How artificial intelligence is reinventing the fintech industry
One of the most repeated phrases I heard at Mobile World Congress 2017 was “reinvention.” It didn’t matter whether the speaker was a CEO of a bank or a mobile manager of a retail company. All of them had the same view: we need to reinvent our businesses, or we won’t survive.
The only way to avoid disruption in the fintech industry is to look ahead and innovate faster than the competition. In this way, companies need to embrace rapid prototyping if they are to manage the fast-paced, agile environment in which every business needs to operate. By 2025, the banking landscape will most likely include some of today’s well-known banking brands in addition to some new names. The use of new technologies will differentiate the successful companies from the laggards that will follow. These technologies include everything from IoT, cloud computing and big data analytics to drones, robotics and artificial intelligence (AI). That last one is especially going to revolutionise the way we manage the relationship between humans and machines forever. And one of the keys will be how we use this intelligence to amplify human cognition.
The era of AI
Large, traditional players can take advantage of this technology to humanize the new digital channels they are building. All with the goal of better communication with their customers. And if these big companies have a great opportunity, the real opportunity resides in fintech industry startups, as they are more open to experimenting and launching new prototypes and ways of interacting with customers. CxOs across the world anticipate more digital and individual engagement with customers by 2020. In fact, from 2013 to 2015, there was a 19 percent increase in CxO interest in digital/virtual customer interaction as opposed to face-to-face interaction and a 22 percent increase in focusing on customers as individuals rather than as segments.
The disruptive neobanks — banks with no physical branches, conducting all business through apps and websites — are not only using messengers and video calls for client communications, they’re also already incorporating chatbots and robo advisors. Eighty percent of financial institutions globally view chatbots as an opportunity and robo advisors are forecasted to manage $8 trillion by 2020. Other fintech companies are going further by using and integrating AI applications, such as Eigencat with IBM Watson and N26 with Siri.
The first step is to include conversational virtual assistants into their digital channels like bots and functionalities like contract and statement analysis, but the second step would be to include the next wave of superpower and supervision to make financial decisions. Companies in the fintech industry will find multiple opportunities to enhance decisions on lending, such as how to optimise financial advising or execute better trading decisions. AI could also help improve the algorithms to create the optimal financial advising.
Some examples include:
- HedgeAble, an American company launched in 2009 that is based on a private wealth management platform for millennials. This company launched a product for high-net-worth investors called Tax Samurai, which uses the AI to automate tax-efficient portfolios, trading and transfers.
- Accurate Quant, a Spanish fintech company founded in 2016 created its own algorithms based on decorrelation using AI. Accurate Quant is also going to use IBM Watson to review client profiles before performing the digital onboarding, and offer them the optimal strategic algorithms.
- Cleo, founded in 2016 in the UK, is an AI money-managing assistant that links up to bank accounts to make financial calculations in order to optimize them.
Disruption is becoming the new normal in every industry. Customers are driving the digital transformation by forcing companies to reinvent their businesses. Machines have been replacing manual labor jobs, but now the challenge is how to manage the technology that will replace other types of jobs. In this regard, any work that cannot be automated or digitized will become extremely valuable. And, without a doubt, fintech startups are leading this exploration.