The past decade has witnessed digital disruption in the personal finance sector, thanks to the deep penetration of internet, widespread use of smartphones, and emergence of various online platforms, such as Google Pay, PayTM, PhonePe, Bhim etc. With finance management now simplified, the role of banks and financial institutions is evolving.
Banks and financial institutions are now investing in digitalization and adopting latest technologies, such as artificial intelligence, machine learning and blockchain, to remain relevant for customers. The outbreak of the COVID-19 global pandemic gave the digitalization efforts a further boost.
According to a Research and Markets report, the global fintech market is expected to grow at a CAGR of 27.5% to reach $31.5 billion by 2026.
Fintech or financial technology is technology-enabled innovation that is helping players in the sector in varied ways, right from management of financial transactions, risk assessment, predicting delinquencies to fraud busting.
Thus, artificial intelligence is becoming integral part of the digitalization efforts by various fintechs.
Benefits of adopting AI
According to Analytics Insight, the five benefits of adopting AI are:
- Boost to cyber security:
AI provides a massive boost to cyber security and are generally in the form of chatbots. These chatbots not just answer FAQs through simulated chats/ conversations, but can also help reset passwords, grant access wherever necessary.
- Driving efficiencies through automation:
Latest technologies in AI, such as machine learning, data analytics and neural networks, can help drive efficiencies by automating processes.
- Improved customer service:
One of the most prominent areas that has already been impacted by AI is customer service. Interface with customers has seen a dramatic change with the introduction of chatbots, virtual helpers etc.
- Better risk profiling:
For banks, insurance companies and financial institutions, profiling clients based on the risk score is critical. AI has been used to create models for client profiling.
- Faster decision making:
Using a set of pre-programmed instructions to analyze data through machine learning helps take faster decisions.
Artificial intelligence holds great potential in the fintech industry and helps improve efficiency, reduce costs and automate processes.
AI revolutionizing fintech
The outbreak of the global pandemic was the biggest trigger for fintech to take the big leap into digitalization, moving towards complete automation of processes.
Two main factors that led to this big leap were:
- Customer centricity: Financial institutions had out customer first. Following the pandemic and subsequent lockdowns, all fintechs had to think about was the best way to communicate and educate their customers.
- Data centricity: In difficult times, speed of decision making is everything. During the lockdowns, fintechs used AI models to predict which customer segment would have the biggest challenge in making repayments. The mode data one has, the better the AI model performs, which helps take faster and accurate decisions.
How AI powers fintech
Digitalization became all the more relevant following the outbreak of the pandemic. Experts have even stated that over the next decade, AI will touch every sphere of life.
Though there are several AI applications in fintech, it is always assumed that the role of artificial intelligence is restricted to credit risk, underwriting. While the use of AI is critical in credit risk assessment, fintechs have come to use AI for training models, dynamic credit line management, fraud detection, improving collections, and providing personalized service to customers.
With help of many of the applications of AI in fintech, digital models are being created that are not just effective, but also consumer focused and customer friendly. This is ironic because the common belief is that machine-led processes are less personal, less friendly. AI allows financial institutions to know their customers, offer personalized service, rather than adopt a one-size-fits-all approach.
Trends to watch out for
The horizon of fintech is ever expanding due to the introduction of latest technology in artificial intelligence. The COVID-19 pandemic gave the fintech industry and shot in the arm, causing a sharp rise in the use of fintech apps across the world.
With many people now using various tech and digital solutions for managing their finances, there is a lot of competition among the fintechs to be the flagbearer of innovation.
Some of the trends that can be expected in future in the fintech industry are:
- Digital Only Banks:
Following the outbreak of the COVID-19 pandemic, the number of people visiting banks for various financial services has seen a big drop. During this period, Digital Only Banks have gained prominence, as it is a win-win for both fintechs and customers. While customers get safely and quickly access finance services, financial institutions can process these transactions automatically without depending on manpower. The Digital Only Banks also offer personalized customer experience, where in customers get real-time data access.
- Open Banking:
Open Banking is the exchange of information or data about the fintech customers with third parties, albeit only after consent from the customers. Information about the customers’ finances is shared with authorized organizations, such as insurance companies. This helps customers manage their finances easily through a consolidated view of all their accounts, besides allowing them to access financial services quickly.
- Robotic Process Automation:
Robotic Process Automation or RPA is the process automation technology that uses digital workers to automate processes that earlier involved human intervention. Several processes, such as security checks, customer onboarding, account maintenance and closing, credit card, mortgage processing etc., are already being managed through RPA in many fintechs.
- Artificial Intelligence, Machine Learning, Blockchain:
Fintechs are using Artificial Intelligence and Machine Learning models to identify fraudsters or alert them in case of any aberrant behaviour by customers. AI is used to analyse the customer and offer personalized services. Blockchain is being used by banks to maintain an automatic record of money – how the money came, where it came from, how it was used and what it was spent on – thereby recording every transaction, reducing chance of any fraudulent activity.
- Regulatory Technology or RegTech:
RegTech is the management of regulatory processes through technology. With digitalization of fintechs, the chances of money laundering, fraudulent activities, cyber hacks and data breaches are also increasing. RegTech helps fintechs comply with complex regulations, while the software automates repetitive processes, monitors data security, alerts the banks and finance institutions about any data breach, hack or fraud.
- Biometric Security System or Biometric Authentication:
Given the increase in cybercrimes, biometric authentication is considered by cybersecurity experts as being more secure than passwords and PINs. Industry experts believe that contactless biometric solutions will overtake touch-based solutions soon.
Voice Biometrics could soon become reliable protection of customers’ data. Customers will be able to make payments and check account balance through voice command. This technology is being seen as a gamechanger in making financial services accessible to persons with disabilities.
- Virtual Cards:
Virtual cards are considered safe. Consumers can use the virtual cards that can be stored on the phone in a digital wallet through a 16-digit of a temporary digital analogue. These cards help fintechs save on the cost of issuing physical cards and offer greater protection from fraudsters.
Demand in fintech job market
With AI automating processes, there was initially also a fear that employment opportunities would come down. However, the opposite is true in fintech. The advent of digitalization and adoption of AI and other forms of latest technology has resulted in a huge demand for data scientists, engineers, AI practitioners etc. in the fintech job market. However, there is a huge supply-demand mismatch.
The demand for data scientists, engineers and AI practitioners in the fintech job market, organizations are looking for persons with the right aptitude and willingness to try new things.
The fintech job market has immense employment opportunities for someone with traditional engineering background, coding skills in different languages, someone who knows how to work with data sets and data curation.
A career in fintech
Given the fast pace of acceleration in digital finance, traditional banks will soon become redundant and the way customers touch financial products will be tech-driven. The way the industry works in being rewritten.
Over the next decade, fintech will be one of the most interesting domains, and a career in fintech will be extremely engaging, stimulating and impactful.
Hero Vired offers a Certificate Program in FinTech, Blockchain and Cryptocurrencies is designed to equip one with different ideas and technologies that are reshaping the world of finance. These range from new investment avenues, such as cryptocurrencies and NFTs, to core financial areas that are rapidly transforming.
Over the course of three months, the program will cover the nitty-gritties of:
- Cryptology – from Operations to Blockchains
- Blockchains at Work
- Trading and Investing in Cryptocurrencies
- AI in Investing and Lending
- Fintech in Asset Management
- Metaverse Avenues
- Applications of Cryptocurrencies and Blockchains in Banking
- Programming for Fintech
The program also offers hands-on learning experience wherein those who have enrolled will be able to work on real-world projects from some of the most innovative businesses across the world. Candidates who successfully complete the certification program will be eligible for a Hero Vired Certificate.
The program is designed for IT professionals and senior managers in fintechs working on blockchain applications and other cutting-edge financial solutions.
Upon completion of the program, successful candidates can be hired for roles of Product Manager, Business Analyst, Functional Architect/Functional Domain Expert, Compliance Professional etc.