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The Role of AI in Financial Services

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Global Trade Daily, Technology

The Role of AI in Financial Services

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Every individual relies on efficient financial services for efficient transactions and workflows. Financial services have come a long way from paper to electronic mail, and now to online banking services. With rapid technological advancements, tasks have become faster, less time-consuming, and more reliable. Internet banking allows users to transact and perform financial tasks at their convenience and ease. Online banking is an electronic payment system that enables users to conduct financial transactions through the Internet. According to the Consegic Business Intelligence, Online Banking Market size is estimated to reach over USD 48,820.39 Million by 2031 from a value of USD 16,819.81 Million in 2023, growing at a CAGR of 14.2% from 2024 to 2031. In the financial services industry, Artificial Intelligence (AI) has become the main tool for business by speeding up the operational process, enhancing customer experience, and infusing innovation. 

Read also: Artificial Intelligence – How it is Shaping and Redefining Logistics

Fraud Detection and Prevention

AI is now used widely as a major tool in the combat against financial fraud. Traditional fraud detection systems entail some defined rules and patterns, resulting in the fact that they may be unable to identify novel and more intricate fraud schemes. AI technology, specifically machine learning algorithms, can examine a considerable number of transactions in real-time to realize uneconomic behavior and inconsistencies that might be related to fraud. Through the automatic learning of the systems and the adaptation to innovative threats, AI systems confirm the increase in the precision and the speed of the detection process, thus the number of false positives and the loss of financial means are minimized.

Risk Management

Mastering the art of risk management is all that the financial system is about. AI changes the rules of the game in risk evaluation and risk mitigation techniques which are now applied in the banks. AI-powered risk assessment systems can review different sources of data such as market data, economic indicators, and historical trends, to predict the appearance of any risks and the effects caused by them. For instance, AI models can predict the heard volatility in the market, credit defaults, and operational risks in a more particular way than the traditional methods. The possibility of this enables financial institutions to determine their risk exposure more accurately, to do their business with prudence, and to comply with regulatory requirements.

Customer Service and Personalization

Chatbots and virtual assistants e.g., are transforming customer service in the finance industry. They are powered by these AI-based technologies and can manage a wide array of customer requests from account balances to complicated financial advice, enabling 24/7 support and reducing the wait time for human customer service agents. Moreover, AI is a real-time and personalized banking supporter because it processes customer information to suggest the most suitable financial products and services. For instance, for this list, AI could recommend investments that suit a certain person’s risk exposure and financial objectives, thus, increasing customer satisfaction and strengthening the bond.

Credit Scoring and Loan Underwriting

One of the areas that AI has impacted the most is the credit scoring and loan underwriting processes that used to be less accurate. Conventional credit scoring systems often only take into account a few parameters, such as one’s borrowing history or income. On the other hand, AI models can also take into account a richer set of data which includes social media activity, transaction history, and even psycho-metric data therefore, complementing the traditional models in the credit risk assessment. Thus, financial institutions can provide credits to those good credits missing their profile simply because of their alternative data.

Regulatory Compliance

Regulatory compliance is a daunting task for banks because they are required to follow an increasing number of rules and their complexity. AI enables precise emulation of regulatory procedures through data-driven analyses that automatize the control and reporting of the establishment of lawful requirements. Moreover, machine learning models can supervise transactions for physical evidence of non-compliance, while natural language processing algorithms can scrutinize legal documents and bring out pertinent compliance info.

Financial Advisory and Wealth Management

The uplifted capabilities of finance advisors and wealth managers with AI are highlighted with an emphasis on providing insightful insights and guiding them toward a better solution. Robo-advisors are popular due to their use of AI to provide investors with automated investment advice, which is increasing particularly in the retail segment. Using these platforms, clients can set their standards for risk and expected return, and AI solutions implement the most cost-efficient way of accomplishing financial goals. In addition to that, AI will help human advisors by aggregating clients’ financial data and market trends analysis to suggest well-meant and personalized consultations.

Conclusion

AI is already making a big difference in the financial services sector, along with other areas of daily life, through innovation and efficiency. Whether it is fraud detection and risk management, customer service, or algorithmic trading, the use of AI technologies by financial institutions is rather advantageous for their own effectiveness and successful issue resolution. As AI continues to develop, its influence on the sector of financial services is now projected to emerge more inherently, which is forming the foundation for a more secure, efficient, and personalized financial services landscape.

Source: Online Banking Market

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Archives, Banking, Banking on Global Trade, Global Trade Daily

Fintech Market to Reach $324 billion in 2026

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U+ today released “The State of Fintech 2022,” a report that analyzes disruptive fintech trends and industry projections including banking, payments and insurance. The report outlines how and why investors have poured $91.5 billion into fintech firms in 2021, nearly doubling the previous year’s figure. As a result, analysts predict the fintech market to reach $324 billion by 2026.

“The growth and investment in fintech points to closer collaboration between startups and incumbents, as well as regulators, investors and even consumers, as the industry searches for cost reductions, client-friendly experiences and technology upgrades,” said U+ Founder and Chief Executive Officer Jan Beránek. “Since technology use has redefined the financial services industry, incumbents and challengers are competing to acquire and analyze customer data. In an attempt to secure brand loyalty, developing client-friendly experiences is a key focus.”

With convenience and enhanced customer experiences at the top of the priority list in fintech, the U+ report also reveals a demand for software engineers to help businesses keep up with the fast-paced tech initiatives.

Innovative banking solutions have arrived in a major way, with about 30% of all global banking customers using at least one non-traditional financial service. With more than 26,000 fintech companies worldwide, now is the time for all financial service providers to secure their place within this sector, even if it means collaborating with innovative partners to lead the industry using big data and artificial intelligence, for example.

U+ also selected the Top Fintech Innovators after extensive market research, leveraging databases including CB Insights and Crunchbase. Market share, along with the amount and date of funds raised, were also considered as selection criteria.

Archives, Commentary, Global Trade Daily

Want In On The Fintech Trend? 4 Options For Funding Your Startup

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Fintech companies are becoming significant players in the U.S. economy, with firms such as Credit Karma, Tradeshift and Plaid enjoying extraordinary success as they use technology and innovation in an effort to transform the financial services industry.

In 2018, for example, fintech investments in the U.S. reached $11.9 billion, a new annual high, according to CB Insights.

But despite the favorable trend, fintech startups also face the same reality that all startups do – raising the capital to launch a business is no easy feat.

The good news for fintech entrepreneurs, though, is that we are well past the time when investors might have viewed fintech as a fad that would pass.

“I think that most investors have come to understand that fintech is here to stay,” says Kirill Bensonoff (www.kirillbensonoff.com), a serial entrepreneur and an expert in blockchain.

“Finance is getting more and more high tech each year.”

Still, coming up with sufficient capital to start any business – whether it’s from your own savings, a loan from a relative, or cash from an investor – can present a formidable problem.

“One lesson I’ve learned over the years is that successful entrepreneurs must be persistent,” Bensonoff says. “You will face challenges and one of those could be raising capital. Perseverance will get you through.”

Options for raising that capital include:

-Venture capital. Venture capitalists might be inclined to invest in your startup in exchange for an equity stake if they think there’s a chance they can score a big return. But they will need convincing. “The failure rate for new businesses is high, so it’s only natural for investors to be skeptical about whether you can pull it off,” Bensonoff says. “Any investment is a risk, and venture capitalists know that. But smart investors want it to be at least a calculated risk, not a roll of the dice.”

-Crowdfunding. If venture capital is not an option, crowdfunding could be the next best bet, Bensonoff says. Online crowdfunding platforms allow you to make your pitch in one spot where a myriad of different potential investors can see it. Examples of startups that used crowdfunding are Oculus and Skybell.

-Angel investors. An angel investor is an accredited investor who uses his or her own money to invest in a small business. Not just anyone can be an angel investor, though. They need to have a net worth of at least $1 million or a minimum annual income of $200,000. Bensonoff himself has served as an angel investor for some companies.

-Self-funding or “bootstrapping.” For those who want to bootstrap their fintech company, relying on their own money rather than the investments of others, there are options. Some people tap into savings or retirement accounts. Many keep their day jobs and make their startup a side business until it takes off. “Bootstrapping has always been an important approach to my life,” Bensonoff says. “I had to rely on my own money and hard work to succeed, and I had to remain frugal. When bootstrapping becomes a way of life, it opens up new opportunities.”

In Bensonoff’s view, raising capital to launch a fintech company isn’t any harder – or easier – than raising money for any other type of business.

“I think a good company in any sector gets funded,” he says. “So for entrepreneurs who want to plunge into the fintech sector, the key is to develop something that’s useful and satisfies an economic want.”

About Kirill Bensonoff

Kirill Bensonoff (www.kirillbensonoff.com) has over 20 years experience in entrepreneurship, technology and innovation as a founder, advisor and investor in over 30 companies. He’s the CEO of OpenLTV, which gives investors across the world access to passive income, collateralized by real estate, powered by blockchain. 

In the information technology and cloud services space, Kirill founded U.S. Web Hosting while still in college, was co-founder of ComputerSupport.com in 2006, and launched Unigma in 2015. All three companies had a successful exit. As an innovator in the blockchain and DLT space, Kirill launched the crypto startup Caviar in 2017 and has worked to build the blockchain community in Boston by hosting the Boston Blockchain, Fintech and Innovation Meetup.

He is also the producer and host of The Exchange with KB podcast and leads the Blockchain + AI Rising Angel.co syndicate. Kirill earned a B.S. degree from Connecticut State University, is a graduate of the EO Entrepreneurial Masters at MIT, and holds a number of technical certifications. He has been published or quoted in Inc., Hacker Noon, The Street, Forbes, Huffington Post, Bitcoin Magazine and Cointelegraph and many others.

Archives, Foreign Trade Zones, Global Logistics, Global Trade Daily, News

China Proposes Three New Foreign Trade Zones

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Los Angeles, CA – Beijing has announced its given the go-ahead to the construction of three new foreign trade zones in Guangdong, Fujian and Tianjin, all modeled on the zone set-up in Shanghai last year.

Officials said the new FTZ will apply “replicable” practice from Shanghai in investment, trade and financial services to the rest of the country and shorten the “negative list” – the sectors where foreign investment is banned or restricted, the cabinet said.

Announcement of the new FTZs comes on the heels of Beijing’s proposed cutting from 79 to 35 the number of sectors restricted or off limits to foreign investors.

After one month for soliciting opinions, the new guidelines will be submitted to the State Council and are expected to come into force by the end of the year.

Sectors with reduced restrictions include steel, ethylene, refining, papermaking, coal chemical equipment, automotive electronics, lifting appliances, electric transmission and transformation equipment, branch railway lines, subways, international ocean shipping, e-commerce, finance companies and chain stores, according to government sources in Beijing.

In addition, the number of sectors currently limited to joint ventures and partnerships has been cut from 43 to 11, while those requiring a majority Chinese investment have been cut from 44 to 22.

Agriculture, high technology, advanced manufacturing, energy efficiency and environmental protection, new energy and modern service industries are encouraged, the sources said.

From January to September of this year, the value of China’s foreign direct investment decreased by 1.4 per cent to $87.3 billion from the same period the year before.

12/15/2014