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How Artifical Intelligence Affects Fintech

Artificial intelligence has rushed into the IT market like a swirl accelerating the operations via automation and decreasing companies’ expenditures. The chatbots are bright examples how AI has simplified business communication processes.

Along with growing interest in Artificial Intelligence, more entrepreneurs, investors, and experts turn their gaze to the financial technology industry, more often called “FinTech” as one of most prospective sectors where vast financial resources, digital technologies, and human capital intersect. Currently, growth dynamics of FinTech is about 10% per year amounting to more than $ 20 million just in 2016 and it is expected, it will be much more soon.

Booming Chinese market as well as powerful the United States and European economies promptly reacted to the discovery of FinTech’s outstanding horizons and became leaders in combining financial processes and IT tools. Nowadays traditional financial institutions undergo a tangible transformation as the introduced digital approaches allow unprecedented regular operational performance enhancement. Incidentally, artificial intelligence is one of those tools utilized in FinTech development.

In fact, the financial companies were the pioneers in the adoption of computing technologies, thus, for years they have been waiting for the moment when computer machines approach human thinking. As soon as Artificial Intelligence era has begun such techs as Machine Learning, Neural Networks, Big Data Analysis, and other useful digital innovations enabled banks, hedge funds, insurance companies to process larger volumes of financial data at the higher speed and with no error tolerance.

During the period of banking market development the bank managers became more distanced from their clients as business scale grew, the number of clients increased and it became difficult to stay in touch with every single customer. But today Artificial Intelligence is going to disrupt this communication model by analyzing more personal client’s information and developing more individualized customer-treatment strategies which, in turn, will increase customers’ loyalty to the brand and company’s profits in total.

Although the impact of Artificial Intelligence on FinTech results in a broad set of advantages and benefits, below there are the most crucial of them:

Data Security Reinforcement

Many financial companies adopt AI into their operations because they expect Artificial Intelligence to improve data and transactions protection under the condition of permanent hacker attack threats. As long as antiviruses are unable to ensure complete information security, the business leaders are looking for the alternative which is AI. Instead of regular data protection software Artificial Intelligence functions based on computational learning principle, therefore, it is more flexible and human-like in detecting and preventing threats. In particular, AI allows identify scam activities, doubtful transactions as well as to forecast future hacker attacks.

Data Processing Acceleration

Along with financial data security reinforcement, Artificial Intelligence ensures acceleration of this data processing which is crucial as the financial papers of different sorts require much time to be verified, archived or transferred. Besides, as data processing operations are automated, less human power is involved, therefore processes cost is cut.

Decreasing Human Factor Impact and Error Risk

Yet, AI is not ready to replace human employees in full in the financial sector as this industry still requires human brain’s logic and flexibility, but at the same time AI can take over the most time-taking and massive tasks which, in case of being performed, by the live worker, would take much of his energy and attention that would result sooner or later in error. Instead, AI can process data and carry out much more work with no concentration loss and double-check is not necessary. Consequently, the involvement of AI gives the possibility to minimize human factor and to let errors happen less frequently. Moreover, acting based on certain algorithms and capable of analyzing a huge range of factors simultaneously AI is unlikely to skip the suspicious operation even if it’s lost under tons of similar transactions.

Process Automation Growth

In fact, automation is the fundamental advantage of Artificial Intelligence which makes it so beneficial and convenient. The automatized processes require less human staff involvement, therefore, it provides with the broad range of benefits such as lower expenditures, because machines need just electricity supplying and some maintenance, also, faster processing, capability to handle more workload and to make fewer errors, or to make no errors at all, except some machine failures that sometimes happen anyway. In a broader sense, AI is better predicted and well-organized than human employees, which enables the manager to plan a budget and to design company’s development strategies for longer periods of time.

Big Data Volumes Analysis

Machine nature of AI allows processing much larger volumes of financial information of any sorts than the human brain is capable of, thus, AI can bring the analysis of business strategic perspectives of much higher value. The full-scale vision of obvious and hidden market patterns can be a determining factor in outstripping the competitors and increasing company’s profits. Big data storage, analysis, and forecasting are one of AI technologies which have already successfully settled in the financial sector as it provides the investment banks and hedge funds with valuable forecasts on their clients’ behavior, market dynamics, competitors’ courses by analyzing all available information with powerful computing algorithms.

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Decision-Making Process Becoming More Clear-Cut

As AI is able to process huge amounts of data with no errors and to deliver it with no delay, it can be a valuable advantage in the FinTech sector as normally the financial companies consist of numerous management levels and plenty of employees which often leads to the failures in the decision-making process. AI helps to combine, analyze and distribute the assignments along with task performance reports via predetermined communication channels, so data loss or its unauthorized change is prevented.

Insurance Services Transformation

Insurance services delivery is supposed to be something time-taking, complicated and with a significant portion of uncertainty as this industry has to deal with the cases when the human factor was multiplied by natural unpredictability. First of all, to make it easier, AI takes over the hardest part by accelerating the processes in general, from underwriting to insurance compensation payment. Secondly, AI analyzes huge volumes of data concerning the person, situations, threats and delivers solid risk analysis which can be used to prevent most of the insurance cases by the probability calculation. In turn, the cost of insurance services is decreasing as the insurance companies spend less for compensations and can afford issuance of cheaper insurance products and programs.

Making Small Business More Competitive

The increasing popularity of technology always leads to it’s growing reproducibility which, in turn, at some point makes it available to the average consumer on the market in terms of its price. When AI was a rare innovation, only powerful companies with sufficient financial reserves could afford it. However, these days the situation changes, the gap between exclusiveness and massive production is so narrow which enables even small firms to adopt AI in order to increase their operational performance and gain more profits.

Personal Finances Management and Optimization

It’s rather obvious that AI is beneficial for the financial companies adopting FinTech, but it is also worth to mention that it can be of use to the customers too. The thing is, a company and a client represent the tightly connected interactive system, therefore when AI optimizes company’s financial operations model, it also positively impacts the customer by more effective recording, planning, and control of his personal expenses, savings and transactions. For example, a private bank implemented the AI-based system to extract more resources to fill in the credit fund, or in simple words, AI had to find out extra opportunities to stimulate the clients depositing more funds on bank’s accounts. The traditional way of calling and texting the clients with the invitation to trust their savings to the bank deposit program was not as effective as the managers wished, so new program has been launched which if fact, was a personal app for PCs and mobile phones. A client, using this app, added his financial information on available funds, incomes, savings and expenditures to the app and the robot calculated the optimal schemes of money management including the recommended amount to be deposited. As a result, a bank has increased deposit inflow for 25% until the end of the year.

Role of Chatbots in FinTech

Actually, the area of Artificial Intelligence application in FinTech is more large-scale that it could be presumed. Being the effective assistant to humans in processing huge amounts of data, AI is also replacing live staff in the communication processes. These days the banks use AI-based apps to reach their clients, introduce new products, interview them to get market insight, recommend most suitable savings programs, verify client’s identity to protect his account, help to complete a balanced budget, inform about purchasing and credit possibilities and so on.

Future of the Artificial Intelligence in FinTech

The competition on the financial market is really tough as this industry has been developing for many years, most of the segments have been crystallized by certain companies, thus, in order to stay competitive, it is necessary to upgrade the company’s performance constantly.

Digitization is the proper way to outstrip the competitors and Artificial Intelligence is the suitable digital tool to do this as it helps to transform your business from an organization full of thinking humans to the company which thinks like a human itself.

Few recent years have shown a really dynamic inflow of investment into AI solutions in FinTech industry because the powerful capital of financial institutions fed technical innovation development and, in turn, AI contributed its digital advantages into making more money by the financial market. Along with obvious success in the private sector, AI is expected to expand into the public sector as well as money laundering and financial fraud are serious challenges to the international financial system these days.

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