By Jeremy Baber, CEO of Lanistar
AI has grown from strength to strength, becoming more mature as its offering develops into something not just business-ready but now business-essential. Where once people feared the technology for its ability to eclipse human input entirely – an unfounded accusation no doubt born from 80s cinema – now in 2024 it holds the promise of an even wider application, already seen rapid progression and transformation in a short space of time.
This presents a lot of challenges for businesses aiming to navigate and master the technology, particularly for the finance industry. Fintech has seen exponential growth in recent years as new technology has burst onto the scene to disrupt traditional banking and businesses. AI similarly presents a lot of potential, but juggling its growth across both markets could present a lot of challenges for businesses inept at navigating the playing field.
Huge potential versus huge risks
AI solutions already have a proven track record in enhancing the customer experience for banks and financial providers. The use of chatbots provides customer service anytime, anyplace, as well as identifying specific user patterns and reducing customer service costs. Professionals across the fintech industry are already looking to see how it might impact businesses in the next decade.
2024 holds the promise of even wider application, including a focus on financial inclusion using predictive analysis. AI has been making immeasurable progress, particularly in promoting financial service offerings globally, but this isn’t without risk. With most in favour of AI investment, the question persists of how AI will reshape the sector on both the business and customer sides.
Whilst AI and Machine Learning (ML) gather vast expanses of data from both internet sources and databases, the downside of these large language models (LLMs) is that they often foster bias. This poses a risk to fintechs dedicated to financial inclusion, therefore stressing the importance of not only awareness of this but also ensuring they actively forward ethical AI practices that training data is diversified, and that data equality is emphasised.
Maximising AI for business needs
In an industry heavily reliant on data, AI provides an abundance of opportunities in data analysis and management. Fintechs must be up to date by exploring and monitoring the dynamic benefits of a fast-advancing technology. AI when maximised to business needs can improve the accuracy and detail of information available to its customers.
Similarly, for cybersecurity, AI also pinpoints fraudulent activities by tracking systems loopholes, reducing risks and improving security. Such models have helped to prevent identity theft and flag criminal activity such as money laundering, with many AML professionals stating that AI and Machine Learning are the most effective methods for preventing money laundering.
Most models AI chatbots and virtual assistants also provide round-the-clock FAQ support whilst more advanced versions offer personalised finance advice and detect fraudulent activity using natural language processing. Maximising business efficiency and freeing up your operational teams is a key practice that is almost a necessity to adopt in 2024, as businesses continue to compete and need all resources allocated in the best way possible.
AI regulation cements it is here to stay
With rapid developments continuing into the new year, regulation for AI in the finance sector has also become a priority for new offerings and faults. When developed fairly, these can be a game changer for consumer investors looking to get ahead in 2024. AI is here to stay, and thus regulating its exponential development is a necessity for financial security as well as for protecting businesses in the sector.
The exponential growth of AI technologies and their widespread use should indeed make the fintech industry wary, and, whilst not standing in the path of progression and adoption, authorities need to embrace and design a robust framework to offer a global legislative structure more than ever. For AI to be ethical it must be met with risk mitigation and transparency, not just for businesses but primarily for the customer.
2024 will be the year of establishing the groundwork for EU regulation, as it has already seen great regulatory success in the emerging LATAM markets. Currently, it is predicted that this will take effect within the next two years, although changes to AI usage will likely be seen sooner. In the meantime, it is crucial that fintechs monitor the AI regulatory space for updates and remain transparent with their customer base to avoid misleading consumers or presenting potentially harmful information.
