Artificial Intelligence in Fintech: Shaping the Future of Finance
The financial sector is undergoing a significant transformation with the widespread adoption of artificial intelligence (AI). Fintech, in particular, is leading the charge in embracing AI technologies, according to a report by Moody's Analytics. Outman explores the key findings from recent studies and trends to highlight how AI is reshaping the landscape of risk management, compliance, and financial services.
Fintech Leads in AI Adoption
Moody's Analytics' report reveals that 18% of fintech respondents are actively using AI, a percentage double that of all surveyed sectors combined, where only 9% are currently leveraging AI technologies. The banking sector follows closely, with 12% of respondents actively employing AI. This surge in AI adoption signifies a growing appetite to leverage technology for productivity gains, especially in areas such as data screening and staff performance augmentation.
Challenges and Opportunities
Despite the enthusiasm for AI adoption, there are numerous challenges that need to be addressed. Poor internal data quality, lack of clarity around regulation, and a gap in specialist knowledge are identified as obstacles. There is substantial emphasis on the importance of new legislation to regulate AI in compliance, with 79% of professionals supporting such regulations. However, the majority lacks awareness of existing AI-related regulations, highlighting the need for increased education and regulatory clarity.
Generative AI Revolutionising Fintech
Another study by the Gillmore Centre for Financial Technology indicates that 93% of FinTechs believe Generative AI (Gen AI) is poised to revolutionise the FinTech and financial services sector. Gen AI, a branch of AI that creates new outputs in response to user inputs, is expected to drive financial democratisation, making financial services more accessible and inclusive. The study reveals that 84% of organisations have already invested in Gen AI tools, with further investment ranking as a top organisational priority for 80% of respondents in the upcoming year.
Case Studies: Fintechs Leveraging AI for Transformation
Several fintech companies are at the forefront of leveraging AI to transform the financial landscape:
Plum: Plum, a London-based fintech, announced a strategic partnership with Eurobank, a leading Greek financial institution. Plum utilises AI to develop personal savings solutions, and the partnership aims to introduce a fully digital wallet tailored for digital savings and investments.
Phare Health: A London-based startup, Phare Health, raised £2.5 million in seed funding for its AI-driven hospital fintech tools. Phare Health uses AI to help hospitals capture high-quality data about the care they deliver, enhancing resource management and cost recovery.
Brex, Enova, Skyline AI, Upstart, Zest AI: These fintech startups in the United States are leveraging AI for various applications, including unified spend platforms, online financial services, real estate investment technology, lending marketplaces, and credit underwriting.
AI's Evolving Role in the Workforce: Opportunities and Challenges
Simon Kearsley, CEO of bluQube, highlights changing views on AI among business leaders and its potential impact on jobs. The survey shows 29% of finance-using AI for tasks like data analysis. AI is expected to reshape finance roles by automating tasks, but 28% of respondents foresee new job opportunities. Kearsley stresses that as AI integrates into accounting, it's important to recognize it enhances, not replaces, human workers. AI is viewed as a tool that enables accountants to provide better financial insights and value to their organizations in more diverse roles.
Navigating the Landscape: Fintech Trends and Predictions for 2023 and 2024
Looking back and forward to 2024, fintech leaders from Finastra, Fujitsu, Workiva, and Unqork highlight the growing importance of Gen AI in finance. Finastra focuses on financial software, Fujitsu on ESG and data, Workiva as a productivity booster, and Unqork in legacy system migration. Gen AI is expected to take center stage in corporate reporting and compliance. Steve Soter of Workiva anticipates a shift to practical Gen AI applications for efficiency and better decisions. Simon Paris, Finastra's CEO, notes progress and optimism among financial executives. Krista Griggs of Fujitsu sees Gen AI as transformative for employee productivity. Gary Hoberman, Unqork's CEO, emphasizes Gen AI for legacy system analysis and migration, fostering collaboration between business and technology.
All these advances collectively paint a picture of AI's growing influence in the fintech and financial sectors. Fintech firms are embracing AI for risk management, compliance, customer interactions, and operational efficiency. While challenges exist, the potential benefits, including improved data analysis, enhanced customer experience, and operational efficiency, position AI as a transformative force in shaping the future of finance. As the industry moves forward, collaboration between regulators, industry players, and AI developers will be crucial to unlock the full potential of these technologies responsibly.