Jun 6, 2020

The AI revolution in financial services

Digital Transformation
John Cushing, CEO and Founder ...
4 min
AI mobile

The financial services (FS) industry is going through a period of profound change and disruption.

Technology provides the means for firms to reimagine the way in which they operate and interact with their customers, suppliers, and employees. One particularly significant area of development is the utilisation of artificial intelligence (AI) and machine learning (ML).

The pace of AI application is clearly accelerating as companies begin to leverage it to increase efficiency and innovation to gain a competitive advantage in the marketplace.

Financial services organisations have a long history of working with data, for example using analytics to extract insights for creating better, more profitable business models, investment strategies and improving the customer experience.

The challenge lies in organising and managing this data, verifying its accuracy and capitalising on the opportunities it provides.

AI can enable regulatory compliance, improve business performance, drive cost-savings and efficiencies, rapidly analyse and spot trends, create new value propositions and promote quicker decision making. This creates a cycle of innovation across a wide range of business functions and a reimagined customer experience.

AI relies on quality data being input, as well as the interpretation of that data. Firms are not quite ready to let the machines do everything and skilled human intervention is still required.

AI will be key in how the financial industry operates and delivers services, and for it to compete and thrive. According to consulting firm Accenture, the contribution of AI and augmented technologies to the bottom line for financial services companies around the world is estimated at $140 billion in productivity gains and cost savings by 2025.

Algorithmic trading has long been a primary user of it, but below are four additional ways the financial industry is rapidly adopting AI:

Customer engagement

AI can reduce the process of customer identification and due diligence from many hours of manual research down to minutes. Using billions of publicly available data points search engines allow companies to find and research individuals and companies which meet exact criteria quickly and easily.

Financial companies can then use AI to transform the customer experience by enabling frictionless, 24/7 customer interactions. Some have introduced chat bots backed by conversational AI abilities which can answer customer questions, manage customer requests, and make product recommendations.

There are even robo-advisers which create personalised investment portfolios, obviating the need for more expensive stockbrokers and financial advisers.

Fraud detection and risk management

The complexities of the ever-changing regulatory landscape can be challenging for many financial institutions. AI can “learn”, remember, and comply with all applicable laws – from Know Your Customer (KYC) and anti-money laundering regulation to rules governing asset management.

Current systems generate a lot of false positives that are reviewed individually by middle-office operators and/or compliance officers. Machine learning can reduce bias, interpret, identify patterns and ultimately reduce the number of false positives, saving costs while increasing the quality of the screening process.

Transforming the deal process

For deal professionals, AI is not just an exciting source of new transaction flow. It can now be applied to every part of the deal process, from tracking and sourcing deals through to due diligence, execution and post-deal integration.

AI-powered deal-flow search engines can help executives improve the effectiveness and efficiency of the deal process. They automate tasks, smooth workflows, and scrutinise company data and information- completing processes that would take months of an analyst’s time in minutes. Deal-flow platforms can visually chart and track balance sheets, profit and loss, creditors, debtors, debt, shareholders, connections, contacts and introductions. This enables dealmakers to identify and assess targets, inform decision making and accelerate execution.

AI-powered deal-flow search engines deliver actionable insights and trends even as underlying conditions change and develop.

Due diligence process

As an alternative to huge teams of people, a company can use an AI platform to rapidly examine thousands of uploaded employment, supplier and customer contracts. AI can run background checks on companies and people, alert for any issues and raise red flags.

In the time consuming and complex discovery and analysis process of Mergers and Acquisitions, AI can accelerate the process and provide analysts with a more comprehensive understanding and accurate view of the business or sector they are investigating.

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Jun 10, 2021

FIVE things fintechs must do to keep investors onboard

Brandon Rembe, CPO, Envestnet...
4 min
Fintech innovations drew in first-time investors who reshaped the markets. What new advancements will help them continue their rise?

New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.

Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?

The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.

Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.

Equal access to financial wellness education

Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.

The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.

More personalisation

Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.

For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.

Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.

The rise of AI-Powered Advice

Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?

Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs. 

Focus on financial mental health

New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.

It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.

Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.

Gamification for good

The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.

Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.

Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.

The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.

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