Financial sector lacks technology products to reach every user wherever they are located. Today around 2.5 billion people (out of 7.8 billion world population) do not have access to financial services. People demand innovations from banks, higher reliability and faster services. Technology progress necessitates it from banks which do not have capabilities to drive technology changes themselves. They are too slow to react, and actually minority of banks focus on fintech innovations and take measures to implement everything into reality.
What is Fintech in baking? Key areas of use.
It has been 10 years since fintech invaded financial institutions and services. Technology in finance has quickly turned from a privilege and excitement to a necessary state of thing. Fintech products allow people to access financial services in a secure and effective online way.
Either banks will be killed with independent fintech companies (the number of fintech startups grows exponentially) or the majority of banks will deepen partnerships with fintech businesses and software development companies.
Things financial technology drastically improves:
- consumers’ satisfaction and experience
- use of AI to develop chatbots, visual or fingertip authentication, detect frauds and threats
These reasons explain why banks have to develop efficient strategies and invest into the future of banking technology:
- Automation and AI has become a sharp customers’ need and an instrument to provide services at as more secure, fast and high-quality level than before;
- Increase consumers’ trust and offer advisory services with which people could leverage their financial literacy, save and spend wisely.
In the last 10 years investment in the FinTech industry has exceeded $350 billion dollars.
More strong and innovative fintech companies appear. Competition for clients is severe, but banks can use it for their benefits and cooperate with fintech companies to develop market needed products. Some banks have already chosen such a path of development. Solutions for the future of fintech which they upgrade together with fintech sector are:
- Churn prediction
- Query routing
- Personal finance management
- Biometric authentication
- Behavioral biometrics
- Sentiment analysis
- Robo assistants
- Conversational AI
- Natural language generation
- Location intelligence
There is so much positive hype around AI and how it improves every domain. Justification for AI can be found easily and examples of how much humans manage to do with robots, smart machinery and intelligent solutions are countless. Let’s take a look at AI in Fintech and how AI solutions will impact the future of fintech.
Location intelligence is not new for banks
Depth of analysis with AI is better than without AI and big data. Predictive analytics, clustering and image processing can tell banks whether there is a need to open a branch in this or that location and what the revenue would be in a 3 year period. AI and ML innovations can help group clients by certain characteristic and behavioural factors which allows finance institutes to launch successful marketing campaigns. Examples of successful cooperation:
- Plink is an AI platform developed by Bancolombia to sell location intelligence to merchants
- Esri location intelligence software is used by SNL Financial to present to clients
Benefits of Personal Finance Management software
Personal Finance Management is another successful application of AI in the finance sector. PFM facilitates banks’ active role in people’s financial well-being. Banks started to give advisory financial services in real time and remotely. One survey shows that two most important wishes of clients were that:
- Banks could give them wealth-being advice
- Banks could give them personal finance management advice
“Your grocery spendings will increase by 30$ next month”. This is a prediction people find helpful. More than that, if they know the reason for increase, they feel more attached to their bank showing trust. Banks could tell clients what they should do to maintain their money balance at necessary levels. Transaction data if analyzed can be used for auto-save advice. Your bank will move 30$ into savings based on your expenses data.
To provide such information to clients banks need to know what data sets to analyze and how to extract insights which would bring real value.
AI is a tool the finance sector should use today for PFM service and help them plan people’s resources in advance. The future of fintech lies in smart solutions and functions which help people save and manage their money effectively. One example of successful PFM app is Clarity Money. Check it as AI-powered financial assistant.
Voice-recognition – new future of fintech?
Voice recognition log-in within banking applications comes more and more needed. Apple has been working closely with Nuance to implement such a solution. Kansas City-based NBKC bank is developing a conversational banking app with Finastra. Everything you can do is now saying to the application “What is my balance?” and it will tell you at once. Voice payments powered by AI help managing payments, balance and solving financial affairs via your voice.
Security is better with AI
Banks are paying enormous non-compliance fees. Finding fraudulent activity is not an easy task and very often banks lose to tricky fraudsters. AI can help detect suspicious activities and find identities who conduct data breaches. How?
Anti money laundering (AML) software helps comply with laws, regulations and meet requirements to prevent money laundering activities. Such software is used by accountants in financial institutions and other industries’ legal entities. KYC is “know your customer” software which helps to verify identities and prevent frauds in business relationships, during transactions and etc. AI can upgrade AML and KYC software to the next level and ensure detecting fraudulent activities much and much faster.
Besides AI can be used in:
- Transaction monitoring
AI detects non-obvious connections during connections
- Entity resolution
ML based name matching system works to create unified view of each user across different databases
- Ultimate beneficial owner
Analysis of government documents to receive stakeholder information and identify real owners
- Media monitoring
Sort crime news by types, identify best relevant matches
Digital banks and cash-free payments
Bitcoins, disappearance of cash, digital accounts, controlling balance on the go by voice and no paper bureaucracy – this is what financial revolution is today. People tend to have more accounts at different banks as they are becoming more informed about having rates on financial products, financial services and whatever. Digital banks recognise excessive spendings, recommend when to deposit, when to pay off loans.
Fintech in banking encourages people to use contactless payments, pay less visits to physical branches. Data scientists, software engineers, Machine learning specialists are creating the 4th industrial revolution. Focus in software development will be not on a mere development but on creating and realizing the ideas. Fintech is full of ideas to investigate and implement. Take only automation:
- the role of agents will go to chatbots
- self driving cars – will automation mark the end of auto insurance?
- the insurance process with AI-powered virtual assistants. They will help with renewals of expiring policies, bill payment and advice on investment
Sweden is the first cashless country. After Sweden, other Scandnavian countries namely Denmark, Norway are also on the way to adopt cashless payments. In the UK cash usage decreased from 60% in 2010 to 28% in 2018.
Cryptocurrency and blockchain technology
Blockchain was an open-source project released in 2009. You basically have an address and can share it with anybody and they can make a transaction with you. It works like an email. Transaction happens on a peer-to-peer network. It’s entirely between individuals. People become millionaires with bitcoins which is a merit of fintech. Banks use blockchain technology to accelerate money transfers, payments and investments. With data decoded, blockchain technology protects from fraudulent activities and breaches.
Personalized and faster banking
Peer-to-peer payment will take its dominant place. It’s like messaging but instead of words you exchange with money. Venmo is an example of an app via which you can access a list of people, your peers if to say, split dinner, send birthday presents and just chat.
A lot of companies failed with their large-scale projects just because manual work was too distracting and ineffective. Tasks were iteratively delayed or even canceled. Signing paper documents, waiting for banks approval, notifying responsible people of money transactions, solving paper issues for days if not weeks – all this job was far away from what we could call effective and on-time.
Future of banking will be definitely different with fintech. Contextual banking, which is personalized banking, is getting a widespread practice.
AI for Longevity Banks and better clients’ well-being
The Longevity AI Consortium at King’s College London is developing AI solutions which uses life data and leverages pension funds and insurance policies. Longevity banking works on simplifying banking for people over 60 and providing aged with better reliable and beneficial financial services. Positioning itself for silver generation, Longevity Bank in UK is going to launch pilot product through which users could even track their daily activity and nutrition.
Previously segmented and separated solutions and services will be integrated into a synergetic blend of health, insurtech, preventive medicine, longevity, agetech and financial well-being.
Sergey Balasanyan, co-founder and CEO of Longevity Bank, UK.
Gallup researched how money, financial sector and external conditions influence the well-being of people. During covid-19 pandemic mental state of people deteriorated. Many feel anxiety and uncertainty from social distancing more than from their financial or physical well-being. In March 78% of surveyed people responded that pandemic has disrupted their lives. Banks began to establish partnerships with healthcare institutions, conduct surveys, hire nurses and simply equip places with hand sanitizers.
Protecting people’s well-being and offering them helpful hand support is not only a manifestation of morality and empathy. Banks become closer to their employees and clients when their strategy includes care policies. According to Gallup research:
Thriving in well-being amplifies employee engagement, and engaged workers achieve better business outcomes.
Fintech products will also be designed to care about people’s health and longevity. Imagine your healthy lifestyle brings you rewards from your bank. Every time you spend money on fitness activities or eco-camping, your AI assistant sends you special offers.
So, the future of financial technology depends on how open banks are to innovations. Fintech businesses are definitely leaders in promoting revolution in finance and adopting AI to voice payments technology, development of digital financial assistants, personalized banking and security.
Are you ready for the future of fintech? If you want to be at the forefront of changes and incorporate new financial services and innovations, we’ll help you develop and create solutions that will suit your needs, business and ideas. Contact us to talk.