A lot of people are interested in how AI can be used in the financial technology industry. Everyone either can’t stop talking about it or can’t say anything because of how quickly it has changed over the last few years. Let’s talk about how AI have changed the FinTech industry and how they are being used all over the world. Are you ready for your mind to be blown?
From 2018 to 2027, the market for artificial intelligence in financial technology is projected to reach $31.71 billion, with a compound annual growth rate (CAGR) of 28.6%. The best thing about AI and ML is that they help businesses better serve their customers by giving them a greater understanding of how users behave through complex formulas.
The financial technology sector seems to be growing quickly as it uses AI to learn more about how customers act. More importantly for the FinTech industry, AI could be used to see possible problems with loans before they happen. Machine learning is a very important part of the growth of financial companies that want to grow by adding more services.
Machine learning is so good at lowering financial risk that it could help FinTech companies a lot with loan screening. The best thing is that AI’s cutting-edge methods can be used to spot scams and keep track of any private or illegal access your business may have.
But there are a lot more reasons than just the ones we’ve talked about so far. Let’s get into the middle of the other reasons why AI in fintech is a good idea.
Barriers to Artificial Intelligence Adoption in the Financial Technology Industry
Both sides of every coin exist. In order to take use of artificial intelligence’s benefits, we must first overcome its primary obstacles. We’ve outlined some of the most typical obstacles that FinTech firms encounter down below:
- Spending increases
When it comes to using cutting-edge technology, businesses may have good goals, but even the best FinTech companies are limited by something. Companies may be ready to work hard, but they can’t do that if they don’t have enough money.
Still, there is reason to be hopeful because of how quickly AI is being used in the FinTech industry. Because the market is moving toward AI, 86% of banks and insurance companies plan to spend more on AI-related technologies by 2025.
So, the AI investing strategy is at the heart of all the brave FinTech companies that have made the strategic choice to use AI in a big way for the future.
- Unreliable method of operation
Due to the erratic nature of their processes, FinTech firms may be led astray if they don’t take a firm stance. Therefore, if you are set on fully embracing AI, you should develop a firm plan of attack after careful analysis of fleeting views.
- Incompetent personnel
Even though FinTech companies’ efforts to use AI in their work are great, they often fail because they don’t know how to work best with AI. Because of this, there will be a lack of skilled workers, which will hurt businesses.
Studies show that the main reason these efforts failed was that they didn’t have enough experienced people working toward a long-term goal. Businesses don’t have a way to hire and train AI workers because staffing plans are seen as a bureaucratic hassle rather than a strategic tool.
Advantages of Using AI in the Financial Technology Sector
There are many benefits to incorporating AI into the FinTech sector, but we have attempted to highlight the most widespread ones that have contributed significantly to the expansion and improvement of the financial sector.
- Customization
A lot of people are interested in how AI can be used in the financial technology industry. Everyone either can’t stop talking about it or can’t say anything because of how quickly it has changed over the last few years.
AI and ML methods have made it so that FinTech companies no longer have to put up their plans by hand. It makes sure that each customer’s business plans and financial tools are safe by using cutting-edge security technology.
As was already said, the age of physical, boring work in FinTech is over because of the widespread use of artificial intelligence. AI is a multichannel method that gives personalized ideas (based on the needs of each character) after a full review of data that takes into account many factors. It then suggests the best investment strategy.
- Dramatic reduction in operating expenses and risk
AI in fintech is making quick progress, but there are still jobs that need human help and therefore have the chance of making a mistake. Fixing these kinds of mistakes takes a lot of time, effort, and money.
Robotic process automation (RPA) is one of the most important parts of AI because it mimics the way people do their jobs to cut down on physical work, lost time, and extra costs.
- Enhanced satisfaction for the buyer
Before the growth of FinTech companies, the banking industry was often made fun of for having bad customer service. Because banks took too long to answer customers’ questions and worries, they couldn’t meet their needs.
Chatbots are one of the most interesting things that AI has done so far. AI apps have been put to good use, as shown by the growth of the FinTech industry.
Most AI robots that can talk to people are used in the banking business. When a customer calls a bank with a question or problem, the issue is written down and the best way to handle it is suggested. Some robots that serve people all over the world are even available around the clock, so you can use them at any time.
- Investing is now fully automated
Given how quickly technology has changed and continues to change, 2023 is the year to fully adopt new technologies. AI is used by a lot of financial institutions to make decisions about investments and to do study for investment banking. Also, some FinTech companies have gone above and beyond by giving their customers AI-powered experts to help them through the process.
It is expected that by 2023, robo-advisors will be in charge of $2.8 trillion worth of investments. Robo-advisors are now smart enough to give useful advice to customers based on the questions they are asked.
- Reliable outcomes
As people, we all make mistakes every now and then. In the FinTech business, there are a lot of large jobs that use a lot of data but don’t change the end output very much. AI can make mistakes, but not as often as humans.
So, using apps that are based on AI in fintech leads to solid results. By using an AI tool, you can save a lot of time and energy and also be free to think freely. You don’t have to spend as much time and energy on everyday tasks because you have more time and money to focus on growing your business.
Financial Technology and Artificial Intelligence
After discussing the pros and cons of AI, it’s time to dive into some frequent uses of the technology in the financial technology sector.
- Studying and analyzing data
Even though FinTech companies’ efforts to use AI in their work are great, they often fail because they don’t know how to work best with AI.
Because of this, there will be a lack of skilled workers, which will hurt businesses. Studies show that the main reason these efforts failed was that they didn’t have enough experienced people working toward a long-term goal.
Businesses don’t have a way to hire and train AI workers because staffing plans are seen as a bureaucratic hassle rather than a strategic tool.
- Facial recognition for contactless payments
This is a game-changer, for sure! Yes! Face-recognition payment methods are an innovative new idea. Even if it’s not popular anywhere else, the Chinese seem to like it a lot. In China, people often use their faces as a way to pay, especially at fast food chains like KFC and big department stores.
It’s all about the customer’s DNA. The system accepts payments in this way and then uses the information to make tips based on the person’s likes. The whole thing only takes a few seconds, and the convenience for the customer goes up a notch because they don’t need any smart devices or credit cards to do it.
- Trade
Quantitative, automated, and high-frequency trading are all ways that companies use AI to evaluate huge amounts of data in real time. You can move quickly because AI quickly analyzes data and sends you trade alerts.
Capital management companies, mutual funds, and hedge funds use AI to keep an eye on stocks whose prices change quickly so they know when to buy or sell.
Also Read: The Impact of Artificial Intelligence on the Job Market
Conclusion
In the last two decades, there has been a huge digital shift in the banking industry. Because of worries about safety, financial institutions are known for having strict rules and policies.
But, from a global point of view, the banking business has made a lot of progress in a very short amount of time. No one thought that people would be able to buy food without using their phones or plastic cards just 20 years after the first cashless payments were made.
With so many good things that could happen, the Financial Sector will quickly accept technology, and AI will be a big part of that. Not just strange things from science fiction anymore.
