Like any innovation, artificial intelligence drives excitement and contradictory opinions at the same time. It can open tremendous opportunities for the future of finance and the planet.
The future of finance can be promising if it’s driven by innovation, technology, and common good. Fintech startups, neo banks, and nonbank challengers bring it to reality by creating innovative technologies that foster social inclusion and sustainability in financial services. The question is how ready are banks to embrace this change? Currently, the financial industry has two scenarios simultaneously with organizations that are genuinely inspired to participate in fintech advancement and those who only emulate the participation while duct-taping the gaps in financial systems with obsolete technologies. Throughout centuries, the engines of traditional banks have been working on oil, coal, and gold. What can fuel them in a more sustainable way today?
The role of banks and fintechs in SDGs
It’s said we’re on the verge of global climate change threatening the common future. Actually, this future is today. Urgent climate action is needed. Every single organizational initiative can make a difference. Banks can play a crucial role in building sustainability by channeling funds into socially and environmentally conscious companies. Increased accessibility of financial services for individuals and small businesses can contribute to another aspect of sustainability – social inclusion and economic resilience.
The UN sustainable agenda defines the 17 Sustainable Development Goals to achieve by 2030. By introducing technological innovations into the financial industry, fintech companies contribute to Goal #9: “Build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation.” However, fintech opportunities go beyond this.
The problems of poverty and financial exclusion can be addressed through low-cost digital solutions that make financial services accessible for the economically vulnerable population. Today, you only need to have a mobile device and internet connection to make payments, receive loans, and open a bank account. And most people do have smartphones even in countries with emerging economies, which allows fintechs to scale their solutions in the near future.
Another aspect of sustainable finance refers to environmental responsibility. Financial companies play a particular part in preventing climate change. Many financial organizations have already made a decision to phase out fossil fuel funding, some of them partially. Banks need to stop new funding for fossil fuels, and existing support needs to be quickly withdrawn. We’re on the path to that, as many banks and fintech companies have taken a climate-risk management approach that implies helping their clients to decarbonize their balance sheets, and ramping up green finance. Fintech startups significantly contribute to a positive change by offering the potential to unlock green financial technologies that will help speed up the transition to a low-carbon economy.
Pushing the boundaries of the possible in banking
There is the opportunity for a new business model, as the competition pushes the boundaries of traditional banking with innovative technologies. Banks face diverse market threats from neo banks and fintech challengers that are gaining customer trust and loyalty with their socially and environmentally responsible solutions. Some of the leading financial institutions are taking advantage of technology disruptions too, integrating artificial intelligence (AI) into different processes and stages of a customer journey. They use AI for biometric authentication, split-second loan approvals, and virtual assistants, to name just a few examples.
Fintechs drive the transformational wave with even greater agility, implementing new initiatives and building new features in weeks instead of 6-12 months, timeframes common for traditional banks. As of February 2021, there were 6,129 fintech startups in the United States, making it the region with the most fintech startups globally, according to Statista.
Today, these young financial companies offer diverse mobile technologies, chatbots, robotic process automation techniques, blockchain, etc. Each of these technologies defines the future of finance, addressing the urgent needs of both customers and bank employees. However, there is something that has caught my attention. It’s banking on artificial intelligence.
AI-powered banking in action
Banking has been class-based and inaccessible for many segments of society. Until today. What’s changed, and how can artificial intelligence (AI) fuel a sustainable future? The use of innovative technologies – and AI in particular – in emerging markets allows financial institutions to further automate their business operations, process large amounts of customer information, and leverage big data sources to overcome SDGs obstacles, such as the high cost of financial services for rural and low-income customers, establishing customer identity and creditworthiness.
There are already a number of successful implementations of AI across bank operations, with chatbots in the front office and anti-payments fraud in the middle office. This technology enables frictionless, 24/7 banking experience, real-time customer support, and more effective financial decision-making.
Examples of AI financial solutions
These fintech and insurtech startups have brought genuinely innovative AI solutions into their niches. Their technologies are poised to become new industry standards and significantly increase the performance of other financial and insurance companies in the near future.
Hennii: AI assistant for personal financial management
San Francisco-based fintech startup Hennii created a personal financial assistant powered by conversational artificial intelligence (AI). This technology allows increasing the accessibility and inclusiveness of financial services for different segments of society by providing easy-to-use tools for personal financial management and voice-enabled control. Till today, conversational AI has been presented by virtual assistants, such as Siri and Amazon Alexa. In the financial industry, Hennii is the first in its kind technology that provides comprehensive money management based on interactions with conversational AI. From a banking perspective, Hennii AI means the revolution of customer experience with the help of conversational UX design and artificial intelligence that assists and guides the user during their banking journey. It is optimized for performance, scalability, security, and compliance.
Featurespace: AI for fraud and financial crime prevention
Featurespace is a Cambridge-based startup that has invented Adaptive Behavioral Analytics and Automated Deep Behavioral Networks technology for fraud and financial crime management and building financial security in society. This development uses natural language processing (NLP) and machine learning (ML) to provide a deeper layer of defense to protect consumers from scams, account takeover, card and payments fraud, which costs an estimated $42 billion. This technology automates feature discovery and introduces memory cells with a native understanding of the importance of time in transaction flows, increasing the market-leading performance of the company’s Adaptive Behavioral Analytics.
Kasisto: AI platform for enhanced customer experience
Kasisto is an AI company founded in New York with a mission to humanize digital experiences and transform customer engagement across the financial services industry. The team developed KAI, a conversational AI platform to improve customer experience in financial services. KAI allows banks and financial companies to decrease call center volume by providing users with self-service solutions. Additionally, the AI-powered chatbots also give users calculated recommendations and help with other daily financial decisions. KAI is constantly engaging with millions of banking customers worldwide, across multiple channels, in different languages. This development makes financial services more accessible for consumers and helps them understand their financial data. On the other hand, it helps financial institutions reduce organizational costs usually spent on customer service.
The ethics of artificial intelligence is still the subject of contradictory statements and discussions. Financial companies must realize all possible risks and threats to social good and take full responsibility for the consequences of their developments. What we can say for sure is that this technology has the tremendous potential to become the lifeblood of next-generation financial services – more inclusive and accessible for different segments of society. Properly regulated and developed under the AI ethics principles, artificial intelligence can help us foster a better financial future and sustainability.