Digital payments are estimated to be growing at a rapid pace to account for more than 70% share of all payments by 2025. Continued innovation and increased performance of digital technology, consumer demand for one-touch payments, political push towards financial inclusion, desire to marginalize the cash and an exponential increase in digital apps and services are the megatrends driving the digital payments revolution.
This increase in digital transactions has resulted in the growth of breach data in 2021 by 10% year-over-year, with the average amount of financial damage caused reaching a record $4.24 million. Fraudsters who obtain this information can commit various types of fraud, ranging from blocking users from their online accounts to full-fledged identity theft.
AI is by far the most effective preventative measure against financial fraud, as it can examine huge amounts of data to identify patterns of risk. Suspicious individuals and activities can then be separated for further investigation to distinguish between real fraud and false positives. Artificial intelligence is actively used to reduce the latest financial crime in bonuses for new deposit accounts or credit cards, as well as monthly subscription purchases made online. The Fintech industry is an early adopter of data science. It makes extensive use of algorithms to create services that are both faster and more accurate than those provided by traditional banking institutions. The payment industry is increasingly information and data driven as technology is the backbone of the Fintech sector, enabling financial institutions to respond quickly to changing customer preferences and emerging trends to drive growth future. The ecosystem, which includes loan issuers, credit card companies, retailers and insurers, has recognized that big data processing techniques will not only simplify complex tasks such as risk management and inclusion financial, but will also enable Fintech players to better serve potential customers.
Benefits the Fintech industry can derive from using AI:
Enhanced security: AI in cybersecurity comes in the form of chat-bots that convert FAQs into simulated conversations. They have the ability to reset forgotten passwords and grant additional access if needed. Artificial intelligence can analyze large amounts of data and successively improve over time through machine learning. Artificial intelligence is used to identify fraudulent activities, suspicious transactions and give a boost to the processing of sensitive financial documents, thereby reducing security risks, by being able to discern suspicious patterns and behaviors.
Improved operations through automation: AI has the ability to generate financial reports much faster and with less risk. It has the technological capabilities to provide employees with tracking and automation, data capture, fraud and security processes. It has the ability to watch, learn and check events for anomalies.
Improved customer service: Artificial intelligence has improved customer service, which is one of the most important areas in fintech. Transactional calls and traditional helplines will become less important as deep learning algorithms and AI’s ability to understand human language and formulate compelling responses improves. AI can understand and follow workflows with minimal risk of error or duplicate processes, resulting in a significant reduction in manual management.
Analysis and information: AI is providing fintech companies with game-changing insights, which depend on collecting and processing customer data. Artificial intelligence (AI) solutions are extremely useful for fraud detection and claims management, as AI tools are used to track behaviors and detect fraud by identifying warning signs. AI systems can adapt and incorporate undiscovered cases into their detection capabilities over time through their self-learning capabilities.
Virtual assistants and chatbots: Fintech companies provide proper data and advice for every transaction. Personalization is becoming increasingly important in the fintech sector as the cost of labor in offshore outsourcing and robotics has increased. AI-powered chatbots and assistants can reduce costs, as text-based personal assistants provide human-like expertise and interaction without having to increase manpower.
Automatic damage assessments and claims management: Fintech companies provide damage assessment for assets such as cars, mobile devices, glasses, shoes, bicycles, and many other types of assets in the event of an accident or mishandling. However, it requires a lot of manpower and sometimes logistics costs, which becomes a huge cost for customers and businesses. However, computer vision-based AI solutions mitigate the need for workforce involvement and significantly reduce logistics costs, which positively benefits brands on the bottom line while shifting the customer service experience at senior levels.
As technology continues to advance rapidly, artificial intelligence could be the future of the fintech industry. The ability to conduct financial transactions without the need for a traditional banking intermediary, technology is no longer centralized in monolithic databases and transaction engines. It’s about giving customers and employees the freedom to work smarter, make better decisions, and focus on what matters most. Now is the best time to harness the potential of AI as an engine for the growth and development of Fintech companies.
(The author is Mr. Vishal Singhal, co-founder, CellStrat and the opinions expressed in this article are his own)