“The major winners will be financial services companies that embrace technology.” ~ Alexander Peh, PayPal and Braintree
There are about 7.8 billion people on the planet, give or take a few. But that number pales while comparing it to the number of connected devices worldwide. According to Autonomous, a financial research firm, people are outnumbered three-to-one by their smart devices — a projected 22 billion in total. And the number of smart devices will continue to escalate, with venture capital firms injecting $10 billion annually into Artificial Intelligence (AI)-powered companies focusing on digitally-connected devices. Autonomous, in an 84-page report on AI in the financial industry, said that financial institutions’ slice of this massive AI pie represents upwards of $1 trillion in projected cost savings. Further, traditional financial institutions can shave 22% in costs by 2030.
The annual budgets of large banks, which amount to billions of euros, can be compared to the national budgets of some developing countries. It is therefore expected that banks and financial institutions in particular will be the main drivers for AI research and development in Fintech. They will also help to bridge the AI knowledge gaps in other industries and develop the ecosystem of Fintech startups.
AI & Financial World: Win-Win?
AI has brought a new stage in the development of applications and services in the financial market. As is known, AI is able to process unstructured data such as images, presentations, video, audio, location and time series perfectly. That is why the existing AI-based solutions offer many options: With their help, the fraud can be identified, the creditworthiness and risks assessed and a person identified based on their digital footprints. In the insurance area, they are used to identify insurance fraud, automate claims and improve risk management.
The AI-controlled chatbots, which have been spoken a lot about in recent years, help the user experience to be personalized in real time and in the most efficient way. This enables banks to reach the next level of maturity in their customer relationships and experiences. Finally, virtual assistants should be mentioned. This is another AI product category that is very popular with banks and financial companies, and just like bots, helps guide the user through the bank’s services and products, thereby enhancing the user’s journey, providing insights and targeted actions to increase target conversation.
Let’s take a quick look at some of the most exciting AI initiatives launched by banks and financial institutions.
JP Morganuses AI to automate loan contract analysis. JP Morgan recently implemented a new program called COIN, which stands for Contract Intelligence. This platform allows users to analyze contracts, highlight key terms and critical data. So far, bank employees have spent a total of 360,000 hours a year doing these mundane tasks.
Wells Fargoannounced the creation of a dedicated AI team to develop innovative payment technologies and improve services for its corporate customers. A special role of the Wells Fargo AI team is to develop the technologies that should enable the bank to provide more personalized online customer service. Current projects, the AI team works on behalf of the bank, include systems that can detect payment fraud or misconduct by employees, as well as technologies that can give customers more personal recommendations on various financial products.
CitiBank places particular emphasis on developing and investing in AI-based startups and projects that are designed to use AI to detect and combat fraud in online banking. For example, it has invested in a data science company Feedzai that uses real-time machine learning to identify fraudulent payment transactions based on big data analysis and to minimize risk in the financial industry.
AI & Fintech startups
The financial services industry is very popular with startups. While some efforts from startups to make a revolution in traditional banking, others try to help banks process of expanding its services with new and advanced products and ameliorate. The AI use cases from a Fintech startup world include, for example, fraud detection and advisory services, personal financial management, transaction support and so on.
When comparing consumer behavior with numerous historical data, the smallest details can be found and cyber fraud can be prevented in advance. AI tools collect data and receive updates, which is why they are continuously trained and improved. The AI-based advisory robots can reduce risks for customers because they are able to recommend suitable financial products and objects for investments via a large amount of information sources. A particularly promising area for Fintech startups is personal financial management. The successful startups here are online budget planner Mint and personal finance manager Wallet.
DreamQuark develops a software platform that democratizes the use of artificial intelligence and is used to develop and design AI applications specifically for the banking and insurance sectors. The solution covers all of its main activities with dedicated applications such as customer segmentation, targeting, underwriting, credit assessment, asset management, anti-money laundering, fraud, dunning, satisfaction and customer loyalty.
DataVisor offers the world’s most advanced AI-based solutions to detect fraud and other financial crimes and protect companies from fraud and abuse. The company uses unsupervised machine learning to detect and prevent modern, sophisticated cyber attacks. As a result, the performance of companies using DataVisor products is 50% more efficient than that of their competitors.
Quantexa, a big data analyticscompany, provides actionable information in the fight against financial crime and customer intelligence. It uses the latest developments in big data and AI to predict default risks, proactively detect fraud, prevent money laundering, profile unscrupulous players and trusted customers, and describe the connections between them.
Thanks to Fintechs, banks have learned to be user-centric and anticipate future needs!
Compared to Tesla, which is perceived more than just a vehicle these days, banking services are also becoming entire ecosystems. As a user, we are fortunate that someone is currently developing a new robotic advisor who will tell you where to invest your money and who will use your father’s voice to make the recommendation as personal as possible. In this way, artificial intelligence helps banks and Fintech startups gain a competitive advantage and make a difference in terms of usability.
Sameer Shaikh is an Academic Writer who has been writing articles for various B-Schools’ Magazines from the last two years. His articles have been published in the Magazines of IIM Rohtak, IIM Udaipur, K.J Somaiya & so on. He writes articles of various fields including Finance, Economy, Marketing and so on. He has achieved many credentials in Academic Writing.