Global funding for fintech firms increased over the last year, and traditional banking institutions experienced disruption as fintechs developed new banking technologies and business models that are driving industry-wide change. It's an exciting time, and the implications for the future of financial services are promising. In this rapidly changing climate, industry stakeholders may wonder what to expect in the coming months. As the year comes to a close, we've rounded up our top five predictions for fintech in 2017. Banking is becoming an increasingly digital experience, and 2017 promises to continue the trend of replacing branch visits with convenient, intuitive digital experiences.
ImpactAlpha, May 21 – Artificial intelligence has a big role to play in extending financial services to the next billion customers. A wonky new report highlights financial service providers in Africa that are wielding AI to lower costs, boost revenues and gain a competitive edge with low-income populations. The report from FIBR, a partnership of BFA consulting and MasterCard Foundation, makes the case that automation, machine learning, statistics and programming can help providers "micro-segment" customers and suit services to their finances. Artificial intelligence algorithms are only as good as their data, notes the report from the consulting firm BFA. "More diverse individuals -- including women, for example, or individuals from under-represented groups -- may identify sources of bias inherent in the data and processes that might have been missed otherwise."
Technology is increasingly integrated into our day-to-day activities, from GPS to services like Amazon Alexa and Google Now that delight us with personalized experiences powered by machine learning and artificial intelligence (AI). Let's face it, we're coming to expect that kind of service from all our digital providers. Many financial institutions, in contrast with tech companies, have taken a more conservative stance to powering their digital banking experiences. It's understandable--there are greater repercussions to offering wrong financial predictions than getting the wrong topping on the pizza. The challenge for banks is that forward-looking insights and personalized guidance are becoming a prerequisite to conducting digital business with consumers.
The increased use of artificial intelligence in financial services could pose a risk to stability, according to an international regulator. The Financial Stability Board, which includes all G20 major economies, has published a report on the implications of the increasingly widespread use of machine learning and artificial intelligence in the financial sector. It has raised concerns about an "arms race" for the use of artificial intelligence, with financial services companies investing in it simply because their competitors are. The report said: "AI and machine learning services are increasingly being offered by a few large technology firms. "Like in other platform-based markets, there may be value in financial institutions using similar third-party providers given these providers' reputation, scale, and interoperability.