In recent years, Artificial Intelligence (AI) and blockchain have enabled major strides in the financial technology (fintech) realm. AI innovations, such as chatbots and data processing, have helped financial institutions increase efficiency and earn higher profit margins. Blockchain offers faster, cheaper transactions and more secure, permanent records. McKinsey research asserted blockchain has, “the potential to dramatically reshape the capital markets industry, with significant impact on business models, reductions in risk and savings of cost and capital.”
Guest post by Amanda Peterson
How is AI influencing fintech?
Fintech firms have integrated AI into their daily operations to facilitate communication and process information. Many businesses now power data analytics and chatbots with AI technologies. Let’s dive a bit deeper into each of these innovations.
AI uses machine learning to sift through massive amounts of structured and unstructured data quickly and accurately. AI can then organize that data into one, easy-to-understand format for data analysts to draw insights. Dustin Plett, CSO at Consensus AI, stated: “AI analyzes data significantly better than people do.” Those analyses can then be used to identify patterns and improve existing systems, as well as to predict future financial profits and scenarios. According to tech industry leader Mark Hurd, finance leaders spend 30 percent of their time trying to reconcile spreadsheets between disparate departments in their organization. However, “using AI, those reports become virtually error-free and insightful, and the work goes away, allowing people to focus on higher-order tasks.”
Gartner predicts chatbots will handle 80 percent of all customer interactions by 2020. Chatbots in the financial space, such as the Wells Fargo Bot or Eno from Capital one, provide users with quick, intuitive, and friendly financial guidance in a conversational format. Users can ask questions in a live chat platform and receive personalized guidance. By automating customer interactions, financial institutions can lower the number of customer service personnel necessary and massively cut costs. According to Juniper research, the use of chatbots in banking is set to save $7.3 billion in operational costs globally by 2023.
How is blockchain influencing fintech?
Blockchain offers incredible potential in the financial space, including lower costs ($8 to $12 billion annually) and higher speed and security. Because blockchain is a publicly distributed, permanent, and immutable ledger, it provides the perfect channel for financial transactions. With the help of AI, one of the most anticipated uses of that channel is the promise of smart contracts.
Smart contracts are automated contracts based on pre-agreed-upon terms between parties. Once the terms have been fulfilled, payment is released automatically over blockchain payment processors. Because the contract lives on the blockchain, it creates an unalterable and transparent record, ensuring the legitimacy of the transaction. With the help of AI’s natural language processing (NLP) capabilities, computers have the ability to recognize and understand human language data so information can be processed without human intervention. Smart contracts allow for completely traceable, anonymous payments with no need for an intermediary or in-person meetings. Through the use of smart contracts over automated blockchain networks, financial transactions, from eCommerce order fulfillment to the real estate market, will become more effective, safer, and easier than ever before.
Summing it up
AI and blockchain are two of the most exciting innovations in the fintech industry. AI technologies are saving financial institutions billions in customer service costs and have streamlined the data analysis process. Blockchain is lowering transaction costs, allowing for faster, more secure financial transfers, and simplifying the way financial contracts operate. In the coming years, AI and blockchain are expected to become major players in the fintech market and provide even more innovation.
Amanda Peterson is a contributor to Enlightened Digital and software engineer from New York City. When she’s not trying to find the best record store in the city, you can find her curling up to watch some Netflix with her Puggle, Hendrix.