Global digitization is on the high side, which is an added advantage to the Fintech world.
Globally, we have experienced a lot of innovations in the tech world which have brought new systems of business and administration, hence the increasing rate of Fintech approaches to business and commerce.
A lot of technologies and finance related technologies are emerging daily thereby transforming financial related services.
Of the many emerging technologies, these two have come to take over the system–artificial intelligence (AI) and blockchain.
The future of Fintech lies in Artificial intelligence (AI), and blockchain.
Fintech, an abbreviation for Financial Technology that describes the emergence of financial services and technology. The term Fintech was originally referred to the technology applied to the back-end of established consumer and trade financial institutions.
Artificial intelligence (AI) is intelligence demonstrated by machines, unlike the natural intelligence displayed by humans and animals, which involves consciousness and emotionality. The distinction between the former and the latter categories is often revealed by the acronym chosen. 'Strong' AI is usually labelled as artificial general intelligence (AGI) while attempts to emulate 'natural' intelligence have been called artificial biological intelligence (ABI).
AI and blockchain have become the new normal in the Fintech World. Today, it is not just in the Fintech world as other industries and some other sectors are demanding and applying AI in their modus operandi.
The obvious grounds broken in the Fintech world is due to the adoption of smart solutions to deal with the daily demands.
AI and blockchain is a complete embodiment of these smart solutions.
There are a variety of reasons why Fintech sectors have embraced AI and blockchain for their advancements.
Artificial intelligence (AI) which works hand in glove with machine learning (ML), and blockchain have almost thoroughly infiltrated almost every area imaginable, from back-end processes to forward-facing front-end roles.
The reason behind this is not far-fetched.
In 2019, the use of AI in Fintech alone reached an estimated value of $6.67 billion. This is expected to grow to over $22.6 billion in just five years.And with a compound annual growth rate (CAGR) of 23.37 percent, there are no signs of any slow-down. But why do we see this growth, and why now?
To get a proper answer to the question, let's quickly look the application of Artificial intelligence (AI) in the Fintech world;
Cost reduction
The use of Artificial intelligence (AI) has helped tremendously in curtailing expenses in the commercial businesses.
Record proves that Artificial intelligence has reduced cost to 38% says Finextra.
This is because Artificial intelligence has been employed to carry out most jobs humans initially do, thereby reducing the cost of paying for employees' services. Machines even perform better than humans.
Customer Relationship
Due to big data interpretations, AI provides a deeper understanding of customers' needs and company processes, empowering businesses to optimize and refine their market offerings for a changing world.
To offer satisfactory financial services, it is paramount to understand customers' feelings and fears. As these tasks might be difficult and take more time for humans to interpret, with the application of Artificial intelligence, it becomes way better and easier.
Fintech uses Artificial intelligence to ascertain customers' experiences
With this technology, it is easier to reach customer satisfaction as the technology makes it easier for financial institutions to ascertain their experiences and desires thereby serving them better.
Fraud minimization
One challenge that is continuously striking on the face of Fintech, is fraud.
Technology has made it even easier for hackers to hack into the database of some Fintech industries thereby defrauding some of the institutions.
According to Experian, over 55 percent of businesses worldwide reported fraud in the last year, with 3 out of 5 saying this has increased in the previous year. Some of the common concerns are related to account opening and take-over fraud.
Fraud is inevitable as long as the financial institutions are concerned. As long as there has been money, there are obviously those that are willing to commit fraudulent acts to get it.
The switch to digital has only meant fraudsters need to be more creative in their actions. That's why it's vital that providers stay one step ahead. Thanks to our Stars for the introduction of Artificial intelligence which makes it almost impossible for frauds to get through.
Artificial intelligence poses to be the step ahead. With the application of Artificial intelligence, it becomes very difficult for fraudsters to carry out their fraudulent activities.
Blockchain Application to Fintech
A blockchain is a decentralized, distributed, and oftentimes public, digital ledger consisting of records called blocks that is used to record transactions across many computers so that any involved block cannot be altered retroactively, without the alteration of all subsequent blocks–wikipedia.
The blockchain technology uses cryptographic systems to maintain these blocks. This makes it nearly impossible for these blocks to be altered.
To this great factors and features of blockchain which includes cryptographic nature for privacy and security, decentralization, which removes the unnecessary activities of middle men which are unhealthy to digital commercial businesses, and distributed ledger– A distributed ledger allows sharing of a ledger of activity- such as bulky and multiples of datas or virtually anything of value between multiple parties.
Operation in that note, allows each of the computers in the distributed network to maintain a copy of the ledger to ensure transparency and also prevent a single point of failure (SPOF) and all copies are updated and validated simultaneously.
With all these unique features of blockchain put together, it becomes easier to say that blockchain is the nose through which Fintech industries can breath.
The very many challenges in the Fintech industries like; lack of trust, insecurities, lack of funds and others, make for the demand for blockchain technology in their systems of administration.
Blockchain is cheap in terms of developing and also highly secure. As Blockchain is a series of undisruptable blocks, this allows industries like Fintech to track the complete lifecycle of a financial transaction. Blockchain has given the financial industries the opportunity to create secure and safe financial products and bring innovations in the financial world.
Closing Thoughts
Blockchain technology has become more predominant especially in the Fintech sector. This could be as the result of the power it possesses such as decentralization, and distribution. These two major characteristics make it possible for blockchain to even disrupt the activities of these financial industries as the owner of these assets can have full control of his assets without the unnecessary services of middlemen.
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Excellent write up . Im big into learning new technologies, and the AI and IOT sectors of the blockchain fascinate me . As long as we can avoid another Carrington event I think AI and Internet of Things technologies are going to change the world just like the internet did in the 1990's . We are living in exciting times for sure .