Post COVID-19: Artificial Intelligence is the game-changer for Fintech

The ongoing COVID-19 crisis is a “black swan” event that caught the world by surprise. It reiterated the fact that change is the only constant, and nothing is for granted. This crisis will have a significant impact on startups, and investors is an accepted fact. Of course, a crisis is also an opportunity to create something new or adopt new behaviors that would enhance our standard of living.

The dotcom bust of 2000 resulted in several changes; telecom companies had laid a lot of fiber optic, resulting in overcapacity. It allowed the next wave of businesses like Netflix and other remarkable applications to deliver sophisticated new services on the cheap. Instead of just being a fad, the habits we acquired during that time became the foundation for our lives to move online, including financial services and banking. Similarly, the Great Recession of 2008 had a significant impact — cloud computing became pervasive and transformational.

The Coronavirus pandemic has affected every aspect of the economy, including financial services and fintech. Fintech companies face challenges like delays and non-availability of venture capital as investors turn cautious, lesser demand for loans as more people are working from home or have postponed purchases. Customers are also reducing exposure or investing less in public markets, and mutual funds through Robo advisors or online brokerages as the markets are volatile, and online payment volumes have reduced significantly with lockdowns in place.

With the global economy likely to experience a period of negative growth following the COVID-19 outbreak, artificial intelligence (AI) could provide fintech firms with a vital head-start when it comes to recovering. Everything has become extremely volatile and uncertain, and this requires building scenarios rather than forecasts and making real-time decisions, which will accelerate the use of AI. It offers the potential for companies to significantly reduce transaction costs, build resilience into managing channels, and product personalization for better customer experience.

Fintechs leveraging AI will be able to increase accuracy and speed, offer people-focused offerings, personalize payments, lending and insurance, improve client offerings, operations, and compliance. Other fintech use cases that will see increased use of AI include audit and assurance, accounting, and risk management.

Opportunities to leverage Artificial Intelligence in Fintech

Artificial intelligence will be a game-changer for the fintech industry with its inherently quantitative nature, large amounts of data, and need for speed and accuracy. Here are some usages & opportunities:

• AI-enabled cash flow prediction engines for businesses, lenders, and consumers
• Real-time decision–making gained from insights and extensive data
• Smart under-writing, client risk profiling, pricing and covering the ‘protection gap’ in the insurance industry
• Personalized customer support and automated virtual financial assistants with a human-like interaction
• AR/VR tools for wealth management plans; real-time insight management for wealth managers
• AI-powered analytical tools that can process and analyze vast amounts of structured and unstructured data for signs of potential risk and future issues; compliance costs will come down with the use of AI/ML.
• AI’s ability to build scenarios and provide accurate predictions and detailed forecasts based on multiple variables are vital to business planning.
• AI and machine learning-powered next-generation trading platforms that monitor structured and unstructured data in a short period and can predict the impact on prices; AI-powered predictions for stock performance, next-generation stock management, and price forecasting
• In personalized banking, AI-powered apps can offer personalized products, financial advice, and assistance with financial goals.
• Artificial intelligence-powered robotic process automation can help with automating mundane, repetitive, and rules-based tasks such as accounting, compliance, and audit.
• AI is a ground-breaking technology in the battle against financial fraud. ML algorithms can analyze millions of data points in a matter of seconds to identify anomalous transactional patterns.
• Another emerging area is Account Takeovers (ATOs), which is about US$4 billion in losses every year and the fastest growing financial fraud. AI-powered platforms to detect such activity and quickly prevent such ATOs.
• Another area of opportunity is in the detection and prevention of money laundering and terrorist financing. Artificial neural networks and ML algorithms used to analyze customer behavior and sophisticated linking.
• AI and ML will gain critical mass in collections, providing insights into which approach is the most effective for a customer.
• As the competition for digital customers heats up and CACs are under pressure, AI-powered tools may assist through behavioral intelligence to acquire new customers.

To conclude, in my opinion, AI will become a game-changer and key to success for fintech companies in a post-Coronavirus world. With “digital-only” becoming a norm in financial services, opportunities for AI-enabled challengers to take on incumbents and offer better services at competitive prices will emerge. These opportunities may see the emergence of new “digital-only” financial services companies or “fintech” market leaders.