Why Incorporating AI in a Fintech Company Is Essential to Survive in a Mega Competitive Market

In Latin America, 21% of the population is unbanked, according to a Mastercard report, and 46% of in-person payments continue to be in cash. Although the figure is improving considerably, inequality continues to be a problem that finds its counterpart in innovation and entrepreneurship.

On the other hand, there are a large number of corporations that are not from the financial industry that see a huge opportunity in incorporating financial services by taking advantage of their digital capabilities and channels, such as AI.

Technology was the engine for the proliferation of new proposals that solve citizens’ problems and financial services are beginning to be embedded in the different platforms they use on a daily basis. The competition has become strong and the difference in most cases is explained by the tool that is changing the future of business: artificial intelligence (AI) .

First of all, it arises as a solution to one of the three problems that the market anticipated for 2023: cyberattacks and fraud. A few years ago, the company VISA prevented fraud for an estimated amount of $2 billion thanks to the implementation of a technological solution capable of analyzing each transaction in a millisecond, identifying suspicious patterns.

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The application of AI in fraud protects four industry players: users, issuing banks, payment method acquirers and businesses

Recently, passwords and two-factor validations have been complemented by biometrics, also developed with artificial intelligence. Nowadays it is possible, based on user behavior and different patterns, to evaluate a suspicious transaction or, on the contrary, a valid one, in less than a second. This significantly impacts the profitability of a business , since it is much more efficient in approving or rejecting transactions. It also positively impacts the user experience.

Another of the great developments is the use of machine learning algorithms to understand the user, personalize their experience and help in decision making. For example, credit rating modeling or investment recommendations.

AI is also creating a huge competitive gap between those who offer AI-enabled customer service and those who do not. By 2025, artificial intelligence will drive 95% of experiences and 15% of interactions globally in customer services, according to BusinessDIT. We are increasingly more accustomed to instant messaging and less accustomed to waiting.

From another perspective, there are companies that are not in the financial industry, but offer these types of services and products in an attractive way for their clients. There is a reality: people want financial services to be integrated into their daily lives , for example, to pay for household services or other types of services such as parking, mobile phones or leaving a tip without carrying cash.

These types of integrated experiences go beyond digital financial services and prioritize customer experience. From there, many firms that are not exclusively finance companies use their user ecosystem to offer tailored products and reduce the friction of financial activities, while increasing customer loyalty. A figure from Ernst & Young is eloquent, and marks that this is the next revolution: it is estimated that the size of the global integrated finance market across the entire value chain will grow from US$264b in 2021 to US$606b in 2025.

Beyond the developments that may arise in the future, there is a variable that each fintech must take into account: training its own employees to work and incorporate new technologies. AI becomes a central tool . The organization that does not use them will be giving great advantages to its competitor.

Fintech and many payment companies were pioneers in adopting new technologies to expand the digitalization of the industry and make the pie bigger and bigger, bringing it to more and more users. At the moment, they once again have the challenge of continuing to innovate, incorporating current technology and continuing to evolve an industry in an increasingly larger market with new players.

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(Featured image by geralt via Pixabay)

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First published in infobae. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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