AI has revolutionized the finance industry. According to the latest report of the Autonomous in an AI in the financial sector, by 2030, traditional financial institutions can shave 22% in costs. Artificial Intelligence also improves the precision level in the industry, enhances the customer engagement level and speeds up the query resolution period.
In this article, we will explore a few essential points that direct towards the importance of AI in the fintech industry. Let’s get started.
- Fraud Detection
Fraud detection is growing exponentially in the finance industry. AI is a groundbreaking technology in the battle against financial fraud. ML algorithms enable the analysis of millions of data points in a fraction of seconds to identify anonymous transactional patterns. Once these suspicious activities are isolated, it’s easy to determine whether it was just a mistake or due to fraudulent activity. Areas where fraud detection and prevention are insurance claims, money laundering, electronic payments, bank transactions, both online and offline.
- Visualization & Transaction Search
A part of AI, NLP (Natural Language Processing), determines the meaning of sending user requests or search queries. These requests are balance requests, general account information, and spending habits. The robot handles all kinds of requests and displays the results. For example, Bank of America uses automated software as a digital financial assistant for its customer base. The AI-powered robot was certified and had one million users in three months.
Furthermore, the bot program provides easy-to-use transaction search. It allows users to search for particular financial transactions with a specific merchant while avoiding the hassles of searching every bank account statement. Bot also calculates the total amount of credit and debit – a task that usually users performed with their calculators earlier.
- Digital Financial Coach or Advisor
One of the most common use cases of artificial intelligence is – business robots. It is possibly adopted across all sectors and different levels. In the financial sector, transaction robots can be used to provide financial advisory or several other advisory services to users. It acts like a digital assistant who helps their users navigate savings, spendings, and financial plans. This specific service boosts user engagement and improves the overall user experience with any financial product that they interact with.
A digital assistant can be treated with NLP (Natural Language Processing), a type of machine learning model that processes data or information in a human language format.
The bottom line: a digital assistant can also be used in various financial scenarios such as managing dividends, extending maturity, approaching any transaction, or verifying notifications.
Fintech companies hugely depend on computer and data scientists to determine future patterns in the marketplace. In a domain, trading and investments rely on the ability to predict the future accurately. In such cases, machines are excellent since they crunch a huge amount of data in a short while. Machines are also taught to observe patterns in past data and predict how these patterns may repeat in the future.
Due to inconsistencies like financial crises, a machine can also be taught to study the data to find triggers for such anomalies. It also provides a plan for them in the future. Moreover, it all depends on individual risk appetite. AI suggests portfolio solutions to meet each person’s demand. Therefore, one with a lower risk appetite can receive alerts when the market is expected to fall. All you need to make a decision about whether to stay invested in the market or to move out.
- Data Security
According to a 2017 report by LexisNexis, companies have to spend $3.37 to resolve the problem and appease the customers for every dollar of fraud. Security solutions have become the need of companies. Machine learning can provide the means to identify, analyze, and implement the required security measures. Fintech companies are based on predictive analysis models wherein the system predicts certain outcomes like security breaches and appropriate actions that can be taken to prevent them.
- Client Risk Profile Analysis
Every financial service provider has to manage the risk profiles of their clients. Based on this evaluation of risk profiles, appropriate services are suggested to the customers. On the contrary, manual management is time-consuming and might be subjected to human errors. With AI integration, it’s possible to eradicate this issue. The risk profiles of clients can be categorized, and products can be auto-classified based on the respective risk category. Thus, it will help to save considerable time and effort.
- Pricing and credit risk evaluation
Insurance-based companies offer underwriting services, especially for investments and loans. The AI can provide an immediate assessment of a customer’s credit risk, allowing consultants to design the relevant offer. Additionally, the use of AI to sign up services increase the efficiency of others and enhances customer experience. Hence, it also speeds up the process and turnaround time for such activities.
Undeniably, AI is powering the financial sector like never before. More and more financial and banking institutions include features of AI to make their process precise and prompt. You can also share your thoughts with us by commenting below.
Hardik Shah works as a Tech Consultant at Simform, a leading mobile app development company in Houston. He leads large scale mobility programs that cover platforms, solutions, governance, standardization, and best practices. Connect with him to discuss the best practices of software methodologies @hsshah_.