Artificial intelligence (AI) has captured the imaginations of society for decades. Countless movies, books, and articles have tracked and discussed current technological developments and potential future iterations. With the advent of the internet and public access to computation, the ecosystem of finance and financial technology has been transformed beyond recognition. Finance has ‘gone digital’ faster than any other economic sector, with customers and businesses benefitting from 24-hour services, online payments, loans, market access, fundraising and more.
As technology continues to develop at the rate equivalent to Moore’s law, we can expect the advent of blockchain technology and artificial intelligence to play an increasingly pivotal role in fintech.
AI. What is it?
In short, artificial intelligence is an ‘area of computer science that emphasizes the creation of intelligent machines that work and react like humans. Some of the activities computers with artificial intelligence are designed for include: Speech recognition. Learning.’
We all use AI every day, from Siri, Alexa, through to Google Maps and even in smart tv’s. Machine learning is seen as the pinnacle of technological development, with major companies plowing billions of dollars into research and development.
Despite the exciting advent of blockchain and cryptocurrency technology, financial experts are most excited about the impact that AI.
One key advantage that AI allows for is the collection and ultra-processing of data. Human behavior is a notoriously hard ‘thing’ to measure and quantify. Random and illogical acts often throw data models off track. AI will allow financial institutions to collect critical insights into human behavior. By combining machine learning and data science, financial institutions will be able to develop razor-sharp, tailored services to individual customers. We are already seeing passive savings accounts linked to the best-performing stocks and funds. Such advancements may begin to make active investment funds obsolete.
Insurance is normally data-driven, however collecting this data can be tricky and full of errors. AI and its approach to data collection can completely transform the insurance industry. Telematics and the resulting data from smart cars could have a profound effect on how premiums are calculated, and how often customers are billed. It may even be possible to combine the telematics with warnings about accident hotspots and traffic data, thereby reducing premiums and potential claims.
There is no question that technology has utterly transformed the financial industry. What these advances have demonstrated is the quantum leap effect resulting from these technological applications. Just as the smartphone ushered in an entirely new commercial ecosystem, so will AI for consumer and corporate products in Fintech.