The AI and ML Blitzkrieg is Unstoppable in Financial Services: Trends to Look For in 2021

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The AI and ML Blitzkrieg is Unstoppable in Financial Services: Trends to Look For in 2021
Artificial intelligence (AI) and machine learning (ML) have been the talk of the town in the financial realm over the past couple of years. Now, companies are embracing digital solutions in a bid to gain a measurable competitive edge to keep up with the evolving industry landscape. These two cutting-edge technologies offer a sound understanding of customer needs as well as help step up the business processes. Consequently, they will help companies fine-tune and quickly tweak their market offerings to serve the ever-changing world.

Let’s Talk Numbers

The demand for AI and ML is remarkable in nearly every industry. At present, the worldwide market value of AI more than US$10.1 billion, and the number will multiply rapidly over the years ahead, clicking around US$126 billion by 2025. In the FinTech industry alone, the adoption of AI in 2019 hit around US$6.67 billion and is likely to surpass US$22.6 billion in just five years. Moreover, with a staggering CAGR of 23.37% through 2025, there are no signs of any downturn.

The Times are A-Changing

In 2020, the COVID-19 pandemic and subsequent nationwide lockdowns pushed the demand for digital services driven by AI. And today we see a rising demand for such advanced technologies in the financial sector. It means that in the future, customers will expect fast and functional AI and ML financial services and tailored approaches among banks and SME lenders. So, let’s delve into the following FinTech trends to have a good thing going in this decade.

Robo-Advisers for Better Decision Making

In line with the continuation of on-demand in the finance industry, product recommendations and personalized portfolio management are two of the most prominent AI/ML solutions for 2021. Even though debates abound pertaining to the accuracy and ethics of such technologies, their popularity is flourishing, as is their development. These innovative solutions can recommend a client’s investment opportunities according to their income, risk appetite, and current investment pattern. Robo-advisors have witnessed progress from online questionnaires to dedicated fund and portfolio management to algorithm-centered rebalancing and propositions. As we march into 2021, we are likely to see an advancement of systems and more fully-automated, self-learning algorithms to help investors.

Customer Service – Time is Precious

No doubt, customers’ opinions do matter. 93% of customers are more likely to come back to a company with excellent customer service. However, what makes great customer service? In the modern world, it comes down to two things – personalization and response time. This is where AI and ML enter the game. With 90% of customers looking for a prompt response to their queries, those valuable minutes and seconds during which they do not get a response let another company take a competitive edge. AI and ML chatbots, however, are taking those moments back. They engage with customers faster than ever before and are smarter as well. These technologies allow them to answer customers’ queries as well as gain insights into their needs. The more the data is analyzed, the more a customer experience can be personalized. This can be anything from responding to a question to offering a tailored product to them, for instance, a loan that fits their income and risk, or information before moving forward to a transaction. The power is limitless.

Stepping up Conventional Credit Scoring System

The existing credit scoring systems are out of date. They make decisions based on supposed demographic profiles including, age, race, occupation, and gender, and barely consider the person making the application. AI and ML will influence companies to map out customer risk more precisely, keeping in mind the individual, not a convention.
Adopting credit scoring technology can decrease the non-performing loans by up to 50% while increasing the returns by up to 30% – which means better loan decision-making. Such technology works by creating models, verifying them to monitor their work, and then rolling them out to the market quickly. This implies companies are less likely to offer loans to risky clients, and customers can avail the services faster, receiving a response to their credit decision when they require it. The future is personalized, almost prompt loan decision-making.

Process Optimization to Cut Down Manual Work

Process optimization, one of the most prominently applied applications of AI and ML in FinTech, will only follow its positive growth curve in 2021. It helps businesses reduce the amount of manual labor and, at large, makes the process more streamlined, boosting efficiency. Process optimization is often used to optimize paperwork for customer-facing chatbots, automate call-center operations, and level up personnel training.
In the following years, we will see advancements in these technologies and a thrust toward automating more systems such as answering customer inquiries, Big Data analytics, and report generation, which will offer more crucial insights into the business.

Security – An Existing Challenge

A recent survey has revealed that 57% of companies across continents reported fraud losses related to account openings and account takeover in 2020. However, fraud in the financial sector is nothing new. As far as money has been the purpose, there have been people who are willing to commit fraudulent activities to get it. The shift to digital solutions has only meant fraudsters have to be more innovative in their moves. As such, it is important that providers stay one step forward.
With nearly 9 out of 10 customers reporting that appearances are everything in terms of trusting a financial provider, companies have to stay updated regarding the recent security techniques and inform their customers about them. The next year will see an upsurge in AI and ML security solutions. Case in point, spotting aberrations in the patterns within accounts, examining documents for account registration (RegTech), and so on.

Tracing the Path Ahead

As with the adoption of any innovation, there are many challenges to address – data quality, privacy concerns, availability of talent, the efficiency of the models, and HR mindset change. However, they are being straightened out. In the long run, it is important to keep in mind that this is not a push problem, but a pull one – we are all entering an AI ecosystem, no matter we like it or not. Either we adapt, or we perish. As technology moves forward, AI and ML will become smarter and better suited to human behavior, enabling them to offer more accurate results.
Miles Education is always committed to your career success and brings to you new-age certifications in Finance and Emerging Technologies. We are the official channel partners for IIT Roorkee and WileyNXT to present PG certifications in AI for BFSI – India’s first-of-its-kind online program made for BFSI professionals. For over 200 years, Wiley has been helping people and organizations develop the skills and knowledge they need to succeed. They are dedicated to developing efficient learning products, digital transformation education, learning, assessment, and certification solutions to help universities, businesses, and individuals move between education and employment and achieve their ambitions In becoming a key player in the market, the course is a boon to the emerging product managers in today’s date. To know more, please visit: Miles Education

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