Opportunities and challenges of artificial intelligence applications in financial technology

Artificial intelligence has now been widely used in data analysis and management in the financial field. AI plays a key role in making lending decisions, providing customer support, preventing fraud, predicting credit, assessing risk, and more. Many modern fintech companies are aware of the advantages of AI and are keen to leverage AI technology to improve their efficiency.

In the financial services sector, the level of process automation and digital transformation activities is increasing. Artificial intelligence technology is developing rapidly in the global financial industry. According to industry data, experts predict that the global market size of artificial intelligence in financial technology will reach US$26.67 billion.

The following introduces the opportunities and challenges of artificial intelligence technology in the financial technology industry.

Types of Artificial Intelligence in the Financial Industry

Artificial intelligence technology is much more efficient at identifying patterns in data than humans. This is why financial companies prefer applications powered by artificial intelligence technology. There are two types of artificial intelligence that are popular in the financial industry:

(1) Weak artificial intelligence

Weak artificial intelligence, also known as narrow artificial intelligence system, is specially designed to complete specific tasks. task or solve a specific problem. Artificial intelligence technology is governed by a set of rules and it delivers the best possible job without going beyond the rules. Apple’s Siri assistant is the best example of weak artificial intelligence.

(2)Strong artificial intelligence

Strong artificial intelligence is also called a complete artificial intelligence system. As the name suggests, it is designed to have greater promise than weak artificial intelligence. Applications powered by full artificial intelligence have immense power and functionality. It also has understanding and awareness. Therefore, many people generally believe that the entire artificial intelligence system mimics the human brain.

Application of Artificial Intelligence in Financial Services

Algorithms based on artificial intelligence are being implemented in financial services in almost all financial industries. Here are several key application scenarios of artificial intelligence in financial services:

(1) Personal Finance

Modern consumers prefer financial independence and seek to improve their financial independence by adopting artificial intelligence technology. The ability to manage your own financial health. This is why financial companies are being forced to implement artificial intelligence in personal finance. Businesses prefer to support customers around the clock through AI chatbots and provide consumers with personalized wealth management solutions.

Eno, a subsidiary of U.S.-based Capital One Bank, launched an SMS-based assistant to customers back in 2017. This SMS-based ancillary service offers 12 proactive services, including notifying customers of suspected fraud or price increases.

(2) Financial consumption

In business cases, preventing fraud and cyber attacks is the most important capability of artificial intelligence technology. Consumers are always looking for banks that offer high security for their accounts. According to data released by research institutions, approximately US$48 billion in online fraud is expected to occur in 2023. Banks prefer AI that has the ability to analyze and find irregular patterns in financial services.

JPMorgan Chase & Co. has successfully implemented a key fraud detection artificial intelligence application for all of its account holders. Every time a customer makes a credit card transaction, AI-powered proprietary algorithms detect patterns of fraud.

(3) Corporate Financing

Artificial intelligence technology is the first choice for enterprises to predict and obtain loan risks. In addition to reducing financial risk, AI technology also reduces financial crime by introducing advanced fraud detection operations.

To avoid anti-money laundering and identify bad customers, Bank of America uses artificial intelligence technology in its middle and back-end operations. AI-driven applications will unlock and analyze customer-related data through deep learning.

Real use cases of artificial intelligence in the financial industry

In the financial field, some companies use a large number of artificial intelligence applications in practical ways to solve their problems and save time and money. Here are some real-life examples of companies using artificial intelligence applications to operate effectively.

• Apps with artificial intelligence technology such as virtual financial advisors and chatbots will automate customer support services. Consumers are now interacting with chatbots to seek the answers they want.
• AI-powered applications such as “Contract Analyzer” detect fraud through anomalies. If a customer applies for multiple identical loans within minutes of each other, the AI ​​application will detect it and flag it as suspicious.
• Data analysis is performed by AI-driven applications such as "churn prediction". It eliminates much of the tedious work for analysts, allowing them to focus on the important issues. Meanwhile, it continues working in the background to identify similar and smaller issues. In addition, the application of artificial intelligence technology helps enterprises analyze large amounts of data efficiently in real time.
• Artificial intelligence technology is widely used by the financial sector to identify someone’s creditworthiness. The app with artificial intelligence technology will help avoid overcharging or undercharging when disbursing loans by checking the credit scores of at-risk customers in real time.

Analysis of challenges and solutions facing the fintech industry in 2022

(1) Data breach

The top priority for financial services companies is to protect their sensitive data from Attacked by cybercrime. Compared with other industries, the financial industry is subject to 300 times more cyber attacks.

Solutions: Implementing innovative solutions, such as applications powered by artificial intelligence technology, will ensure financial services stay ahead of cybercriminals.

(2) Comply with the rules

The regulations and terms set by government departments for financial services continue to increase. Financial service providers are forced to spend significant amounts of money to ensure that their operations comply with all these regulations. Additionally, they need to frequently change their systems to keep up with evolving regulations and standards.

Solution: Adapting AI technology will help financial services providers avoid significant costs when complying with changing regulations. AI technology provides the necessary flexibility for businesses to define their own set of rules.

(3)Consumer expectations

Modern consumers have increasing expectations for financial service providers such as personalized financial services.

Solution: Introducing chatbots powered by artificial intelligence will help businesses understand the needs of consumers and provide the exact services they are looking for.

Benefits of Adopting Artificial Intelligence in the Financial Industry

In addition to enabling financial companies to automate tasks, detect fraud, and provide personalized financial services to valuable consumers, artificial intelligence technology also Offers a wide range of benefits to the financial industry.

The perfect implementation of artificial intelligence technology in the front and middle offices of the financial sector will have a significant positive impact on its operations. Let’s take a look at a few of the key benefits financial companies can gain from AI-driven applications.

• Eliminate time wastage on duplicate work.
• Significantly reduce human error through automation.
• High quality, frictionless, 24/7 customer interaction.
• Compliance and fraud detection.
• Help prevent fraud.
• Saving costs, etc.

Furthermore, artificial intelligence technology provides the fintech industry with unique solutions to solve all modern problems. The ability to identify patterns and suspicious behavior helps financial companies effectively deliver sensitive financial services.

The future of fintech is artificial intelligence

The financial sector has experienced substantial growth over the past few years. To solve modern problems and provide smarter services to customers, financial companies need to take full advantage of innovative technologies powered by artificial intelligence. By offering a wide range of benefits, AI technology offers financial companies the potential to conduct innovative financial transactions without changing traditional banking intermediaries.

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