How AI is transforming the world of finance

From barter to paper currency to plastic money to contactless cards, the world of payments has come a long way. AI promises to usher in a new world of frictionless and seamless payments

Piyush Sharma
Updated: Sep 29, 2021 11:10:41 AM UTC
Financial risk control and management is one of the most definitive early applications of AI in fintech. Image: Shutterstock

The AI apocalypse is here. Across industries, segments, walks of life—one may not realise it but it is playing out large. Larger still is the opaque jargon and the hype around it. Not without basis though.

The race to reach the top has many participants—research institutes, top corporates, educational institutions, and even states around the world. Artificial intelligence-powered fintech startups are registering exponential growth and so is the venture capital funding for them. Adapting quickly to embrace digital and become an active part of the ecosystem is essential. Network-enabled co-creation is at the heart of the new digital transformation.

AI and fintech
AI promises to completely transform everything—some things more than others. The BFSI space has already seen the sheer efficiency of AI to process massive data logs and deliver masterful insights through pattern recognition. AI has made a huge difference in the world of payments and financial services which is plagued with incidences of identity fraud and imposter scams.

With the need to deliver better experiences and customer conveniences, AI enables better and faster fraud detection in a hyper-digitised world where PII (Personally Identifiable Information) is available for a few hundred dollars on the dark web. Advanced risk monitoring and fraud detection enables prediction and detection in real-time and not post factum.

From barter to paper currency to plastic money to contactless cards, the world of payments has come a long way. AI promises to usher in a new world of frictionless and seamless payments where the ubiquitous modern POS of today will look archaic. Amazon’s experiments to do away with the retail checkout queue are a good example.

AI and investing AI-powered robo-advisors are the 'in' thing what with their ability to go beyond mere algorithm power to considering far more complex parameters including a range of factors from tax-loss harvesting to financial planning.

The applications of AI include predicting consumer behaviour and enabling effective buying of hyper-relevant and personalised products, to offer tremendous opportunities to marketers of financial services.

Digitisation and decentralisation are at the core of powering the fintech revolution, enabled by AI. Besides AI, there is blockchain, robotic process automation, and data analytics which constitute other prominent technologies impacting fintech.

The structuring, delivery, and consumption of financial services have all been disrupted, courtesy AI, while the new technologies lend an umbrella branding to the fintech transformation. To capitalise on the opportunities being unleashed, it is imperative develop an enterprise-wide strategy and apply AI to revenue and customer engagement opportunities.

Financial risk control and management are the most definitive early applications of AI in fintech. It is helping restore trust in the financial systems and bringing inclusion with digital finance, bridging the gap between the hitherto unbanked and the banked. The pandemic has further hastened the pace at which AI adoption in fintech is becoming the norm.

The fintech market story
Mordor intelligence predicts the AI fintech market at a projected $22-plus billion, growing at a CAGR of 23 percent by the year 2025. The top finance leaders around the world acknowledge the role of technologies led by blockchain and AI. The global fintech market has a predominant penetration in the APAC and Americas with the APAC market forecasted to be the fastest-growing region.

The frontrunners amongst Indian fintech companies using AI include Razorpay (AI-powered system Third Watch helps address fraud issues); INDmoney (AI-driven financial advisory); CogNext (regulatory tech company using AI through automated tech platform, Platform X); Capital Float; Credit Mate; Lending Kart, and Mswipe.

Industrial revolution 4.0 will see a fusion of technologies across physical, digital and biological spaces, and will allow reinventing the firm around data, connectivity, analytics and AI, which removes traditional limitations of scale, scope and learning.

The writer is an executive-in-residence at the Anderson School of Management, UCLA besides being a global CEO coach and C-Suite Advisor.

The thoughts and opinions shared here are of the author.

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