Why AI and ML is Reshaping the Fintech Industry

Andreas Braun is the Director Artificial Intelligence & Data Science at PwC Luxembourg. He is passionate about technologies that have the human factor at the forefront. Biometrics, in particular in its usage of Machine Learning and AI methods is his area of expertise. We caught up with him to find out how his role has developed, and why AI is at the forefront of the most innovative fintech solutions.

Tell us about your role and how you became involved with the fintech sector?

I am the AI lead at PwC Luxembourg, which gives me the great opportunity to have an impact on all the different sectors that are touched by AI – which pretty much means all of them.

While Luxembourg is first of all  known as a prime destination for the fund industry, it also has a very healthy start-up scene, with a strong focus on fintech. We are involved as mentors and partners for many of the initiatives in this area. AI plays a key role in many innovative products and services provided by fintech companies.

How do the latest AI technologies look and perform compared to the first generation wave - and how far has the technology come?

The last decade in AI has been truly exceptional. From humble attempts to improve scanning documents, Deep Learning and further developments have been truly exciting. It enabled computers to overtake machines in many tasks, from object recognition, face detection, to many predictive tasks that are highly relevant in the financial sector.

There are however limitations for the foreseeable future. Just like our cars are not fully self-driving yet, we still need the human factor in many investment and financial decisions – and for the foreseeable future this will not change. There is a lot of opportunity in combining human ingenuity and AI’s capacity in learning rapidly from large amounts of data.

AI and the use of data is becoming increasingly popular in the fintech industry. What are the latest developments in the space - what can we expect to see happening?

Pretty much all fintechs use data, and most of them AI. So let me just pick two examples. Know Your Customer (KYC) and Anti Money Laundering  (AML) are  areas where AI-powered robots are able to rapidly screen massive amounts of information and find links between globally distributed information sources. Imagine a fintech that would have predicted (and maybe prevented) the Wirecard scandal if it happened just a few years later.

RegTech is exploding – using AI technologies to deal with the increasing cost and complexity of compliance. AI systems assess the most recent regulations and legal communications from governments around the world and compare it with your procedures. The cost savings can be massive. And of course, fintechs could help regulators create more effective regulation, too.

With great technology comes great responsibility. What kinds of new regulations are being implemented - and which areas require greater regulation to keep customer data from being exploited by cyber crime?

Maybe let’s just focus on one key regulation, the European AI Act that has been in the making for almost two years. It foresees a risk-based approach towards the use of AI, when dealing with customer data, or when making decisions that may impact your customers, which covers a large chunk of AI applications. Credit risk for persons and claims processing are two areas in which many fintechs are active that are specifically mentioned as high risk. However, the regulation is still under discussion, so changes may still apply in the future.

How is AI and data usage in fintech impacting incumbent banks at this point in time?

The smart incumbent banks are looking at inspiration or see it as a potential investment opportunity. In terms of personal banking, many have rolled out features that leverage AI to analyse personal spending habits, also in order to suggest suitable products. Others acquire teams in order to foster their own innovation capacity.

The sector is however still hampered by a long legacy of data processing and storage, meaning that they are partially working with very old infrastructures, dissociated data sources and manual processes that prevent the effective use of data and in turn, AI.

What AI trends will we see emerging in the next few years in fintech, in relation to AI and data - and why?

Looking into the crystal ball is always challenging, but one topic will be hyper personalisation of services, which becomes more feasible with advanced AI techniques. The capacity to provide your client with the perfect service is bound to be a significant competitive advantage. This has driven the success of many shopping and streaming services and the AI investments and advances are massive. A fintech that cracks this case will have a chance to become the next unicorn.

5G/6G the IoT and metaverse are all transforming the industry at an incredible pace. What do you think the financial industry will look like in a decade as a result of these technologies?

One can see this as a continuation of existing trends. Mobile first, multi-channel services have been shaping the financial industry already over the past years.  These technologies will allow our mobile devices to become more powerful and our access to online financial services becoming more immersive. Personally, I am not sure if I want to check how my stocks are doing through VR goggles, but it will enable more services being available 24/7. Honestly, who really wants to spend 2 hours in traffic and the waiting room, to get a single signature from your agent?

What inspires you in fintech today?

Curiosity has been driving me in both my research and professional career. The fintech sector has an exceptional capacity to pique my curiosity. I never cease to be amazed by the new means and ways in which fintech companies are using the latest innovations from research, find new applications for “old stuff” and come up with amazing solutions to many of our main pressing global challenges.