FinTech has been around for a while and it has complemented what big banks offer for the majority of the half-century. But in recent years, the development of artificial intelligence (AI) applications has put the sector in the path of ‘innovate-to-survive.’
Finance is one of the most inert sectors of the economy. Earlier iterations of FinTech products and services mostly served institutional investors, banks, and financial services. FinTech companies mainly provided risk assessment tools, e-commerce portals, trade processing, and data analysis as auxiliary services to the financial sector. Fast forward to today, many of the biggest FinTech firms are consumer-facing and in direct competition to banks — offering checking accounts, credit lending, payment hubs, and credit risk assessment.
In the middle of this is an arms race of leveraging AI in financial services. In fact, a recent Deloitte survey among financial firms found that those who leverage AI saw a 19% aggregate revenue growth. Similarly, KPMG revealed that an overwhelming 94% of respondents to their auditor and risk manager survey see AI as a marker of competitive advantage.
The Race for AI
The accelerated growth and sharper competition brought about by AI applications pose a threat to many FinTech firms. Conventional banks have a huge advantage in leveraging AI in financial instruments and services, as they hold so much financial data. However, FinTech firms are more nimble and agile, and therefore quicker in adopting the optimal utilization of AI, Big Data, and Predictive Intelligence.
Tech giants, which have massive AI resources, such as Apple, Google, and Amazon, are already starting to move towards the finance sector. Ahead of Facebook’s launch of its digital blockchain wallet Calibra, Apple has created its own credit card to complement Apple Pay. Google has recently announced its plans to launch its own checking account services, which has prompted what’s now being called ‘deposit wars.’ These developments, now more than ever, put pressure on FinTech firms to leverage AI to survive.
Leveraging AI in Finance
AI in finance has taken over all aspects of the sector. Here are the major sections AI is upending:
Personalized Financial Services
FinTech services that thrive focus on customer satisfaction, and AI delivers this through personalization. AI-enabled financial wellness products include financial robo-advisors, virtual banking assistants, chatbots, and automated credit scoring.
Algotrading or AI-assisted trading is becoming more common. In fact, CNBC notes that finance jobs which require AI knowledge posted by banks and FinTech startups has increased by 60% in the past year. In swelling proportion within this are financial analysts capable of integrating AI in trading and exchange platforms. Maryville University points to how the demand for financial analysts is projected to grow by 12% until 2024, underscoring the increasing role of business data analytics, a field that depends largely on AI-enabled FinTech. In the same vein, AI applications in market intelligence, home trading, and risk management in trading are also increasing.
From underwriting and pricing, to credit risk assessment, AI applications have streamlined insurance services. Automated analytics on claims using image processing, voice calls using language processing and risk prediction are just some applications currently being developed by InsurTech startups and banks.
Distributed ledger technologies promise a more secure and transparent way of handling finances and financial data. While it’s another avenue banks and Fintech startups are investing in, the complexity of its applications today makes it hard to scale. However, initiatives like those of the FinTech communities in Michigan University are catalyzing its development. Companies like Ocean and the SingularityNET blockchain aim to democratize AI in finance by combining it with blockchain.
This guest post was written for planetcompliance.com by Raven Julian