Four Ways AI Is Transforming Fintech

Comparisons between AI and the early internet are unavoidable. So let’s get them out of the way: we’re fast approaching a time where apps without AI will seem as unthinkable as doing business without the internet. Right now, there’s lot of talk about fintechs adding AI to enhance core functionality within their consumer apps. In the future, this conversation won’t be had because it’ll be taken for granted that AI is underneath the hood.

Artificial intelligence is already here and all up in your neobanking app, crypto dapp, and digital portfolio. It’s just, as the saying goes, not evenly distributed. While some forward-thinking companies have raced ahead with what we can call the AI-ification of their products and services, others have lagged behind – or worse still, have added AI as a box-ticking exercise rather than to empower their users. Most fintechs are smarter than that, however, and are embracing AI for the right reasons. Here are four of the best use cases it enhances.

Automating DeFi

Where there’s AI, there’s AI agents – at least when you’re operating in web3, whose onchain landscape is awakening to the possibilities afforded by autonomous bots that do their master’s bidding. Your average digital banking customer is scarcely au fait with AI, let alone AI agents, but it’s a different story in decentralized finance, whose users tend to be more tech-savvy, and whose permissionless money markets are ideally suited to getting the agentic treatment.

From a consumer perspective, these agents are being seamlessly integrated into dapps, where they can take care of tasks such as yield optimization and portfolio rebalancing. The infrastructure powering all of this AI activity comes from specialist web3 projects that can supply the compute and data that agents demand. 0G Labs’ Layer 1 chain is doing a lot of the heavy lifting here, providing the resources for dapps to scale infinitely so that AI agents can realize their full potential. Pretty soon, all of DeFi will be agentic, and the best thing is you won’t even notice it’ll be so smoothly integrated.

Fraud Detection and Security

As we’ve established, AI is great at automation: it excels at handling the sort of digital tasks that humans are unwilling or unable to do, and with minimal oversight. This makes it ideally positioned for fraud detection, something that requires round-the-clock monitoring. And since AI is adroit at pattern recognition, it’s very good at identifying unusual behavior – such as someone accessing an app or platform in an atypical manner.

In short, AI is great at securing fintech applications, and this is one of the first areas where it’s being implemented within the industry. From a consumer perspective, not much changes other than your banking app gaining a “Protected by AI” sticker somewhere. But behind the scenes, that AI will be watching vigilantly for anything that might constitute unorthodox behavior. And when it identifies something abnormal, it’ll be flagged for a human operator to check, or the AI may unilaterally lock an account or halt a transaction pending further investigation.

Personalized Financial Insights

The person who knows you best after yourself isn’t your spouse or bestie – it’s your internet browser. And soon it will be succeeded by your AI, which will be your digital friend, doppelganger, and other half, alerting you to the things you like and opportunities that are relevant to your interests. It’s already happening within investment apps, where AI can analyze user data, such as transaction history and spending patterns, to provide tailored financial advice.

While apps have attempted to provide this sort of service in the pre-AI era, using user preferences and past behavior as a guide, it’s been a pretty crude heuristic. AI allows for much more granular recommendations that are more up-to-date and generally served to your liking. It’s your digital barista, essentially, adding an extra shot and a dash of cinnamon to sweeten your financial planning.

Credit Scoring

The notion of being denied credit because an AI has deemed you unworthy may sound dystopian, but it’s actually no different from the rule-based computer scoring that’s already in place. AI just does it better, working with greater accuracy and more up-to-date data. One of the reasons why AI can do the job better is that it’s more capable of analyzing alternative data, such as social media activity or transaction history, to assess creditworthiness.

Naturally, as with all forms of AI, there needs to be a balance struck between granting access to rich datasets while protecting user privacy. No one wants to be denied a mortgage because of a throwaway social media post they made in their teens. This is where AI has the potential to be a better judge than the rule-based systems that are currently in place, since it can apply nuance and reasoning in arriving at its decision. Credit scoring isn’t going away anytime soon, so we might as well embrace the fairest scoring we can by roping in AI to figure out who’s good for a loan and who’s a liability.

Customer Support

Yes, we’re talking chatbots, whose AI incarnation is now live in your fintech app and offering to answer your support tickets. Chatbots sometimes get a bad rep, partly because the first wave of them has been imprecise and, well, unhuman. But if there’s one thing AI excels at, it’s imitating humans, right down to the sort of conversational tone that comes across as authentic and even empathetic.

Pre-AI chatbots can be maddening to use: illogical and cold, they’re often good for little more than linking you to an unhelpful support link that doesn’t address your problem. AI-powered bots aren’t just more civil: they’re actually capable of getting to the root of the problem in record time and either resolving it directly or escalating it to someone who can. If you’re gonna have to deal with customer support, an AI chatbot beats an automated phone service every day of the week.

AI Is Everywhere

As we’ve established, AI is everywhere and yet nowhere to be seen. Most of the apps implementing it aren’t making a big deal about it, which is the correct approach since AI isn’t a solution: it’s a tool. In other words, AI alone doesn’t make your digital life better. But when it’s auto-optimizing your yield, locking hackers out of your account, and dealing with your customer support query in a jiffy, well, then it’s justifying its existence. Use case by use case and app by app, AI is making inroads into the apps and platforms you know and love. Like the internet itself, we’re fast approaching a time when life without it would seem unfathomable. All hail our new AI overlords.