Across the globe, Artificial Intelligence (AI) is stirring up a lot of excitement among organisations. In the FinTech sector, AI has demonstrated potential to make the availability of financial services to everyone in a better, faster, and cheaper manner.
After making anentry into India in the past decade, AI is now causing a big boom, and the technology is finding use in a wide range of applications. Let’s see how AI is contributing to making financial inclusion a reality in the country.
FinTech in India
According to studies*, the Indian FinTech market is expected to grow at a CAGR of 22 percent over the next five years, with the transaction value crossing $73 billion by 2020. Moreover, with over half a billion people in the country having access to the Internet, it is posing a great opportunity for the fintech industry.
Financial services are impacting more than 300 million users by enabling them access to credit, while the same users are completely ignored by traditional players due to insufficient credit history.
A recent study that examined fintech adoption across 20 major economies found that 52 percent of consumers in India use fintech service. India also emerged as the world’s second largest fintech hub in 2018.
There are quite a few challenges in the Indian fintech market – India is a country with many languages, habits, cultures, and preferences. Fintech is relevant to each of the 1.3 billion people in the country, and therefore the interfaces developed for the user interaction should be versatile, easy to understand, and transact.
Keeping this in mind, developing that one service that provides a suitable or desirable user experience to everyone across the country is very important. A key aspect that can make this happen is AI. As fintech grows, all companies involved in this space needs to reinvent the scale, speed, and accuracy of distribution of services.
AI in Fintech
So, what is AI? For starters, AI is about automating the logic implied by humans in a process.
For example, if a fintech product is relevant to the working population in India, then technology is applied to dissect this data from a large data set and utilise the desired information.
Similarly, most fintech companies no longer interact with users through a human representative to ascertain their creditworthiness. The scores or worthiness is automatically determined through the information fed by the user on the platform.
Some of the ways in which AI is being used in FinTech include:
1.The process of analysing risk and approving a loan is now automated using AI and takes only a few minutes instead of a few days. AI allows computers to process information to make decisions more easily, and in a better manner than humans. But, mind you, AI is not replacing humans.Rather, it is complementing human efforts to deliver efficient and swift solutions.
2. Another technology that is the perfect companion to Artificial Intelligence is Big Data. It helps AI in making accurate decisions and reinvents logic. Data is considered a gold mine in today’s scenario and managing this data of millions of users is not an easy task. Humans alone cannot assess and interpret the datasets, which are collected every minute.
3. The third and most important application of AI in fintech is the user experience. Today, from joining a fintech service platform until the end of the transaction, the journey is seamless. Everything is automated and delivered using AI, making fintech a preference for the user. You may ask why? Well, for the simple reason that people no longer like taking multiple visits to a bank to make a simple transaction, when they can now complete the same process from the comfort of their homes. Similarly, accessing credit from a fintech company does not require completing thousands of paperwork, or physically visiting a bank, because the entire process is now digital. The borrowing process happens in a snap, and the overall experience is now quite seamless.
Lending is not limited only to consumers with credit score or credit cards. Thanks to fintech, it is available to everyone and it is reinventing lifestyles. Fintech companies in the country are filling in the gap left behind by the traditional banking sector, and this is happening by using the power of technology and innovation in Artificial Intelligence.
The users being positively impacted by these lending startups were never considered serviceable by the formal banking sector. Also, Fintech, powered by AI, helps in assessing credit scores of users based on various factors like digital footprint and other alternative data points, thus lending to NTC customers and therefore significantly increasing the number of ‘credit worthy’ people in the country by introducing them to the market, safely and affordably.
Today, AI has become the de-facto technology used by all fintech companies to build their platforms. It is estimated that within the next decade, AI-powered financial services will be the only medium of interaction for the users, making financial products and lending available to masses even in the remote towns of the country, thereby making financial inclusion a close reality.