FinTech as the name suggests is made of a combination of two words: finance and technology. Fintech, as such, refers to the integration of technology and innovation into financial services. The primary aim is to compete with traditional financial methods by leveraging the power of technology to offer better and quick financial services to end users. Nowadays, fintech firms are increasingly making use of new-age technology like AI and ML to augment, digitize and streamline financial services for their customers.
In short, FinTechs are a complex ecosystem that makes use of advanced software and technology to automate financial services for businesses or consumers. FinTech companies have totally revolutionized the way people interact with financial services. Fintech, as such, is marked by a high level of innovation, which means the fintech industry has been an eager adopter of sophisticated technology such as AI, ML, data mining, and deep learning to name a few. An established fintech software development company can help your fintech firm derive meaningful customer insights for strategic decision-making through the use of artificial intelligence (AI) and machine learning (ML).
You can safely rely on the software developed by a quality provider of AI development services to better understand your target audience’s behavior to offer a better digital transaction experience.
According to Forbes, The FinTech industry is a happening industry, with a report from Forbes revealing that the industry received more than $350 billion dollars in funding in the last 10 years. The most prevalent use of AI and ML relates to fraud detection, preventive analytics, enhanced security, personalized banking apps, risk prediction, AI-driven chatbots, user behavior analysis, and AI for back-office operations to name a few.
In the following paragraphs, we shall look at some of the important applications of AI in the FinTech industries, and see how new digital tools are improving customer experience.
Uses of AI in the Fintech Industry
Increased security through fraud detection
Fraud results in huge financial losses for FinTech organizations. But this is only a small part of the real problem. Any type of financial fraud can lead to irreparable loss of reputation for a service provider. The company’s standing will be severely damaged, which will eventually translate into a huge loss of customers.
As such, banks and FinTechs making heavy investments to prevent fraud should not come as a surprise. Some of the ways in which AI and ML help in preventing fraud are mentioned as follows:
Diagnostic Capabilities: Traditional financial institutions generally relied on ‘if X then do Y’ algorithms to prevent fraud. This is not a foolproof method as false alarms are often triggered thus lowering customer satisfaction. AI technologies leverage dynamic datasets to bypass false alarms. They constantly learn from experience to sift through a huge amount of data for hidden patterns and anomalies. This helps organizations better comply with anti-fraud regulations, detect questionable transactions, and allow them to better serve their customers.
Security of sensitive financial data: Increasing sophistication of cyber criminals and cyberattacks makes it imperative for FinTech organizations to stay well-informed about the latest trends and developments. AI allows real-time fraud detection by discerning patterns and flagging suspicious behavior of people. AI is used to develop more precise algorithms that are exceptional in detecting fraudulent activities and transactions.
Better and more efficient customer service
There are a variety of ways in which AI can help an organization improve its customer service. A few prominent examples include:
Chatbots: AI-powered chatbots are fast replacing humans working in call centers that deal with common and everyday questions and queries from customers. For example, Erica, an app belonging to Bank of America offers quick and correct information related to a customer’s balance and transactions, bill reminders, important notifications, EMI reminders, etc. AI-powered chatbots are available 24×7 and offer an instant response.
Personalized banking apps: AI is increasingly being used to offer a more personal and customized banking experience to customers through apps. Customers are offered useful tips related to their expenses, income, financial goals, and financial planning to name a few.
Read More: How Blockchain and AI Transforming Businesses Globally?
Customer profiling for better risk management
Risk profiling of customers is a vital part of the FinTech industry. Clients are categorized from high-risk to low-risk based on certain criteria for credit risk assessment. Traditionally, a certain level of manual activity was involved in the process, which was not foolproof. Now AI algorithms using Artificial Neural Networks (ANNs) are entrusted with the task of analyzing a customer’s historical data to prepare a risk profile.
Conclusion
AI in FinTech is used for an extensive array of tasks ranging from customer support, credit-risk assessment, AI-driven chatbots, fraud detection, and wealth management to risk profiling. A reputable provider of AI development services can enhance your business’s reputation and customer base by allowing you to offer fast, secure, and personalized service at an affordable cost. AI and ML can help your business make prudent decisions for fruitful solutions.
