving, and borrowing. Immediate, data-driven decision making helps to quote the most accurate numbers for financial products. This in turn helps fintech organizations to save time and costs. At Upstart, 70% of the loans are fully automated. By leveraging the capabilities of AI, Upstart can overhaul its legacy credit scoring system and make better lending decisions. As a result, the company would provide loans to less risky customers, making loans more accessible to customers. According to the company, four in five Americans have never defaulted on a credit product. Yet a surprisingly small proportion of people have access to top-notch credit. The implementation of AI in decision-making for the fintech industry would benefit the sector to achieve higher profits with lower risks.

Fraud detection

The digitization of industries has led to an increase in fraud activity, and the fintech industry is no exception. According to Veriff, the global fraud rate increased by 15% in the first half of 2021. And fintech saw a rapid 21.24% increase in fraud rates from 2020 to 2021. With the industry becoming more susceptible to fraud as more companies go online, AI could help significantly reduce fraud activity. Fintech companies are supplementing their traditional anti-fraud systems with AI. With technologies such as Machine Learning (ML), companies’ systems can now recognize patterns of fraudulent activity through data entry and make data-based decisions about whether something is fraudulent. Fintech giants Ant Group has already established a mature system for fighting fraud through AI. According to the company’s 2021 Anti-Fraud Governance Annual Report, Ant Group’s Alipay can use AI to automatically detect more than 50 different types of fraud. The AI ​​essentially ‘races’ with scammers by detecting and delaying suspicious transactions and intervening via queries, phone calls or pop-ups to at-risk clients.

Customer service

It is inefficient and expensive to have live agents 24/7 to meet customer needs. With AI-enabled smart FAQs, customers can get faster and more accurate answers to specific questions. In addition, AI offers customized support based on customer questions, usage, transactions and interests. AI-powered customer service can streamline onboarding for new services and apps. SenseTime has even rolled out a digital human called “Xiao Ning” for the Shanghai branch of Bank of Ningbo. ‘Xiao Ning’ can greet customers and give various business advice and questions through professional and natural interactions. It can also perform intuitive guidance and intelligent sorting according to customer needs. At the back, the digital human is connected to the banking activity management platform, which can realize the continuous update of the knowledge base and business data analysis, and promote the intelligent management and operation of the banking system. AI features such as a digital human can reduce the operating costs of agent hiring and training. They further help collect and sort data to predict trends in service demand. Adding digital people provides a coherent user experience. While the magnitude of AI-driven customer service still rests on human effort, AI is likely to dominate and eventually surpass human labor in customer support.

Outlook

AI continues to be a driving force within the fintech sector. But concerns have been raised about access to data. Regulation may increase as AI and fintech advance and leverage more data. Pandemic accelerated the shift from physical to digital, which has impacted the fintech industry in several ways. But the overall effect of the transition to digital is beneficial to the industry.

AI in fintech promises huge benefits for individual customers and financial institutions. Countries will save millions with the capabilities of AI. Studies have shown that AI will reduce operating costs for banks by 22% by 2030, which is a savings of about a trillion dollars. AI will also help the industry deal with the adoption of blockchain and its related products and services. And with an edge in almost every category of fintech adoption, China should be on the watch list for investment opportunities in AI in fintech.

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