FinTech companies that embrace artificial intelligence (AI) will gain an edge over the competition and improve their chances of success.
In 2024, the financial technology (FinTech) industry is “letting in the new” and “shaking off the old” to accept AI-based advances. Why? The rise of AI has dramatically impacted the financial technology business. Financial technology is becoming safer and more appealing thanks to AI.
Additionally, AI and ML are being utilized to offer various financial services as the financial sector becomes more automated and digitized. Services include personalized financial advice and safe online transactions—top 10 AI advances in finance technology for 2024.
Innovations that will shape future financial technologies
Modern financial technology solutions use AI, cloud computing, blockchain, and the Internet of Things extensively. Let’s analyze each invention and discuss its impact on financial technology.
AI: By 2031, AI In Fintech Market Research will reach $61.30 billion, indicating its widespread use in FinTech solutions. Due to its revolutionary potential, AI may be used in several FinTech processes, including those below. AI technologies make fraud detection easier by monitoring users’ financial activities in real time and detecting unusual activity or deviations.
Cloud computing: McKinsey discovered that nearly half of financial services executives want to transfer certain activities to the cloud within five years. The survey was conducted by McKinsey.
FinTech companies worldwide are interested in cloud computing. It simplifies access to enormous amounts of data and reveals client preferences. FinTech organizations can save on server hardware and network infrastructure by keeping data in the cloud. Scalable storage and processing resources can be used instead.
BlockChain: By 2030, blockchain-based financial technology will produce $8.7 billion in worldwide revenue. Blockchain technology in FinTech applications may be due to the growing use of cryptocurrencies like Bitcoin as payment methods. Blockchain-based smart contracts can automatically enforce FinTech agreements, increasing confidence and transparency and eliminating costly intermediaries.
Blockchain has various applications in other financial technology. Tokenized asset. FinTech platforms can tokenize commodities and real estate into blockchain-based digital tokens. Asset liquidity, trading, and settlement will improve, increasing investment prospects.
Internet of Things: The Internet of Things (IoT) could transform FinTech by improving backbone processes. By updating inventory and processing transactions in real time, IoT-based POS terminals improve the shopping experience. Smartwatches and rings provide safe contactless payment.
For instance, the Indian fintech industry, predicted to reach $1.3 trillion by 2025, has long used IoT to improve user experience, security, and payment options. IoT devices help consumer financial management. The IoT can generate personalized recommendations by tracking individuals’ spending, buying, and saving activities. Thus, the user experience improves.
See also: State of AI in the Financial Services Industry Going into 2024
Top 10 financial technology advances in 2024
The Fintech industry was valued at $305.7 billion by 2023. Blockchain and embedded finance, two important fintech innovations, are responsible for that figure.
1) Blockchain technology
In recent years, Blockchain technology has gained widespread adoption across businesses. The COVID-19 pandemic drove consumers to seek safer, faster online banking transactions. By 2026, Statista expects the global blockchain market to be worth $72 billion. The following justification will explain several factors.
DeFi, a blockchain-based decentralized financial ecosystem, offers borrowing, lending, and trading. These services can be obtained through borrowing, lending, or trading. Since Covid, more people know about Defi as a reliable banking alternative. DeFi is predicted to increase in the future as its rapid and cheap banking services attract more users.
2) Automating money services
Market growth is anticipated to be 27% from 2022 to 2029. Rephrased, the RPA and highly automated banking markets will grow 25% per year. RPA and hyper-automation save staff a lot of time they may use for critical financial activities. This event decreases human mistakes and data breaches, which improves compliance. RPA improves compliance, according to 73% of Accenture survey respondents.
This is not everything. Deloitte found that 80% of banking clients have used an RPA in the past year. Seventy-three percent of Accenture RPA users stated it improved compliance. Business banking could go further with advanced hyper-automation technologies like IBM Watson. After gathering AI, ML, and RPA insights, institutions can employ big data analytics to increase revenue and improve decision-making. A hybrid strategy for automation that blends hyper-automation with RPA, AI, and ML can help any bank succeed.
3) International business deals
The globalization of commerce and the desire for frictionless international transactions have driven cross-border payment system growth. Businesses and customers always desire faster and cheaper international money transfers due to the increased use of cashless transactions and online buying.
Financial technology companies use blockchain and AI to make international money transfers faster, cheaper, and safer. The system also simplifies, transparentizes, and speeds up international financial transactions with real-time tracking and speedy settlements.
4) Cryptocurrency
Cryptocurrencies will expand in financial technology in 2023 due to their decentralization. Thus, transactions can be fast, secure, and transparent without banks. Blockchain technology is making these digital assets more popular and well-known.
This is the foundation of the cryptocurrency business, on which most coins are built. More businesses accept Bitcoin, and massive financial institutions are investing in blockchain and cryptocurrency projects. Because of this, more people are using cryptocurrencies, and investors are interested in the industry.
4) AI software availability
AI and deep learning allow banks to classify customers by preference. For instance, consumers who have just acquired their first financial product are unlikely to have a credit history, credit score, or any other conventional signals indicating a favorable credit risk with a high possibility of repayment.
Traditional banks’ apathy toward this demographic leaves a gap in the consumer market. Fintech organizations may employ AI and deep learning to identify non-traditional consumer risk and profitability indicators. One reason may be to identify consumers whose conduct is unusual enough to be concerning. Both the customer and fintech can get better lending rates using this strategy. The deal benefits both parties.
The COVID-19 pandemic has also hurt brick-and-mortar retailers selling directly to customers. Thus, more companies are exploring POS finance to expand. In addition to using bank account statements for underwriting, these organizations are applying AI models to evaluate consumer behavior based on transaction histories, product purchases, and other data sources to create a more accurate client risk profile. This is done to satisfy customers.
5) Neo Banks
More “neobanks,” or internet or cloud-based financial institutions, than “traditional banks” with physical locations. They align traditional bank services with digital client expectations. Since the pandemic, Neobanking has grown to $40 billion, 2.2 percent of the global financial sector.
Neo-bank is interesting because it offers personalized savings with AI and data analytics. Many neobanks target internationals, moms and their children, working adults, pensioners, and blue-collar employees with personalized products and services. Students coming to the US for school or work may be eligible for credit cards from a student neobank. This neobank evaluates applicants’ creditworthiness and other variables using big data and analytics.
6) BNPL—Buy Now, Pay Later
You can delay paying for goods or services through “buy now, pay later” (BNPL) finance. People prefer BNPL over traditional finance since it has no interest. By 2023, BNPL for financial transactions will likely skyrocket as fintech companies like PayPal and Citibank adopt it.
The ease of payment is the main reason consumers select BNPL, according to a 2021 C + R Research research. The market’s flexibility, falling interest rates, and simplified approval process have helped BNPL.
Traditional bank loans include high interest rates, considerable paperwork, and strict criteria, but BNPL offers a modern alternative. Retailers may benefit from consumers’ rising interest in partial or delayed payments.
7) Chatbots for finance
Chatbots employ machine learning and natural language processing to communicate with users and deliver customized help. Conversational user interface (CHI) refers to chatbots. Transaction assistance, account details, FAQs, and banking industry financial advice are their areas of expertise.
Chatbots can benefit the banking industry by helping customers 24/7. Shorter wait times and faster service may boost customer satisfaction. Chatbots can save financial institutions money and free up people for more meaningful and sophisticated work. They reduce human error and simplify procedures, improving efficiency.
8) Personal Identity Digital Authentication
Online personas are expected to grow. The COVID-19 epidemic accelerated this financial tendency. It will remain the key way to access financial, governmental, medical, and other services as well as professional and educational prospects. The global market is estimated to reach $33 billion by 2025, rising over 100% from 2020.
Additionally, digital identity wallet use is expected to rise. Due to the increase in onboarding situations requiring verification, performing the same procedures for each service is now more time-consuming.
Digitization may increase check types. BYOI, with a simple ledger system, will get public support. The availability of these systems varies by location, and there are no universal compatibility standards. If use cases increase faster in the coming years, a global standard for portable decentralized IDs may become a reality.
9) Built-in money system
The term “embedded finance” refers to a variety of financial services and products that can be used within an infrastructure or platform. Blockchain technology is an example of “embedded finance.” Bundling various services into a single app or platform will let customers track their money. Customers won’t have to switch between multiple digital platforms.
Credit with embedded financing can be obtained without visiting the bank or filling out paperwork. Instead, they can raise money with their current tool. This makes the procedure more effective and efficient.
A last word on AI in FinTech
AI may appear futuristic, yet it’s been around for almost 50 years. AI was first demonstrated in 1956, but businesses are just beginning to realize its global potential.
Financial technology companies may gain from AI, while those that don’t may struggle to compete. Start employing AI immediately to gain an edge over the competition and improve their chances of success. AI will help organizations produce innovative, safe, and secure financial solutions.
