AI and FinTech
Artificial Intelligence (AI) in FinTech is expected to be worth $7 billion by 2022. That is according to a study released by MarketsandMarkets, a research company which studies niche business opportunities worldwide.
The study found that North America is one of the most competitive areas for AI in the financial industry. Development of the technology is rapidly growing in the region. This is due to early implementation of AI technology in FinTech.
The demand for the service is growing as the technology evolves. FinTech has been evolving for many years to include automated technology. For example, financial services already use algorithms to undertake their business. This happens at both the front-end and back-end of services. Banks use algorithms for exchange operations, price discovery and automated trading. Human capacity cannot calculate these transactions as quickly, or as efficiently as machines.
Therefore, it is no surprise that AI is expected to experience growth in the FinTech sector. Cutting-edge technology has always given an advantage to the financial industry. The market has been able to adapt to the changing technological expectations of the public. Those who have not embraced these changed have tended to fall by the wayside.
That does not mean there are not hurdles to faced by FinTech when integrating AI. We expect that robots have the ability to make unbiased decisions. This is something which human nature is prone to do. However, engineers have discovered that AI technology reflects the biases of its human creators. The technology succeeds by the amount of data and information that is fed into it. Therefore, it can often reflect the biases of its human developer.
There also exists a risk that AI technology can fail. There are numerous examples where robots have made embarrassing errors. Some of these mistakes have been humorous in nature. Nonetheless, the potential for mistakes in FinTech could have disastrous consequences. The ‘Flash Crash’ of 2015 was caused by an error in market operations. While the market quickly recovered, there still exists the possibility of wider chaos. When AI is carrying out transactions of funds in the millions, or even billions, an error could result in a market downturn. The FinTech industry should fully understand the implications of AI from the outset.
Despite the growing pains, those who do not integrate AI into their business model could fall behind competitors. Tech giants Apple recently announced a journal into the developments in machine learning technology. There was a public perception that the company had fallen behind Google in the development of such technology. Every industry will need the embrace the changes of AI, and FinTech is no exception. As MarketandMarket’s report suggests, the rewards are substantial.