Artificial Intelligence (AI) technology is changing the way we live, move, work, interact with each other and even shop. Today, financial institutions are reinventing themselves and their services by taking advantage of innovations of the new technological era. The finance industry follows technological advancements with a keen interest to address the shortcomings of traditional financial services.
The Powerful Combination of AI and Fintech
AI in FinTech focuses on the use of artificial intelligence techniques in traditional banking services. AI applies aspects and methods derived from Human Intelligence beyond the traditional ‘human’ scale. It allows personalization of services, which helps in anticipating customer needs without the customer having to take any action themselves. Also, it improves customer experience when using financial services, minimizes errors, overcomes security challenges, provides high-speed financial services, solves human problems by increasing efficiency, manages and augments rules and trading decisions, helps process data and create algorithms for managing trading rules, evaluates danger, detects fraud, etc.
In AI, real-time plays a vital role as individuals with smartphones gain access to quick, personalized, and customizable financial services. The need for faster financial activities has prompted financial institutions to meet time demands by ensuring that financial services being availed in real-time are given higher priority. AI technologies are applied to deliver a human-like chat encounter in real time, without the need for nearly as many human helpers.
How AI is transforming the financial services sector
AI is contributing to the digital revolution in the banking sector. It helps eliminate human error in banking procedures, truly understand customer demands, and ultimately reduce dependence on traditional instruments. Several institutions are employing chatbots to make customer interactions more transparent and provide customers with a smooth and hassle-free experience.
Artificial intelligence helps lenders and debtors speed up financial service processes. AI can process vast amounts of information about customers in a relatively short time. This information is analyzed and implemented through the production of suitable services that customers require. This translates to AI applications recommending results based on what helps customers make better decisions. Hence, AI can help achieve higher levels of customer satisfaction. It requires financial institutions to work closely with coders, developers, designers, and other technicians to ensure new concepts are developed and commercialized effectively and professionally.
Smart wallets use AI technology to monitor user behavior and actions to limit their financial spending and reduce their expenses. AI in the banking sector reduces costs by shifting tasks from humans to machines, decreasing response times, keeping customers apprised of the latest regulatory changes, and saving time by automatically preparing reports.
AI applications can help in the management of financial risks. As AI continues to grow, it attempts to overcome automated security issues/challenges that are human-centric. Artificial intelligence not only sends alerts of fraudulent transactions, money laundering and threats to data security to investigators but also enables them to increase transaction security. Consumer banking, advisory services, retail financial planning, investment advice and wealth management services can be provided with the help of AI-powered software.
Generative Adversarial Networks (GANs) is an emerging trend in AI research. It is a technology with immense potential in trading as well as asset and derivative pricing/risk factor modeling. GANs are capable of solving a lot of problems that AI has struggled to deal with using the limited and noisy data created in financial services. Automated virtual financial assistants assist users in making better financial decisions which include monitoring events and stock and bond price trends as per the customer’s financial goals and personal portfolio.
AI in Fintech Market scenario
The Fintech market predicts that AI use will cause a 10% reduction in the financial services workforce by 2025. With the advancement of AI technology, financial institutions are likely to switch to machines and disregard human analysts. This switch is to process transactions more efficiently and to lower operating costs while attempting to simulate human behavior. Technology-enabled employment also tends to impact lower-paid and lower-qualified workers more than others, which results in a decrease in opportunities and the loss of jobs due to increased competition for non-routine manual labor.
Banking services are the most obvious target for online fraudsters and hackers. As the amount of data collected is enormous, AI helps identify weaknesses and solutions, which provides the key for innovation of new security solutions. Artificial Intelligence tools learn and monitor the behavioral patterns of users in terms of fraud attempts and incidences. These tools identify patterns relating to fraudulent claims in the collected data in the process. The technology, with its self-learning capabilities, can adapt to new undiscovered cases and further enhance the detection rate over time. Instead of training humans to act like machines, financial institutions are teaching machines to understand humans. A few of the crucial challenges for AI in Fintech solutions market are the increasing use of data and the growing number of business collaborations. While AI technology can be used to calculate and analyze cash flows and predict future scenarios, a notable flaw is that it does not explain the logic or processes it uses to conclude. Today, AI is not yet ready to entirely replace human efforts. Instead, it will speed up the transaction process, letting human employees move into more value-added services, freeing them from rote actions, making them more efficient and providing accurate calculations that are otherwise challenging for a single person.