Artificial Intelligence in Fintech and Payments – The Impact and Challenges

Artificial Intelligence [AI] storm is here, enterprises working hard to deliver the best of the solutions. Fintech firms are strategizing their approach and research firms calculating the impact and its reach. No one is spared. Be it the big investment banks like Wells Fargo or Morgan Stanley or the fintech start-ups like Numerai and Alphasense . But do we have a clear path for our sail? Is there a need? Or is it just a bubble? To answer all these questions, please read on –

Artificial Intelligence is all about capturing data, recognizing behaviors and patterns and acting accordingly. Just for example when someone knocks at the door the predictive behavior is to open it. Or as soon as you receive a call you either lift it or hung it based on the caller name & number. Thanks to data storing capacity, data is abundant. What researchers and technical team are now focussing is making sense of behavior.
Quite recently, one of my acquaintance while communicating with Google Home told him – You are useless to which the machine replied – I will convey this to my engineer so that they could refine me and make me more useful. My acquaintance and I were shocked by such a meaningful reply from a machine.

So talking about the impact of AI in fintech sector is all about making sense of the data. To answer all such questions as –

• Could my spending patterns provide me my credit rating on my mobile app?
• Could closing this debt fund balance my portfolio?
• Could I get loan processed based on balance of digital wallet?
• Could opening a Fixed Deposit help me save for my kids’ education?
• What payment option suits me when I online shop for ABC product?
• How could I get best deals from Agents via Agent banking solution?
• When they need insurance? How much? On what basis?
• Could a machine detect fraud?
• Could it serve as a regulatory authority?
• What affects my credit score?
• What effects my firm’s rating?

In fact, as per CBInsights report , AI has made an enormous impact on the fintech world. There are firms under different categories trying to deliver an intelligent solution. Take a look in above diagram.

With each vertical of Finance and Banking under development with AI, we could probably witness a hurricane of products in the market. But it’s not the AI that would drive people towards it, it’s the enhanced accessibility to various banking products, convenience ,customized services, speed and above all security that would make an impact in the fintech world.

There is no linear path growth; experts believe we are at a tipping point of the technology breach. So, either it gets sink-in or would burst depending on how we process the data. Another aspect that would decide the AI growth chart in fintech world is the access, as pointed out by Linden Tibbets , the CEO of IFTTT.

With an abundance of data how do we access it and how do we make sense of it? These are the two-vital question that needs to be answered and would see a breakthrough in future to decide fintech growth with AI. Sample this –

For AI to work it needs to study pattern and know the behaviour of humans to make a predictive guess on what action should be performed. But how to we conduct the study unless we have the data to access? Agent Banking solution, Digital Wallets or Analytics they cannot make an informed decision unless we program them to do it.
A rural person is facing short of cash, he needs to get his roof repaired as rains are approaching, but also need to pay for his kid’s college fees. He has following options –

• Take a loan
• Divide the surplus into half for repair and fees
• Pay the fees and make temporary arrangements to the roof
• Pay for roof and make temporary arrangements to the fees

The answer suggested by AI would need a through reality check before making an informed decision. The above example was quite straight forward, but the point is that the information is scattered and to make sense of that information we need access to it.

Lastly, comes another challenge to let people adopt it. Money matters are close to people’s heart. So, could the fintech firms and payment channels with their innovations in Artificial Intelligence domain make clients use their technology? An interconnected network that has studied my spending patterns advise me to stop buying that costly attire or process a personal loan from ABC options. Would I listen to it?

While fintech firms focus area is to adopt AI into digital banking, they could leverage the technology to aid in decision making, offering customized products and building end-to-end data products. Welcome to the future!

References:

AI is About Access, Not Interface
Artificial Intelligence and You: Demystifying the Technology Landscape
The impact of AI on fintech’s future
5 ways how Artificial Intelligence (AI) is impacting consumer FinTech
Human-Level Intelligence or Animal-Like Abilities?