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THE NEXT BIG THING: How Big Data & AI are revolutionising FinTech?

Big-data-&-AI-in-FinTech

Data & analytics have created a paradigm shift in pretty much every aspect of our life. FinTech isn’t evaded either. In fact, the financial sector has been one of the foremost adopters of emerging technologies and new business models, most of the credit goes to Big Data & AI prediction models.

With the proliferation of digital assets, a slew of data analytics promises the creation of new payment possibilities. Ergo, the new FinTech startups pop up every day, all around the world. For those who don’t know, FinTech is a portmanteau created using two words “Financial” & “Technology”

FinTech assists firms, governments & organizations manage their financial practice more effectively. Countless financial incumbents offer services in insurance, banking, risk management & trade using FinTech to enhance their operations. In this article, you’ll witness how Big Data & AI helped financial incumbents take a leap & completely changed how we used financial instruments.

How Big Data & AI is leveraged across FinTech & transactions? 

To put some statistics on the table, the value of digital payment in India will grow three-fold to touch $1 trillion by 2026 as compared to $300 billion in 2021. Mostly because of the Indian Government’s emphasis on digital payments since demonetization. India is outpacing the World in “Digital Payments”; all thanks to FinTech Players like Paytm, Phonepe & Google Pay & their digital payment apps through UPI.

All of this was possible due to the use of Data Analytics in various forms- Big Data, Data Science, ML, AI, Blockchain & many more. Moreover, a study by McKinsey & Company states that 82% of US citizens use digital payments, and consumers have spent around $871,703 billion on digital transactions on US services & products.

Here’s a list of some of the areas in FinTech & financial services which are seeing a massive overhaul.

1.Credit Scoring

Credit Scoring is undoubtedly one of the major sectors that have witnessed unprecedented new solutions with the help of Big Data & AI. Earlier, it was strenuous for credit card firms, and applicants to do all due diligence manually and check if an applicant is eligible for credit or not. Essentially these new solutions go beyond the quantitative data from banks and assess qualitative data such as willingness to pay back credit, behavior, ability, etc. AI-based solutions, however, can gather, mine & analyze the data across billions of accounts to spot frauds, payment defaults & build risk assessments thus giving an insight into the profile of people. There is also a significant growth in P2P lending, SME financing, Neo banking from these innovative credit scoring models. Example of such Startups in India includes- ZestPay, UNI Card, One Card CRED & much more.

2. Marketing, Loyalty Programs & Customer Retention

AI can now create an overarching system by monitoring customer behavior and rewarding them for their timely payments. We all love rewards- be it discounts offering or product/service advertising or cashbacks. Contextual & personalized engagements have become the new norm of New Age-FinTech companies. Big Data & AI analytical solutions tend to combine historical transactional data along with external information sources for the sole purpose of conversion. CRED does it with brands affiliation, card-linked offers, customized reward solutions & loyalty programs to build customer retention.

Artificial Intelligence or Machine Learning? What’s gonna flourish in 2022 & What should you learn? 

3. Better Customer Service

Many banking, finance institutions & FinTechs leverage technology & big data analytics to simplify the process of a transaction. World-over, real-time payments have taken center stage. Hence there is a requirement to monitor the transaction right from the time the request was made till the time transactions are processed. With the help of Big Data, AI & ML, Merchants can now figure out overall success rate, geographical location, card used, and other relevant parameters. Therefore, they can devise a strategy to increase their authorization rate, minimizing the payment failure rate.

One more critical aspect of AI in FinTech is to provide customer advice in terms of financial health & regain credit scores. Various FinTech Startups in India has developed an AI-based engine to help customer pick loan options. The ones which are easiest to repay, & leverage low-interest rates. Thus AI is used not just to provide key data points to financial institutions, but also to aid the customer in real-time.

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4. Investement Management

Investment ventures & management came across various innovations on multiple fronts. While AI customed investment advisory bots take the limelight, other solutions leverage the power of Big Data. For instance- robust investment management solutions that offer potential upward/downward scenarios. How do they do it? They utilize search trends, quantify the latest insights/news & combine multiple microeconomic factors to build adequate investment assessment.

Also, many AI solutions detect specific market anomalies and provide preventive action in the investment portfolio.

5. Fraud Detection & Prevention

Recall that the last time you made an unusual hefty transaction on your card, the customer service called you to confirm if it was you. How do they get to know that you are spending money on your card? To mitigate this, FInTech firms use AI tools to gather & analyze evidence. These AI prediction models study & monitor user behavior patterns to spot fraud attempts and incidents that are unusual. Because of their self-learning capabilities, AI algorithms can alert companies about potential frauds. Moreover, they can enable preventive steps to avoid them. In case, a pattern deviates from conflicts, a human employee can take over to make a rational decision.

6. Customer Acquisition

Big Data & AI helped companies curb the cost of customer acquisition by providing considerable benefits to both financial services & startups. For the last decade, digital channels have dominated place- one of the four Ps of marketing. Most companies rely on leveraging Big Data & AI to acquire new customers. There is significant growth in several segments that are moving online- Direct Insurance plans, Direct investment plans, account opening, automated advisory services & more. Above all, this indicates the importance of digital channels in financial services.

The beauty of technology is that it can be molded to suit needs and if weilded well, it can transform the way we do things. At GUVI ZEN CLASSES, we acknowledge the skills it takes to make disruptive products from scratch. That’s why we have curated this IIT certified programming & Data science bootcamps, tailored to your skills. Your future is just one step away!

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