Artificial intelligence in fintech market: Growth, trends, and forecast

With the advent of transactional bots, chatbots, Artificial Intelligence Decision Algorithm (AIDA), Automated Claims Processes, Optical Character Recognition (OCR), Churn Prediction, Algorithmic Trading, Augmented research tools, Valuation Models, and other AI-based technologies, the global fintech market has simplified all their operation, assessment, and customer management procedures.

Consequently, the world’s leading financial behemoth, JP Morgan, could save 360,000 hours (yearly) from its employees’ load. Also, being the early adopter of technologies, the Indian financial market is not far behind in availing AI and ML. According to the joint research of the National Business Research Institute and Narrative Science, about 32 percent of financial service providers in the country are already blessed with artificial intelligence.

Innovative products and services

Today, the banking service, such as mobile banking, Online financial tools, Social Media Banking, NFC Payments, Video chat advisory, are taking Finance to another level, making it more cost-effective and easy to access around the world. Indeed the more progressive banks have already made a significant headway with the adoption of advanced technologies, such as open banking, cloud computing, Big Data, blockchain, AI and IoT. And, India is actively warming up to its consequential impact on the banking operation.

Indeed, the rising digitalisation in the market is profoundly influencing Indian banking sector. In FY18, India’s digital lending stood at US$ 75 billion, which is further estimated to reach US$ 1 trillion by FY2023 driven by the five-fold increase in the digital disbursements.

Benefits of artificial intelligence in finance

Today many technological developments in the lending industry happen due to the increasing role of AI, resulting in more efficient transactions, more accuracy in risk management and fewer errors on the lender side. These desired changes resulted in better profit margins for the financial institutions. A report claims that through traditional ways of checking an individual’s creditworthiness, a bank approves only 25 to 40 percent of total loan applications, but after using AI and ML, they approve 10-15 percent more loan applications, which is great news for India’s growing fintech sector. While fintech companies are empowered with high efficiency, scalability, cost-effectiveness, better control, and gain from data mining, customers get quick responses, transparency in dealings/transactions, better results, and freedom from paperwork.

Trending artificial intelligence solutions

Artificial Intelligence (AI) is helping mankind in every walk of life. The technological development has meant that life has become easier and professional services becoming more effective. The new-age financial institutions, including banks, NBFCs, and fintech firms are deploying AI in most of their core activities such as assessment of the credit profile of customers, analysing customer bank statements, auto computation of internal risk assessment, and chatbot suggestions to prospects on websites. AI has brought everything together in an automated manner using Computer Annunciation Matrix (CAM), Case Summary, Digital Profile, and automated calculation of Fixed Obligations to Income Ratio (FOIR), etc.

A lot of NBFCs claim that their tools are powered by AI and machine learning (ML) but one cannot so easily rely upon their words without getting a correct reply of each and every question. The best way is to ask: what types of AI capabilities does your app or product has? What type of machine learning does the product use? And also ask for case studies in support of their claims. One can question how their AI products will get better at making accurate predictions with time. If the prospect is not getting satisfactory answers then it is time to do more research and get hold of the right product.

Future of Fintech

Many Indian banks are looking to expand their branches overseas, expected to become the fourth largest private wealth market globally by 2028. Following the same track, SBI, one of the biggest public sector banks, is looking to expand its international operations to 15 percent of its total business.

Furthermore, by 2025, the Association of Mutual Funds in India (AMFI) is targeting nearly five-fold growth in assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and over three times growth to 130 million in investor accounts.

In fact, it is estimated that by 2022, the Indian mobile wallet industry to grow at a CAGR of 150 percent to reach US$ 4.4 billion while the mobile wallet transactions to touch US$ 492.6 billion.

Presently, India is one of the most vibrant global economies, and with the moderation in foreign investment rules, the insurance sector has received positive responses. It is anticipated that many companies are planning to increase their stakes in joint venture deals between global insurance giants and local players, over the coming quarters.

By Rachit Chawla, Founder and CEO, Finway