AI is being actively used by Fintech companies for transaction monitoring and fraud detection.
Key Highlights
- 18% of the Fintech surveyed by Moody’s Analytics were actively using AI.
- Fraud detection and user profiling remain two key applications of AI in the banking sector.
- Artificial Intelligence is used by Fintech companies to improve underwriting models.
As Artificial continues to seep into various industries, the Fintech segment is not insulated from the trend.
A recent report by Moody’s Analytics reveals that the banking sector and Fintech companies are leading in terms of AI adoption for risk and compliance.
The report, titled “Navigating the AI landscape – Insights from Compliance and Risk Management Leaders” sheds light on the results from a primary survey to understand the outlook of professionals on the application of AI for risk and compliance-related functions.
The report reveals that around 18% of the Fintech surveyed were actively using Artificial Intelligence, while a similar percentage in the pilot stage of implementing AI for various functions.
In the banking sector, around 12% of the respondents were actively using AI and 28% were implementing AI in a trial phase.
It found out that businesses that were larger in size were more likely to be using AI or planning to use it.
Similarly, their understanding of key terms around AI like Machine Learning, Generative AI, and Natural Language Processing (NLP) was higher than their smaller counterparts.
Most of the uses of Artificial Intelligence by the Fintech and Banking companies pertained to three key themes, according to the report.
One of those was transaction monitoring and fraud detection.
Companies were mostly using AI for detecting outlier transactions to detect fraud compliance breaches.
Other applications of AI were customer profiling and automation of tasks.
However, 2 out of 3 respondents of the survey revealed that their data is inconsistent or unstructured and requires cleansing, thus hindering their effective use of AI.
How Fintech companies use AI for profiling
The analytical capabilities of AI are specifically beneficial for Fintech companies that often rely on alternative sources of data for providing financial services.
Such companies use Artificial Intelligence and Machine Learning to analyse past trends of user transactions to predict the future trajectory and outcomes.
They also collate data using Digital Public Infrastructure (DPI) to present a holistic profile of the user and predict behaviour and outcomes. Such profiling helps lenders and other financial institutions determine their exposure to the user.
However, as the Fintech industry is poised to grow to a market capitalisation of USD 375 billion, concerns about the data privacy of users remain intact along with the lack of regulation on AI.
