The financial technology sector has undergone a rapid transformation in recent years thanks partly to the integration of artificial intelligence (AI) technologies. AI has become a powerful tool that assists various aspects of the FinTech industry, including improving risk management and fraud detection and enhancing customer experiences. If you want to know more about how AI plays a pivotal role in reshaping the FinTech landscape, all you need to do is continue reading.
Customer-centric solutions are one area where artificial intelligence is making a significant impact. Chatbots and virtual assistants are nothing new because many industries, including online retailer Amazon and online sportsbooks like MyBookie, have used them for several years. However, the latest line of AI-powered bots is growing increasingly human-like on a seemingly daily basis.
The newest AI-driven customer support tools can provide real-time support and even assist in making financial decisions. They can help customers perform basic tasks such as checking their account balances, setting up automatic payments, etc.
These AI-powered chatbots and virtual assistants are available 24/7, ensuring customers can access information whenever they need it, and they can also handle a high volume of inquiries simultaneously, thus reducing waiting times and improving customer satisfaction. As developers use machine learning to enhance AI assistants, they will become an ever more important tool for a FinTech company because they will become more adept at understanding and addressing customers’ needs.
Risk Management and Fraud Detection
Managing risk is a crucial aspect of the financial industry, particularly with institutions that offer credit lines or insurance products. AI can analyze vast amounts of historical data much faster than any human and instantly spot patterns that may not initially be apparent to human analysis.
For example, an AI bot can predict the likelihood of a customer defaulting on a loan by going through credit and employment history and other relevant data. It can then present this to a human operator to make the final decision. Likewise, insurance companies can use AI to help assess the risk of their policyholders and adjust premiums accordingly. This allows insurance companies to manage risk exposure and keeps their pricing competitive for low-risk customers.
Companies can now use bots to create a more in-depth credit scoring model for potential customers. AI can incorporate non-traditional data into its decision-making, including utility bill payments, smartphone usage patterns, and social media activity. These state-of-the-art profiles then provide more accurate assessments of an individual’s creditworthiness, helping lenders manage their financial risks.
Artificial Intelligence has become increasingly powerful regarding fraud detection and prevention. Modern cybercriminals use sophisticated methods to try and beat the systems FinTech companies have in place, so AI is becoming more important. AI can almost instantly analyze datasets to detect unusual patterns and anomalies that could indicate fraudulent activity. They can work in real-time and flag any activity that deviates from a customer’s spending habits.
The financial industry must adhere to a complex web of rules and regulations, and those regulations often change. Complying with these regulations can prove costly and time-consuming, especially if a company has millions of records needing sifting through.
RegTech, the abbreviation for AI-powered regulatory technology, can parse through millions of regulatory documents in seconds, extract relevant information, and ensure financial institutions adhere to the latest regulatory requirements.
Anti-money laundering measures are a massively important part of a company’s regulatory obligations. AI can be used to flag transactions that have the potential to be part of a money laundering scheme or that indicate other illicit activities. AI systems automate this process, helping to reduce the risk of receiving heavy fines from regulatory bodies.
Enhancing Data Security
Data security is of paramount importance in the financial industry because of the sensitive nature of the information it handles and stores. AI is used for advanced data encryption and anomaly detection, particularly activity on its networks and storage systems.
Complex algorithms continuously monitor network traffic and the end user’s behavior to see if anything unusual is occurring, which may indicate a security breach. Such systems allow FinTech companies to be proactive in their defense against potential threats and enable them to detect and mitigate them before they lead to data breaches or other cyberattacks.
AI-related Challenges and Ethical Considerations
Everything you have read about so far shows artificial intelligence in a positive light. Still, many people are out there with concerns about allowing machines to work in highly sensitive business areas.
A primary concern is the potential for bias in the algorithms AI uses. For example, if a bank or other financial institution’s bot is biased, it could discriminate against specific demographic groups. Regulatory bodies are increasingly focused on the fairness and transparency of AI-driven financial services to ensure this never happens.
Furthermore, another challenge is the need for ever more robust cybersecurity measures to protect artificial intelligence systems. Cybercriminals could target and exploit the very machines designed to protect data and networks. Elite-level cybersecurity is not cheap, but it is a necessary evil today.
Lastly, having artificial intelligence perform jobs, roles, and tasks that humans once enjoyed does not sit well with some people. AI-driven bots can do the work of dozens of human equivalents, often resulting in those people losing their jobs. As AI becomes more complex, accurate, and understanding, the potential for human job losses goes through the roof.
Artificial intelligence’s role in the FinTech industry will only increase and become more critical as the technology advances. AI is far better and faster at detecting anomalies and patterns and can perform its tasks in real time, resulting in reduced costs for companies and improved customer experience for the end users.
While some ethical concerns surround AI, regulatory bodies will not allow FinTech companies to use machines to discriminate against particular demographic groups. One can only imagine the severity of the punishment landing at a company’s door if they were found to be adopting such practices.
Overall, AI is a powerful and vital tool that is an asset to any financial company when used correctly and in the way developers intend. AI is not going anywhere fast; it is taking over more advanced roles, if anything.