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The FinTech industry is popularly known for its unending innovations. The sector operates within complex systems, including start-ups, financial service providers, and banks. In the recent past, FinTech has relied heavily on machine learning and artificial intelligence for strategic customer insights, improving digital transactions experience, decision-making, and understanding customer purchasing behaviour. This article will explore the role of AI in Fintech, its benefits, and its limitations.
What is Fintech?
As defined by Investopedia, fintech refers to the use of new technology to enhance and automate the delivery and utilization of financial services. The primary purpose of fintech is to assist business owners, organizations, and consumers in better managing their financial operations, lives, and processes. The technology consists of specialized algorithms and software applications that can run on computers and smartphones.
Fintech emerged in the 21st century. When the technology was new, it was only applicable to the backend systems of the foundation of financial institutions like banks. However, from 2018 to 2022, the practice shifted to customer-oriented services, and fintech started including other industries such as retail banking, investment management, education, fundraising, non-profits, and many others.
Currently, fintech is the leading payment and data solution software in the high-end alcohol and beverage industry. Fintech’s primarily aims to empower suppliers, retailers, and distributors by streaming data insights and automating invoice payments. In addition, fintech has been in the market for over 30 years, confirming its dependability and reliable experience.
What is Artificial Intelligence?
Artificial intelligence (AI) is software that operates like human beings, and the software imitates learning patterns and human behaviours using digital programs. In the recent past, companies were reluctant to embrace AI. However, businesses are increasingly turning to AI solutions to enhance the efficiency and productivity of their operations and automate manual tasks.
Artificial intelligence can also be used, for simple to complex tasks in diverse business departments, from data analysis to sales, customer service, and IT tasks automation.
AI in Fintech
There are several benefits businesses can leap from using fintech technology driven by AI. The primary benefits are:
Personalized Financial Services
The primary solution AI provides to fintech companies is the ability to use customer data effectively. With AI, companies can identify customers’ preferences and tailor financial services to meet specific needs. A good example is how Banks can use AI-powered credit systems to analyse a customer’s income and expense history before providing loan assistance.
Efficiency and Cost Reduction
Before the incorporation of AI into fintech, financial services, and products were a realm of branches, and desktops and representatives were present in the workspace. Conversely, artificial intelligence automation in fintech has improved companies’ efficiency and reduced the cost of processing financial transactions for customers.
Risk Management and Fraud Prevention
With AI integrated into fintech, the system can prevent fraud by flagging information about unauthorized payments. The system can detect any transaction anomaly through data analytics stored in the system.
Challenges and Limitations
According to the US Department of the Treasury, whiles fintech firms provide valuable services to businesses, there is a need to be cautious due to data privacy and regulatory arbitrage, which is a big concern.
The technology has weak regulation. In the world of cryptocurrencies, the forms of fundraising are unregulated and have become firm grounds for fraud and scams.
Most of all, access to data is critical for AI to be more effective in its deliveries. Therefore, fintech companies must constantly address any form of limitation of extensive data to train AI algorithms.
In Summary
Artificial intelligence in fintech is here to stay. The technology is used for various purposes in the financial sector, and its solutions are customer support, credit risk assessment, lending decision-making, wealth management, fraud detection, and many more. Currently, fintech companies are using artificial intelligence for improvised precision levels, enhanced efficiencies, and high-speed query resolution.
AI in fintech accelerates innovation leading to fast, personalized, and secure services with high-level customer satisfaction and global reach.
Article Sources
Financial Technology (Fintech): Its Uses and Impact on Our Lives. https://www.investopedia.com/terms/f/fintech.asp
Wealthy Asians dash to ditch their US passports. (2015, February 1). AsianInvestor, 35.
