The financial technology (Fintech) world is experiencing a drastic change, and AI is leading the charge.
Imagine a bank that anticipates your every financial need, stops fraud before it happens, and offers 24/7 support at your fingertips.
This is no illusion; it's the reality of FinTech in 2024. Even the biggest financial institutions are embracing its potential, with 91% already exploring or using it, per a recent report.
In this article, I’ll discuss 5 ways AI is revolutionizing fintech, with real-life examples to illustrate its impact.
Let's dive in!
AI's Impact on FinTech: 5 Ways it's Revolutionizing the Game in 2024
AI is shaking up the world of finance, creating new opportunities for everyone, whether as a business or an individual.
Here are the top 5 ways it's transforming FinTech in 2024.
1. AI-Powered Hyper-Personalization
In the past, financial services were often the same for everyone, offering generic advice and products. But now with AI, companies can get to know customers and offer solutions that truly fit their needs.
How AI Personalizes Financial Services
It starts with financial companies using AI to analyze customer data. This includes their income, how they spend money, what they invest in, and even what they do online. With this information, they create a detailed financial profile for each customer.
And, based on that profile, they can then provide tailored services and personalized suggestions that perfectly suit the customer’s needs.
Real-World Examples of Hyper-Personalization
-
Wealthfront: Wealthfront is a robo-advisor and a prime example of AI hyper-personalization. It uses AI to create investment plans tailored for each customer. It does this by looking at their finances, investment goals, and how much risk they're comfortable with. Then, it suggests the best investments.
-
Betterment: This is another robo-advisor that uses AI to offer personalized financial advice on everything, from retirement to taxes. And it does all this at a low cost.
This kind of personalized financial service was previously reserved only for the wealthy. But now, thanks to AI, everyone can access it!
Jason Wise, Editor at Earthweb, buttressed this point in a recent discussion:
AI-powered robo-advisors are democratizing access to sophisticated financial strategies for average consumers at a fraction of the cost of traditional financial advisors. Even small-scale investors can now benefit from AI-driven investment tools that were once available only to high-net-worth individuals and institutions, save money on fees, and build wealth passively.
The Benefits of AI Hyper-Personalization
-
Happier Customers: Customers love it when companies understand their needs. This leads to increased satisfaction and loyalty.
-
Reaching Goals: Personalized services and products can help customers attain their financial goals faster.
-
More Sales: Companies can suggest things customers are more likely to want, thus leading to more sales.
-
Customers Stick Around: When customers get a more personalized experience, they are more likely to stick around.
Also read: Benefits of Artificial Intelligence
2. Advanced Fraud Detection and Prevention
In 2023, financial fraud caused a massive $485.6 billion in losses worldwide, according to a Nasdaq report. This means one thing: financial institutions need to strengthen their defenses.
But thankfully, AI is helping to tackle this problem.
How AI is Outsmarting Fraudsters
AI-powered systems use smart algorithms to analyze tons of data in real-time. Unlike old-school fraud detectors, they have no strict rules. They can spot suspicious patterns, like unusual spending habits or logins from risky places, often before any damage occurs.
Russel Gous, a financial expert from MoneyTransfer, shares similar thoughts in another response I received:
AI is making a big difference in the fight against fraud, which is crucial given the rising number of fraud attempts. Banks, money transfer companies, and payment processors now use AI to analyze transactions and catch anything unusual that might signal fraud. This helps keep up with the growing threat of fraud. Also, this means fewer false alarms and a smoother customer experience.
Real-World Examples of AI Fraud Detection
-
Feedzai's Railgun: Feedzai, a top financial security company, launched Railgun in 2023. This AI tool analyzes huge amounts of data instantly to spot fraud faster and more accurately, which helps businesses stay ahead of criminals.
-
Mastercard's Decision Intelligence Pro: Mastercard's AI system already checks over 143 billion transactions yearly. But now, with a new upgrade called Decision Intelligence Pro, it's getting even better at stopping fraud. This technology is expected to boost fraud detection by an average of 20%, sometimes by as much as 300%.
The Benefits of AI-Powered Fraud Detection
-
Stops Fraud Instantly: AI can block bad transactions as they happen, saving money.
-
Fewer False Alarms: AI is more accurate, so real transactions are less likely to get flagged.
-
Always Improving: AI systems constantly learn and adapt, helping financial companies stay ahead of new scams.
-
Saves Money: Automating fraud detection means less manual work, saving companies money.
The fight against fraud is never over. But with AI, financial institutions are better equipped than ever to protect businesses and customers.
Learn more about How to Use AI for Business
3. Streamlining Customer Service with Intelligent Chatbots and Virtual Assistants
Gone are the days of endless waiting on hold for customer service. Now, thanks to AI chatbots and virtual assistants, customers can get instant help, 24/7. AI is changing the game for financial customer service, making it faster, smoother, and much more convenient.
How AI is Making Customer Service Better
AI chatbots and assistants use natural language processing to understand what customers are saying and provide helpful answers, just like a real person. They can do many things, from answering simple questions to fixing problems. If a problem is too hard, they can connect customers to a human agent.
Unlike old chatbots that followed strict rules, these new AI assistants are always learning and getting better at helping customers.
Here's how Michael Ringman, a Forbes council member, captures it in a recent post:
AI is playing a key role in improving customer interactions through the development of conversational interfaces. Its ability to provide quick, efficient, and hyper-personalized support is a game-changer for financial institutions.
Real-World Example of AI-Powered Customer Service: Bank of America's Erica
Bank of America's virtual assistant, Erica, is a great example of AI in customer service.
It can do several things, like checking balances, giving financial advice, scheduling appointments, and lots more. With over 42 million users and 2 billion interactions, it's clear that people love having this kind of personalized help at their fingertips.
The Benefits of AI-Powered Customer Service
-
Always Available: Customers can get help 24/7, no matter when they need it.
-
Faster Answers: AI tools can handle many questions at once, so you don't have to wait.
-
Personalized Help: Chatbots can use customer information to give advice that's just right for them.
-
Saves Money: Automating customer service helps companies save money.
-
Handles More Customers: AI tools can easily help more people without slowing down.
AI isn't just making customer service better; it's transforming the whole experience. By offering fast, personalized, and helpful support, AI is helping financial companies build stronger relationships with their customers and grow their businesses
4. Data-Driven Decision Making and Risk Assessment
In the fast-moving world of finance, quick and informed decisions are key. AI is changing the game, helping financial companies use data to make better choices, faster and with less risk.
How AI is Changing Decision-Making
Traditionally, financial companies based their decisions on past data and gut feelings. While helpful, these methods often miss the subtle complexities of today's markets. AI, on the other hand, can quickly process huge amounts of data, both organized and unorganized. This helps uncover hidden patterns and trends that humans might miss.
For instance, AI algorithms can predict stock prices by looking at market data, news, and economic factors. This helps traders make smarter investments at the right time.
Furthermore, financial institutions can use AI to assess risk. It can predict if someone might default on a loan. It can also spot potential problems in investment portfolios.
Real-World Example of AI Decision-Making: Kensho
Kensho, a top AI company owned by S&P Global, uses AI to analyze tons of financial information, news, and even things like satellite images or social media posts.
By automating research and analysis, Kensho gives financial professionals immediate market insights. This helps them make faster, more informed decisions. It also improves the accuracy of investment strategies, risk management, and more.
The Benefits of Data-Driven Decision Making
-
Better Accuracy: AI's ability to analyze lots of data leads to more accurate predictions.
-
Improved Risk Management: AI can identify and measure risks better, leading to smarter risk strategies.
-
Greater Efficiency: Automating data analysis frees up employees for more strategic work.
-
Competitive Edge: Companies that use AI for decision-making have an advantage over those that don't.
Bernard Marr, a well-known expert in AI, sums it up perfectly:
AI isn't just about automating tasks; it's about making humans smarter. By combining AI with human expertise, we can make better decisions, handle risks more effectively, and achieve better financial results.
5. Transforming Banking Operations with Robotic Process Automation (RPA)
Banking is no longer just about money; it's about efficiency, accuracy, and a smooth customer experience.
Robotic Process Automation (RPA) is leading this change, but it's not about robots taking over. Rather, it's about making banking better for everyone - both banks and customers.
How RPA Makes Banking Better
Gareth Boyd, a financial expert at Credit Card Compare explains:
Banks are already using RPA for things like moving credit card accounts between banks or reissuing cards," explains . It's cheaper, faster, and better for the customer.
But RPA does much more than that. These software robots can handle all sorts of banking tasks, like opening accounts, processing loans, and checking transactions. This frees up bank employees to focus on more important things, like helping customers and coming up with new ideas.
And, while some worry about job losses, Boyd believes otherwise:
RPA will free up employees for more interesting and creative work. This could lead to a more skilled and motivated workforce, ultimately benefiting both the bank and its customers.
Real-World Examples of RPA in Banking
-
Deutsche Bank: Deutsche Bank has embraced RPA in a big way, especially for behind-the-scenes tasks. They've seen some tasks get done up to 50% faster. This frees up their employees to focus on more challenging and rewarding work.
-
OCBC Bank: OCBC Bank in Singapore also recently rolled out OCBC Chat GPT, a smart AI tool for its 30,000 employees. This tool helps them get their work done faster and better. For instance, they can use it to write documents, research topics, and generate new ideas. This not only makes employees more productive but also helps them focus on providing a better customer service experience.
The Benefits of RPA in Banking
-
Lower Costs: RPA automates tasks that used to be done by hand, saving banks money.
-
Faster & More Efficient: Robots work 24/7 and don't make mistakes, so things get done quicker and better.
-
More Accurate: RPA eliminates human errors, leading to more accurate data and better compliance.
-
Happier Customers: Faster service and fewer errors mean a better customer experience.
It's clear - RPA isn't about replacing humans; it's about helping them to do their best work. And that's good news for everyone in the banking world.
Conclusion: AI is Shaping the Future of Finance
As discussed in this post, AI is revolutionizing how we handle money. From personalized banking experiences to advanced fraud detection, and more, AI is transforming the financial landscape.
But this is just the start. As AI evolves, we can expect financial services to become even smoother, easier to use, and safer.
The possibilities are endless, and one thing is clear: AI is the future of finance, leading us to a world where our financial well-being is not just protected, but actively improved.
