To maintain a competitive edge in the next coming years, you will need to familiarize yourself with – FinTech and AI.FinTech is a synonym for Financial Technology while AI stands for Artificial Intelligence. There instances you will find the two interloping or one fueling the other.
Using FinTech and AI to stay ahead
Traditional banks are facing the biggest market disruption since their inception. Startups run by millennial are leveraging technology and taking banking facilities to the unbanked. Acting as micro-lenders, these startups are offering more personalized services to a large percentage of the population at a fraction of the cost.
Fast loan approval processes
By deploying complex AI algorithms, these FinTech companies are reducing time spent on credit assessment. Loan applications that usually took five business days now take a few minutes. After setting up various loan application parameters and engaging in personality tests, the companies can leverage on personal phone data. The default risks have considerably gone down when AI and FinTech is used for loan applications. The security of consumer data is critical, and that is why the companies have used this list of the 10 best VPN services providers to ensure none of their client’s data gets into the hands of hackers.
Today if you have a query that needs urgent attention just launch the chatbot found in most organizations websites’. The chatbots use AI to enhance customer experience, making responding to queries faster and more efficient. Some banks have deployed their virtual assistants to help them serve customers better. VA extend to various mobile banking Apps. Millennial customers prefer interacting with chatbots and VAs than visiting their local bank branch for assistance.
Money laundering is big in the banking industry. Detecting fraud is before it happens is key objective for many banking organizations. By deploying AI technologies, companies can get alerts for possible security breaches and curb the vice before it causes further harm.
Reduced overhead costs
A large percentage of operating costs in most banks goes to staff wages. By deploying FinTech and AI technologies, financial institutions can reduce their wage bills. Automation of both front and back-end offices will bring down both costs associated with wages and infrastructure. As machine learning continues becoming more advanced, we will see repetitive tasks being replaced by machines.
Enhanced user experience
One of the reasons that an increasing number of financial institutions are deploying FinTech is that it makes it easier to serve customers faster and efficiently. The process of customer care has been mapped out and carefully laid out using FinTech. You can get instant feedback from customers on the performance of a specific product. Companies enjoy cost savings. When your customers are happy, you
FinTech and AI adoption challenges
While there are many positives with adopting FinTech and AI, there are challenges that you need to be aware of. A simple AI system will require heavy investment in software and hardware to handle the complex algorithms. This basic IT infrastructure is different from what you see in a conventional office setting. Your hardware should have fast processor speeds and have the capacity for scalability as demand for FinTech products grows. This Infrastructure cost is what keeps many small to medium sized corporations from FinTech and AI.
Handling big data
One of the challenges you will face when scaling up your FinTech infrastructure is handling data. Most of the data available online is unstructured and of poor quality. This poses problems to your AI system because it is unable to understand and comprehend it.
One of the benefits of using machine learning is that it gets better with time. A challenge arises on who should take responsibility when an AI system makes a mistake. A human supervisor is needed to take charge for actions like approving trades and releasing block payments. This negates the reason FinTech and AI is put in place – replace human involvement in transactions. There is still fear of giving machines too much autonomy as people still fear that it will lead to an apocalyptic period where machines become independent and no longer need human input.
Resistance from big banks
Some large financial institutions are still fighting FinTech and AI due to the large infrastructure outlay that they have invested. It is very easy for highly trained graduates to get into the industry and develop products that revolutionize the banking industry. These graduates do not need a huge capital investment and but they cause disruptions that replace existing products. Most of the incumbents have handled competition by buying out some of these startups. However, this has come at the cost of stifling innovation.
The role of AI in FinTech is going to transform the banking sector in a big way. It will transform all sectors of the banking sector – from wealth management to customer care to the use of mobile banking. Many people are skeptical of AI seeing it as a technology that will steal their jobs. But, adoption has already become in other sectors, and this makes it inevitable. What the banking industry can do is engage in training its employees to handle the new technologies.
Ventura capitalist have already begun investing in promising startups that are embracing the technology. Some have even started working with existing banks in an effort to introduce FinTech applications. The move is expected to bring banking services to the unbanked and bring down the cost of financial products.
Regulation will play a big role in the adoption of FinTech and AI systems. Regulation is a double-edged sword that depending on the side you are holding can act as either an enabler or barrier. Most regulators are wary of emerging technologies with some considering it as hype. They prefer to take a cautious approach before authorizing widespread adoption to the masses. This has led to the rate of approval of various FinTech and AI applications taking longer than expected. There is a need to be on the lookout for tech-savvy criminals who will take advantage.