Fintech AI Applications: Digital transformation accelerated across all sectors due to the COVID-19 pandemic, although it was most pronounced in the financial services. The increasing reliance on fintech apps highlights the importance of digital transformation in the financial sector. Fintech has transformed traditional views of finance, harnessing the power of technology like blockchain, cloud computing, and AI. AI and fintech have the potential to revolutionize the financial industry in the future.
Big organizations and startups in the financial services industry have thus been drawn to AI applications in fintech. Surprisingly, almost 90% of finance organizations utilize AI. When it comes to artificial intelligence, how can fintech companies utilize it? Now that we know how AI may be used in fintech let’s look at some examples of fintech businesses that have used AI and the benefits it offers.
Why Should You Consider the Use of AI in Fintech?
Identifying the reasons for embracing AI in fintech is vital before you can learn more about the top AI applications in fintech. Artificial intelligence can greatly benefit companies and clients in the financial industry. Here are the main benefits of integrating AI into the financial technology industry.
Better Decision Making
Artificial intelligence can instantly analyze large financial datasets. Analytics combined with AI also aids in making strategic decisions. Artificial intelligence (AI) can aid fintech firms in spotting dangers and providing customers with tailored financial advice. AI can also help with data mining, which is excellent for learning about customers’ habits and ensuring services are optimized.
Enhanced Risk Management
Improved risk management is another area where AI can benefit fintech. One area where AI is seeing use in fintech is in improving credit score production. Also, by spotting questionable trends in financial transactions, AI enhances risk management. Therefore, fintech firms can guarantee better anti-money-laundering measures and fraud detection.
Advantages of Automation
Fintech can benefit from AI-powered automation solutions for handling mundane, repetitive operations. The use of robotic process automation to streamline operations like data entry and email processing is one of the top AI applications in fintech. It can significantly improve the workflow efficiency of fintech companies and help them save a lot of money. Artificial intelligence (AI) has the potential to improve the accuracy and dependability of all business operations while simultaneously decreasing the likelihood of human mistakes.
Personalized Customer Service
Virtual assistants and chatbots are two examples of AI applications in banking that show promise for better customer service. Chatbots can learn human-like speech patterns with natural language processing. The assortment of various robotic advisers is one of the most notable ways artificial intelligence is being used in fintech to enhance customer service. AI can analyze client data and provide tailored recommendations. In addition, AI-powered chatbots and robotic advisers may answer client questions at any time, regardless of the day or night.
Most Popular Fintech AI Applications in 2024
As more financial AI applications prove successful, the chances of adopting AI in fintech are growing. Potentially worth $61.3B by 2031, the AI in fintech industry is a promising sector of the economy. If you own a financial company and want to implement some AI in 2024, here is a rundown of the most popular apps.
Algorithmic Trading
When it comes to financial technology, AI is most often used in algorithmic trading. Artificial intelligence technologies can make it possible to analyze huge datasets in real time. By revealing insights that statistical models would miss, they form the basis of a leading fintech AI application.
As a result, fintech businesses can facilitate stock and share trading for their clients through intuitive mobile applications. By analyzing financial data for trade trends and quickly recognizing abnormalities, AI can help customers make smarter investment decisions. With the help of algorithmic trading, traders can search for lucrative possibilities while avoiding problems.
Credit Scoring
By factoring in more than just income and credit history, fintech AI applications in 2024 will heavily emphasize credit rating. Artificial intelligence algorithms can use several financial data points to estimate the borrower’s repayment probability. Artificial intelligence (AI) technologies in the financial technology sector can aid lenders in the loan approval process. In order to find those who might be liable for default, AI systems can use a variety of data sets, including demographics and social media activity.
Robotic Process Automation
By 2024, Robotic Process Automation (RPA) will have become the most significant AI application in the financial industry. Concerning “How AI is used in fintech,” responses would center on dealing with complicated and repetitive back-end operations. RPA can automate and simplify back-end office processes. For example, a chatbot at JP Morgan Chase can do the equivalent of 360,000 hours’ worth of work in seconds.
RPA can automate security checks, consumer onboarding, mortgage and credit card processing, and other repetitive operations. Banking institutions can benefit from RPA software in three ways: speed, cost-effectiveness, and efficiency. Fintech organizations may free up human workers to concentrate on core operations with the help of robotic process automation.
Customer Support Chatbots
Chatbots are another example of how the finance business uses AI to assist customers. Chatbots driven by artificial intelligence have revolutionized customer service strategies, especially regarding efficiency and cost. One of the most effective uses of AI in the financial technology sector is chatbots, which saved about $7.3 billion in operational costs in 2023.
Popular AI help desk software like Zendesk can automate collecting support issues and adding new contacts to the customer database. Consequently, fintech organizations may provide superior customer support using an interface miming a human’s. One well-known example of an AI application in the financial sector for customer service is Amy, the chatbot from HSBC. Plus, there’s Erica, Bank of America’s virtual assistant, who advises customers on how to save money.
Fraud Prevention as a Service
As more and more people use fintech, consumers are putting themselves at greater risk of cybersecurity breaches. Ensuring fintech experiences are secure can be achieved by raising awareness and preventing fraud. It is among the top AI applications available for better risk management in the financial technology industry. Using predictive and prescriptive analytics by AI models and ML algorithms allows for thorough fraud detection. Fintech companies can use AI to identify potentially fraudulent transactions and alert them.
Regulatory Compliance
A growing body of research suggests ways to use AI to ensure financial technology companies are in full compliance with all applicable regulations. Automating the compliance process and effectively monitoring transactions to detect possible infractions are two areas where most of the top fintech AI tools can be helpful.
One benefit of using AI to streamline compliance processes like AML and KYC inspections is reduced human labor. AI has the potential to simplify compliance procedures while also reducing compliance expenses. To top it all off, AI can keep meticulous records of compliance procedures, which makes for a good audit trail for reporting to regulators.
Customer Segmentation
Artificial intelligence (AI) client segmentation and targeting allows fintech companies to reach their target customers. By sifting through consumer records, AI systems may determine which market groups are most likely to generate a positive return on investment and suggest strategies for more precise advertising campaigns. Improved client acquisition and retention rates are two areas where finance firms can benefit from artificial intelligence.
What Fintech AI Situations Are Not Recommended?
There are many different kinds of fintech applications where artificial intelligence has proven to be quite beneficial. Some scenarios do not lend themselves to applying artificial intelligence in financial technology, but the responses to the question “How is AI used in fintech?” take precedence. Financial technology companies should avoid using AI due to several reasons, including high costs and a lack of available data.
Additionally, fintech firms with simple, repetitive processes should stay away from AI. In addition, one of the major obstacles that financial service providers may have when trying to implement AI is a general lack of knowledge about the technology. There will be a day, though, when artificial intelligence is required by fintech companies of all sizes. So, it’s up to us to seize the initiative and provide fintech companies an AI competitive edge.
Examples of Fintech Startups Using AI
Discover how artificial intelligence has contributed to promising advancements in fintech by looking at examples of firms that use the technology. Some of the most prominent AI-powered fintech companies are highlighted below.
Enova
Enova provides services for advanced credit evaluation and financial analytics, making it a reliable lending platform. Its Colossus platform exemplifies a top-tier artificial intelligence application in the financial technology sector.
People without access to conventional banking services are the primary target of the new platform’s credit offerings. In addition to lowering the time it takes to approve loans, Enova allows for quicker and more effective processing of loan applications.
Kasisto
The finance AI business Kasisto is a great example of a company that is making great strides in developing conversational AIs. Because of their improved capacity to decipher vague questions, the new conversational AIs have the potential to revolutionize the financial sector’s digital transition.
Therefore, by utilizing the capabilities of natural language processing models, Kasisto can influence the future of digital assistants. Above all else, it has the ability to personalize digital assistants for use in consumer, business, and investment banking.
Zest AI
For financial organizations, Zest AI offers a robust underwriting platform powered by AI with enhanced functionality. It is a powerful illustration of how artificial intelligence is being used in the financial technology sector to assist businesses in evaluating applicants who do not have a credit history. Lenders may better evaluate historically vulnerable demographics with the use of the platform’s openness, which is made possible by thousands of data points.
Challenges of Adopting AI in Fintech
In their pursuit of AI, fintech companies are likely to face a wide range of obstacles. Massive volumes of sensitive data and the necessity to build trust are two obstacles to the adoption of leading banking AI technologies. The significance of the extra work needed to accomplish compliance should also be considered by fintech enterprises. A fintech company’s meticulously crafted reputation poses the greatest threat to the industry as a whole. This means that, to avoid failure, you must constantly monitor the operations of financial AI solutions.
Conclusion
To gain a fresh perspective on fintech’s benefits, read our evaluation of top AI applications in the industry. One of the most influential technologies driving fintech and potentially determining its future is artificial intelligence. Customer service chatbots and credit scoring apps are just a few well-known examples of how artificial intelligence is revolutionizing the financial technology industry. Studying the examples of successful financial businesses that use AI might help shed light on the hurdles of integrating AI in fintech.
