Artificial intelligence (AI), a robust technology, can make financial services more effective, accurate, and secure. Automation of processes, data analysis, fraud detection, personalized advice, and the emergence of innovation opportunities are all possible with AI. Fintech companies associated with AI have chances to grow at 28.6%, reaching $31.71 billion in 2027. There are numerous use cases where AI is already being used. According to the Cambridge Centre for Alternative Finance, 90% of fintech companies already employ artificial intelligence. The fintech sector is changing in several ways thanks to AI, including the following:
Fraud detection: By keeping an eye on transactions, spotting anomalies, confirming identities, and flagging suspicious activity, AI can assist fintech companies in preventing and detecting fraud. For instance, the release of ARDEN, a risk-detection engine powered by AI that helps fintech companies protect their cardholders and financial assets, was announced by Brightwell Payments, Inc. This financial services company develops financial solutions to move money securely anywhere in the world.
Virtual assistants: Using chatbots, voice assistants, and robo-advisors, AI can help fintech companies offer better customer service and support. These solutions can respond to inquiries, offer knowledge, give instructions, and carry out commands. For instance, voice recognition is used by UPI, an AI-enabled platform in India, to enable users to make payments.
Credit scoring: Using alternative data sources like social media, online behaviour, mobile data, and biometrics, AI can assist fintech companies in evaluating the creditworthiness of borrowers. These data can shed more light on customer spending patterns and preferences, particularly for unbanked or underbanked customers. For instance, ZestFinance, a fintech business, asserts that it can reduce default rates by 50% by using machine learning to enhance credit decisions.
Quantitative and asset management: By utilizing cutting-edge algorithms, data analysis, and machine learning, AI can assist fintech companies in optimizing their investment strategies and portfolios. These solutions can produce insights, predictions, and recommendations based on market trends, risk factors, and customer preferences. For instance, Wealthfront, a robo-advisor that manages investments using AI, asserts that it can increase returns by 2.66%.
Thanks to AI, Fintech is undergoing a revolution which offers new ways to satisfy stakeholders and customers. Adopting AI involves risks and challenges, such as ethical concerns, legal compliance, data security and privacy, and human-AI interaction. Fintech companies must adopt best practices and standards to ensure AI's ethical and reliable use.