AI Revolution - Innovations That Shape The Future Of Finance

1. Trend of finance in this digital era

In 2024, the fintech market size will exceed $340 billion (Fortune Business Insight), and by 2032, this figure will increase almost fourfold and reach $1,152 billion. Such rapid growth will provide a staggering compound annual growth rate (CAGR) of 16.5% and will push the rise of new fintech sectors and banking services.

1.1. Growing adoption of embedded finance

Forget traditional banking! Embedded finance is the future, seamlessly integrating financial services into non-financial businesses. Imagine empowering companies you already use to handle payments directly-that's the power of embedded finance.

Today, embedded finance is one of the fast-growing and latest fintech trends. According to Dealroom, the embedded finance market will reach 7.2 trillion by 2030.

Examples of embedded finance are payments on streaming platforms like Netflix or Spotify , on online games, Roblox or Genshin Impact FR Impact, and on online learning platforms, like Coursera or Udemy .

1.2. The rise of AI in personal finance: Transforming how we manage our money

The fintech space is witnessing a surge in investment for AI-powered startups. From just $500 million in 2017, funding has skyrocketed to $2.5 billion in 2023. This trend is fueling the development of innovative AI-powered financial applications and intensifying competition in the market.

Traditionally, managing personal finances involves making informed decisions to improve your financial well-being. However, a key fintech industry takeaway for 2024 is the growing adoption of AI for financial decision-making. According to Forbes, a staggering 59% of users trust AI-based services for investment decisions, with only a fraction expressing skepticism.

This shift in user behavior is fueled by the rise of AI-powered money management apps like Cleo , Eva Money, and Wizely . These tools go beyond basic budgeting by offering personalized advice that simplifies financial management, making them increasingly popular among users.

The future of personal finance is undoubtedly shaped by AI. Stay tuned for further insights on how AI is revolutionizing the way we manage our money!

1.3. Emergence of new open banking products

Open banking is no longer a novelty - it's a driving force in 2024! This revolutionary concept allows banks to securely share customer data through APIs. But here's the magic: it fosters exciting partnerships between traditional financial institutions and innovative fintech companies.

Open banking's journey began with #PSD2 in 2015, and now it's experiencing a global wave of adoption and regulation. As we head into 2024, technological advancements and the arrival of #PSD3 are setting the stage for a new era of open banking possibilities.

2. AI use cases and applications in the banking and financial services industry

2.1. Fraud detection

AI algorithms can process massive amounts of transaction data in real-time, scrutinizing details like purchase amount, location, time, cardholder information, and merchant history. This real-time analysis enables swift identification of suspicious patterns.

2.2. Automated credit checks

AI can be applied in finance to analyze massive datasets, including credit history, employment records, and financial statements, to paint a complete picture of an applicant's financial health.

2.3. Transforming customer service in banking and finance with AI

While combatting fraud remains a top priority, the financial industry is embracing AI to redefine customer service. With their real-time data analysis capabilities, AI algorithms empower financial entities to address customer queries and proactively deliver personalized recommendations. This not only enhances customer experience but also reduces operational costs..

3. Case study: 萬事達卡 's AI System for stopping financial fraud and scams

In an era where digitalization is king, safeguarding financial transactions has never been more critical. In April 2024, Mastercard unveiled a new generative AI model designed to enhance banks' ability to identify fraudulent transactions within its network. Leveraging data from the approximately 125 billion annual transactions processed through its card network, 萬事達卡 stated that this technology can increase fraud detection rates by 20% on average, with potential improvements of up to 300% in certain cases.

So, how does AI-powered fraud detection work on 萬事達卡 ? The process includes:

1.Real-time transaction analysis: Imagine a massive data stream – every 萬事達卡 transaction flowing through. AI algorithms analyze this in real-time, scrutinizing details like location, time, merchant history,..

2. Identifying suspicious patterns: The AI is trained to be a master detective, sniffing out anomalies that might suggest fraud. Some red flags like unusual speeding, transaction bursts, multi-layered security,...

3. Risk scoring and alerts: Based on its analysis, the AI assigns a risk score to each transaction. Transactions exceeding a certain threshold trigger alerts for further investigation.

4. Multi-layered security: AI is just one weapon in 萬事達卡 's arsenal. It works alongside other security measures, including: CVV (card verification value), merchant risk assessment,...

6. Human expertise in the loop: While AI is fast and efficient, human judgment remains crucial. Security analysts with fraud detection expertise review AI alerts and can approve the transaction if deemed legitimate, decline the transaction if suspected of fraud and request additional information from the cardholder for verification.

By leveraging AI in this way, financial institutions can proactively safeguard their assets, protect their customers, and maintain the integrity of the financial ecosystem. The future of fraud detection lies in AI, and its transformative impact is already evident in the banking industry.

4. Thriving in the AI Revolution: A Guide for the Financial Industry

4.1. AI application in the finance industry

With the relevance of AI, finance expertise should review and evaluate existing processes to determine which existing processes can and should be automated to free up time for employees to focus on higher-value tasks. You can discuss with your workforce to identify the processes that are repetitive and tedious, and those that can be carried out with automated methods.

In the financial services industry, tailored customer service, risk model improvements, and day-to-day transactions have been made possible by AI.

4.2. Building a workforce-centric AI future in finance

Transparency and collaboration are key when integrating AI into your financial services organization. While automation can raise job security concerns, proactive employee engagement is crucial.

Finance expertise need to

• Educate their team: equip them with knowledge of upcoming AI implementations and their role in the process. AI is not meant to replace them, but to free them from repetitive tasks.
• Focus on upskilling: Invest in training programs that prepare employees for higher-value activities alongside AI. Highlight the opportunity to focus on strategic initiatives and client relationships.
• Embrace a collaborative mindset: Foster a culture where human and AI capabilities complement each other. Emphasize how AI will augment their skillsets, leading to increased efficiency and productivity.

In finance specifically, AI can handle time-consuming tasks like 24/7 security monitoring, freeing up human expertise for strategic decision-making. This shift creates a win-win situation for both employees and the organization.

4.3. Upgrade your infrastructure which can catch up with AI

With the rise of AI, businesses need robust data processing capabilities to ensure seamless AI integration. Modern infrastructure can bring many benefit for business. This translates to real-world advantages. Imagine streamlining data analysis, customer support, and real-time transactions. Trading and stockbroking firms can offer exceptional customer service with efficient data flow. You know? Partnering with a forward-thinking outsourced infrastructure provider can be your secret weapon for a successful AI journey. Embrace the power of AI without infrastructure headaches.

As an AI enabled Edtech platform with the mission of reskilling and upskilling for learners, we strongly believe that it is necessary for people to have knowledge and know how to apply AI in their work. Now, we also have an AI series course called AI in Action, including AI in Finance.

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