As per fintech icon Michael Zetser entrepreneur, two cutting-edge innovations that have managed to alter the entire financial sector are artificial intelligence (AI) and financial technology (FinTech). AI is capable of delivering a 26% boost to economic growth and a 34% boost to revenue from financial services. It has proven to be pivotal for the rapid advancements in fintech, as it is helping businesses and financial institutions analyze large quantities of data for identifying patterns and make efficient and data-driven decisions.
AI’s role in fintech involves development of cutting-edge products, which include algorithmic trading systems, financial robo-advisers, personalized customer services and fraud detection. With the constant evolution of artificial intelligence and its integration in the fintech industry, there is a potential of massive change in the financial landscape that would provide more tailored experiences to customers.
Not only is AI revolutionizing traditional financial practices, it is also paving the way for cutting-edge and innovative advancements. This is why Michael Zetser says that AI can redefine the entire fintech industry. In fact, he has detailed some of the ways that AI will disrupt the fintech sector in 2023 and beyond.
AI-driven customer engagement and service
Virtual assistants and chatbots powered by AI have proven to be game-changers, not just for the financial industry, but for others as well because they can improve customer satisfaction and engagement. They are capable of handling routine inquiries, providing personalized and instant customer support, assisting with account management and offering product recommendations. Moreover, customers are able to access support at all times because AI-powered assistance can be offered 24/7.
AI systems are also helpful in understanding customer behaviors and preferences, as they are capable of data analysis. Fintech companies can use these systems to assist customers in making vital financial decisions and provide personalized advice. Thanks to this customized attention, they can offer a better client experience and boost business growth.
Strengthen fraud detection and cybersecurity
The number of fraud attempts and cyber threats has increased after the rise of online financial services and digital transactions. AI is capable of promoting and strengthening fraud detection and cybersecurity efforts in the payments and fintech industry. According to Michael Zetser, the use of AI for prevention systems and fraud detection will help businesses in the sector save a massive $10.8 billion by 2027.
This is because AI algorithms are adept at analyzing massive amounts of data in real time, monitor transactions continuously to identify anomalies and recognize patterns, along with potential vulnerabilities and security threats. The systems have become quite sophisticated and can prevent financial loss and unauthorized access by distinguishing between fraudulent activities and legitimate customer behaviors.
Data-driven decision making
The use of metrics, facts and statistics for making strategic business decisions for accomplishing the initiatives and objectives of a company is what data-driven decision making is all about. There are a number of advantages that it offers over the traditional process of making decisions. Since it depends on specific facts and data, it offers greater accuracy and objectivity because bias is eliminated. It also helps in improving predictions because they are based on data and reduces the time and cost incurred in decision making.
Scalability, personalized decisions and risk mitigation are some other benefits of this approach and AI technologies are designed to facilitate it. They help in informed decision-making through data extraction and its analysis, which can boost efficiency and reduce the effort and time otherwise needed for a traditional manual analysis. Huge volumes of data can be analyzed by AI-powered systems that are obtained from multiple sources, which helps in finding relevant opportunities and insights.
Michael Zetser points out that fintech firms can use these AI-driven insights for improving their business and marketing decisions. Optimizing market plans, offering individualized products and services and developing cutting-edge solutions for catering to the unique demands of customers are some of the perks fintech companies can enjoy when they use AI technologies for data-driven decision-making.
Predictive analysis
The success of financial organization is mostly dependent on their ability to assess the existing market trends and predict future issues. While predictive analysis models have existed in the traditional financial market as well, they come with limitations because of the volatile and complex nature of the markets. Thus, more adaptive technologies are needed for predictive forecasting, as they can help in data consolidation, budgeting, planning and scenario evaluation.
Machine learning algorithms are used in AI-driven predictive analysis for identifying trends and patterns in historical data for making forecasts with greater accuracy. Financial institutions can employ AI in predictive analysis for making informed decisions about market trends, risk management and investments, which can help in mitigating risks and improve portfolio performance. Investors can also make well-informed decisions for maximizing their returns with the help of AI-powered LLMs (large language models) that can analyze financial data for forecasting future investment patterns.
