Artificial intelligence (AI) is becoming pervasive in several industries becoming somewhat mainstream in finance, healthcare, retail, hospitality, and transportation. Nearly every time you get on the phone to speak to someone in customer service an artificial intelligence product help direct your call to the correct person to help answer your question. Fintech's concerns are establishing AI strategies and using it to streamline fraud detection, underwriting, as well as wealth management,. AI can create efficient products and experiences in construction and manufacturing and has been a key component of the advancement in financial technology.

What is Artificial Intelligence

Artificial intelligence (AI), is intelligence derived by machines, which differs from natural intelligence displayed by humans. AI can be defined by any device that perceives its environment and takes actions that maximize its chance of reaching its goals. The term intelligence refers to the ability of the machine to use historical references to mimic cognitive functions that are displayed by humans. The goal of an artificial intelligence machine is to learn from prior experienced and use that information to achieve its goal.

How AI is Changing Fintech

Financial technology currently can process many different transactions, improving the experience and saving time and energy. The addition of artificial intelligence allows financial technology to adapt to changes in the market environment and provide nuances to customer requirements in real-time. For example, a Robo advisor can provide information on the best way to invest in the capital markets based on your age. By adding the addition of artificial intelligence, a Robo advisor can effective at interpreting and recommending actions based on real-time data. So, if the Federal Reserve unexpectedly raises interest rates, the Robo advisor will use this new information to provide you with a flexible investment choice.

Artificial Intelligence in Mortgage Applications

Interest rates in the US have declined substantially with the 10-year yield falling to a low of 55-basis points during the first half of 2020. The 30-year fixed mortgage rate has fallen in tandem dropping below 3%. Demand for mortgages has moved up sharply due to low levels of borrowing costs which have generated an additional need for screening for first-time lenders. 

A recent TransUnion survey showed that approximately 70% of young home buyers are willing to relocate to buy their first home, leading all active generations. This information can allow artificial intelligence to help lenders more precisely target these young first-time homebuyers, measuring the impact of their marketing campaigns. The survey also found that 58% of respondents are delaying a home purchase due to anticipated high down payments. The TransUnion market analysis found that many young first time home buyers had not heard of low down-payment options from Fannie Mae, Freddie Mac, or of the Federal Housing Administration.

Banks are Jumping into Fintech Artificial intelligence

Large commercial banks have always been at the forefront of financial technology. From the bank's perspective, it's much better to design products internally to make sure they have a competitive advantage over the field. Bankers used to have personal connections to their customers to help them make decisions. With the rise of the digital world and the spread of COVID-19, there is less need to speak to someone in person and more of a need to get information at your fingertips. Artificial Intelligence has at several levels can provide bankers with connections to their clients that might have been lost do the rapid change in the way people bank. For example, as COVID19 spread across the United States fewer people were going out to use cash machines. The access to cash declined but artificial intelligence was able to pick up that people were using fintech transactions through Venmo and Paypal, which helped lift Paypal's stock trading price to all-time highs. This data was extremely important 

Artificial Intelligence can be leveraged to bring back that connection. With consumers using cashless transaction banks can provide them with the necessary tools they need to manage their finances and allow them to benefit from using an online transaction. 

The Bottom Line

Artificial intelligence is continuing to make its way into the fintech environment providing companies with information that makes marketing to customers more efficient. Whether is telling consumers about the types of mortgages that they can afford or the available types of cashless transaction, adding artificial intelligence to financial technology is allowing companies to be more efficient. The spread of COVID has increased the demand for digitization and the increasing demand for fintech will likely require additional artificial intelligence to enhance the earnings allowing companies to reach their financial goals.