Published: 06 January 2020 Author: Sarah Amundsson Artificial intelligence / AI has revolutionized the way we carry out everyday tasks. Communication, financial transactions, consumer purchases, and several other services have become faster, cheaper and more accessible with the use of machine learning and automated solutions. One notable area of impact is the fintech industry which has disrupted traditional banking and financial management at both industry and individual levels. Machines are learning from human experience and delivering quality services at reduced costs to allow firms to operationalise AI in business processes. The fintech industry has grown in scale as new banking technologies have successfully transformed financial service delivery for large audiences. By 2022, the expected global transaction value in fintech is projected to increase to $8 trillion, growing at an annual rate of 18%. According to Accenture, there is a marked increase in global fintech deals indicating higher confidence in the industry. Investors are also finding common ground with fintech startups and the technology that is being leveraged by them on a large scale. This transformation has refined the financial sector in three prominent ways: 1. Long-term Cost Optimization Businesses undergoing digital transformation are looking for high returns in terms of cost reductions and a competitive advantage for their enterprise. Innovations and customisation in digital services are helping firms make this headway. Banks, insurance companies, payment services and mobile wallet payments are switching from traditional service delivery methods to more contemporary digital solutions that are easily deployable. The inclination is now towards the tech savvy customer whose priorities include convenience, accuracy, and security. Financial services and products by fintech firms have provided banks and other service providers with the opportunity to perform faster and more accurate transactions with the use of software. Automated identity verification solutions provide seamless customer on-boarding solutions for clients in a vast array of industries. Real-time data integration fast-tracks verifications and reduces customer drop-off rates while improving data transparency for end-users. For the banking sector, this digitization of services leads to significant cost reductions with AI-backed financial solutions for money lending, investment or budgeting. Operational costs need to be mitigated in order to serve a large number of digital customers at high speed and accuracy. Machine learning algorithms are augmenting the scope of financial services by partially automating customer queries and marketing campaigns reduce manual labour. This translates into less complex business flows such as in documentation and service delivery. 2. Unmatched Customer Service Expectations of user experience are rapidly evolving, as end-users are looking for fewer hindrances associated with traditional banking services. Fintech analytics have improved with advancements in the use of iterative machine learning methods and are complementing data-driven decision making for companies across the board. AI solutions are employing predictive analysis to collect and store data in a more proficient manner than before to better serve customers. Consumer-centric services such as AI-enabled chatbots, voice assistants and robo-advisors are also playing a central role improving customer understanding of financial services. Although with significant human insight and oversight, the trading and financial service industry is being facilitated by machine based review of customer transactions and risk profiling. This opens up the possibilities of improving fraud prevention techniques and identifying suspicious activity well in time. Customers can be assured that service providers are employing security protocols to ensure protection against digital ID theft. Only valid credentials and IDs are accepted to safeguard payments and transactions. The use of biometric authentication is also picking up as a recurring trend that has found its way into our lives largely through smartphones. Customers are now finding it easy to scan fingerprints and faces for verification as commonly accepted methods for unlocking devices and signing in to applications. 3. Potential For Financial Inclusion A large unbanked population remains outside the circle of formal financial systems. Digital financial solutions are now being peddled for a larger audience as mobile money markets open up new avenues of service delivery. This has been facilitated largely by outreach of internet services to underdeveloped areas, as well as the proliferation of smartphone devices that have made transactions faster and easier. As part of its ambitious agenda, the fintech wave also aims to open up mainstream financial services for masses. As traditional financial players continue to ignore previously unreached segments, AI-based solutions have the potential to provide credit access to consumers. Machines are performing risk analysis – an important part of determining a user’s creditworthiness – by processing large amounts of information collection via digital channels. As a game-changer, big data is enabling AI to help drive financial inclusion and fill gaps in traditional banking services. Future Outlook on Fintech We may be well into the era of digital revolution, but there is still a long way to go before we can tailor digital services to comply with international regulatory standards. With rampant digitization of financial services, it is imperative to regulate the industry and account for risk management controls. Companies are still struggling with the use of reliable APIs and digital databases for improved accuracy, as well as adherence to privacy standards. Therefore, investment in what is now well-known as RegTech, or regulation technology, can offer tangible results through installation of automated KYC and AML solutions. With better compliance standards, firms can make sustainable progress towards improved customer interactions and higher serviceability. The key is to recognise the changing role of fintech as a supplementary, rather than a disruptive form of technology that seeks to improve traditional methods. In the near future, it will be possible for existing business models to be able to synergise newer forms of AI-powered solutions to augment both short-term service delivery and long-term growth strategies.

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Sarah Amundsson is a Senior Business Developer at Shufti Pro, an AI-powered identity verification service provider. As an expert in digital identity verification, she helps businesses deploy solutions globally to solve their problems for KYC, KYB and AML.

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