Digital Twins: AI & ML Transforming the Fintech Landscape

As emerging technologies of AI and ML get weaved into the fintech fabric, the industry will have to prep up to address an avalanche of new use-cases

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Award winning inventor and science fiction writer, Sir Arthur Clarke said, "Any sufficiently advanced technology is equivalent to magic", and there could not have been a more apt description for fintech and the manner in which it is transforming human interaction and everyday life. The Central Bank of Brazil unveiled its immediate payment system, PIX, in November 2020, enabling instantaneous transfers and payments at any time of the day, at little or no cost to the end consumer. The ease with which PIX got incorporated into the marketplace, across delivery, e-commerce, and banking apps offering smooth and safe experience is what made it so appealing.

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Back home, India's Unified Payment Interface (UPI) remains at the forefront of these digital railroads, with giants like Google pushing neighbouring economies to follow suit. From Peru, to West Africa, to Brazil, countries are experimenting with new technologies that will allow regular payments to be completed in real-time. The context here is the rapid pace at which digital practices are making inroads into all realms of human life with finance and tech coupling.

The COVID-19 pandemic has altered travel, trade and human interaction, probably forever. To adapt to the new norms of remote working and social distancing, businesses across the globe have been investing heavily in emerging technologies and a new work order. Even as we gradually emerge from the shadows of the pandemic, it is clear that these developments are here to stay. With a renewed focus on digitisation across the board and the adoption of consumer friendly tech, there is a growing need to emulate human intelligence, automate processes and upscale operational efficiencies. This has in turn pushed brands to grow increasingly conscious towards integrating artificial intelligence and machine learning across processes and functions.

Additionally the nature of the target audience that fintech brands are pursuing today also is driving the shift. With millennials being the driving force behind the changing consumption landscape across the globe, brands have been scrambling through their marketing game plan to grab the attention of this cohort. Going beyond typically automated responses AI & ML are helping brands to unlock engagement with the tech-savvy millennials and Gen Z. With DIY investing and lending growing rapidly, platforms that empower millennials to make their own decisions and see them through to full, are witnessing accelerated growth.

As emerging technologies of AI & ML get weaved into the fintech fabric, the industry will have to prep up to address an avalanche of new use-cases, most of which will have the potential to transform the fintech landscape at large.

Today the digital twins are widely employed across an array of functionalities within the fintech ecosystem: customer support, fraud detection, lending decision making, credit risk assessment, wealth management to name a few. This is in turn helping companies strengthen their business model, achieve growth objectives, and relish a competitive edge while making them increasingly relevant for their customers. While artificial intelligence and machine learning pose a new terrain for many companies; the digital twins are jointly altering the fintech industry in India and throughout the world -

High user engagement: If you want to know what your customers want, then communicating with them seamlessly becomes significant. With the rapid growth of digital interfaces and growing demand for customised experiences and real-time responses, fintech firms are investing heavily in deploying chatbots and voice systems that can effectively address customer issues on the go. These AI-based digital assistants keep an eye on app users, answer their queries instantaneously (chatbots), and offer customised experience basis collected data on user preferences and behaviour patterns.

Fraud detection: According to Norton Report, over 27 million Indian adults experienced identity theft in the past 12 months. Alongside the phenomenal growth of digitisation, businesses have also been combatting the challenge of digital frauds, primarily owing to lack of awareness and digital skills. Leveraging the ability of advanced algorithms, Artificial Intelligence makes it possible to detect fraud attacks in real-time while Machine Learning draws data from historical fraud patterns to recognize them in future transactions. The digital twins are thus building a robust framework in putting a check on fraudulent activities early on in the process.

Customer retention and loyalty: The digital twins are playing a big role in helping businesses put customers at the heart of everything they do. They use customer data to ensure that firms are offering the best things at the best moment. This provides organizations the chance to enhance their services and offerings, hence increasing consumer loyalty.

Can 'AI' be trusted?

During the pandemic, AI and machine learning went from being a novelty to a necessity and priority, especially for financial markets. As asset managers continue to experiment with digitization, there will be an uptick in AI and ML powered security solutions in the years ahead. We anticipate seeing more regulatory (RegTech) systems that scan documents for account registration, identify abnormalities in patterns within accounts besides additional chores.

AI and ML are turning challenges into a win. From automating the complex process of loan origination to churning applications using digital footprint across web and social media to ascertain credit worthiness, the digital twins have empowered lending to come a long way while delivering customer delight.

The road ahead

While developing their solutions, AI developers in financial services must emphasize on the audit trail. The refinement will equip businesses to compete while offering tailored solutions. However when it comes to AI redefining the 'human touch' in the fintech space, notably the commercial loan and credit assessment space in which we operate, we are firm believers that its future rests in complementing humans rather than displacing them.

Data is the new oil and with the future being data-driven, businesses who seek to transform digitally should undoubtedly work towards creating a strategic fit for the digital twins into their technological eco-system to explore and build path-breaking use-cases. From customer interaction to forecasting to process automation, the possibilities are infinite!