AI in FinTech Market Report

Market Insights

The global AI in fintech market is expected to grow from USD 8.65 billion in 2022 to USD 27.96 billion by 2029 at a CAGR of 18.2% during the forecast period.

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What is AI in FinTech?

AI in FinTech, or financial technology, refers to the use of artificial intelligence technology in various aspects of the financial industry, including banking, investment, insurance, and payments. AI algorithms can analyze large amounts of financial data to provide insights that can inform investment decisions, fraud detection, risk management, and customer service.

In banking, AI can assist with tasks such as customer onboarding, loan underwriting, and fraud detection. In investment, AI can help to analyze market trends, identify opportunities, and manage risk. In insurance, AI can assist with claims processing and fraud detection. In payments, AI can improve security and customer service by enabling biometric authentication and personalization. Overall, AI in FinTech is transforming the industry by making it more efficient, secure, and customer-centric.

Key Players

The major players operating in the global AI in fintech market are:

• Salesforce, Inc.
• Microsoft
• Google Llc
• Nuance Communications, Inc.
• International Business Machines Corporation.
• Amelia Us Llc
• Complyadvantage.Com
• Narrative Science
• Affirm, Inc.
• Upstart Network, Inc.
• Intel
• Instructure, Inc.

Market Dynamics

Market Drivers

Financial institutions were among the first to adopt mainframe computers and relational databases, eagerly anticipating the next wave of computational power. Artificial Intelligence (AI) has since emerged as a game-changing technology, leveraging human intelligence methods on a larger scale to yield improved results.

In recent years, a computational arms race has transformed FinTech companies, with the likes of machine learning, AI, neural networks, Big Data Analytics, evolutionary algorithms, and other technologies enabling computers to process huge and diverse datasets. The benefits of AI and machine learning extend to banks and FinTechs, as they can leverage vast amounts of customer information to develop timely services and products that foster stronger customer relations.

Moreover, there is a growing adoption of machine learning, particularly in the creation of propensity models. In fact, banks and insurance companies are now leveraging machine learning-based solutions for their web and mobile applications. As a result, real-time target marketing has been greatly improved, with the ability to predict a customer's product propensity based on their behavioral data in real-time.

AI has emerged as a highly successful technology in the FinTech sector, especially in bolstering security measures. One of the most common applications of AI in cybersecurity is through chatbots, which can simulate conversations and address frequently asked questions, reset forgotten passwords, and grant additional access when required.

Additionally, customer service has greatly benefited from AI's increasing sophistication, as chatbots, virtual helpers, and AI interfaces can effectively interact with customers. The ability to answer basic queries has the potential to greatly reduce front office and helpline costs.

The integration of AI in FinTech enables personalized financial advice to assist users in achieving their financial goals, thanks to AI-powered innovations. In addition, AI improves customer service through the use of chatbots, virtual helpers, and AI interfaces that can interact with customers effectively. Another critical aspect of AI in FinTech is its ability to aid in fraud detection, which is a significant concern in the industry.

These factors are driving the growth of the AI in FinTech market. Nevertheless, it is worth noting that the finance and banking sectors are heavily regulated by strict laws to ensure fair play and compliance with tax codes. It is important to note that AI analytics for financial services differs from traditional, human-powered analytics as it cannot be used for regulatory reporting purposes.

Additionally, exclusivity of AI in FinTech presents a major hurdle in the growth of the AI in FinTech market. However, despite these challenges, FinTech companies, from digital banks to payment gateway providers and stock-trading apps, are increasingly leveraging the power of AI to automate workflows, improve decision-making, and add value in FinTech crypto. This trend is expected to create lucrative opportunities for AI in FinTech in the years to come.

Market Restraints

There are several restraints in the use of AI in the FinTech market, including data privacy and security concerns, lack of skilled workforce, lack of standardization, bias and fairness issues, legal and regulatory challenges, and  integration challenges. Financial institutions handle sensitive and confidential data, and AI applications may pose a risk if they are not properly secured.

Regulatory compliance and data privacy are critical in the financial sector, and companies must ensure that they comply with relevant laws and regulations. There is a shortage of skilled professionals who can develop and implement AI solutions in the FinTech sector.

This can limit the growth and adoption of AI in the industry. AI applications in FinTech are still relatively new, and there is a lack of standardization in terms of data formats, data models, and application interfaces. This can make it difficult to integrate AI applications with existing systems and platforms.

AI systems may have inherent biases based on the data they are trained on, which can lead to unfair or discriminatory outcomes. This is a significant concern in the financial sector, where fairness and transparency are crucial. The use of AI in FinTech may raise legal and regulatory issues that need to be addressed, such as liability for algorithmic decisions, transparency in decision-making, and compliance with anti-discrimination laws.

Integrating AI systems with existing financial systems and infrastructure can be challenging and time-consuming, especially for legacy systems that were not designed with AI in mind. Overall, while AI has enormous potential to transform the FinTech market, there are significant challenges that need to be addressed to realize this potential.

Segment Analysis

Application Insights

In terms of application, the virtual assistant (chatbots) segment experienced the highest growth in 2022, mainly due to their effectiveness in the financial and banking industry. Chatbots have provided an intelligent solution that eliminates long queues at physical branches, saving time and energy for customers while allowing them to get their work done from anywhere without compromising safety. This has become a major driving factor for the growth of virtual assistants or chatbots in the AI in FinTech market.

Additionally, fraud detection is expected to witness significant growth in the future. Fraudulent activities in the financial industry have evolved significantly over the decades. Initially, fraud was limited to cheque and wire frauds. However, with the growth of the cybersphere and the expansion of the cybercriminal realm, fraud has taken on more virtualized forms.

Fraud prevention and detection remain a significant concern for financial institutions, and this segment is likely to become one of the primary drivers of IT expenditure. As a result, AI technologies that are capable of preventing these types of fraud are expected to experience increased adoption in the FinTech industry.

Geographic Analysis

North America achieved the highest growth in the AI in FinTech market in 2022. This can be attributed to the fact that the majority of financial advisors in North America believe that AI is expected to transform the FinTech sector and help drive business growth. In addition, as market conditions become increasingly challenging, AI has the potential to help FinTech sustain and drive new growth by creating operating efficiencies and transforming the customer experience through more hyper-personalized insights and products.

Research Methodology

This report offers high-quality insights and is the outcome of a detailed research methodology comprising extensive secondary research, rigorous primary interviews with industry stakeholders, and validation and triangulation with Stratview Research’s internal database and statistical tools.

More than 1,000 authenticated secondary sources, such as company annual reports, fact books, press releases, journals, investor presentations, white papers, patents, and articles, have been leveraged to gather the data.

We conducted more than 15 detailed primary interviews with the market players across the value chain in all four regions and industry experts to obtain both qualitative and quantitative insights.

Report Features

This report provides market intelligence in the most comprehensive way. The report structure has been kept such that it offers maximum business value. It provides critical insights into the market dynamics and will enable strategic decision making for the existing market players as well as those willing to enter the market. The following are the key features of the report:

• Market structure: Overview, industry life cycle analysis, supply chain analysis.
• Market Environment analysis: Growth drivers and constraints, Porter’s five forces analysis, SWOT analysis.
• Market trend and forecast analysis.
• Market segment trend and forecast.
• Competitive landscape and dynamics: Market share, Product Portfolio, New Product Launches, etc.
• Attractive market segments and associated growth opportunities.
• Emerging trends.
• Strategic growth opportunities for the existing and new players.
• Key success factors.

Customization Options

With this detailed report, Stratview Research offers one of the following free customization options to our respectable clients:

Company Profiling

• Detailed profiling of additional market players (up to three players)
• SWOT analysis of key players (up to three players)

Competitive Benchmarking

• Benchmarking of key players on the following parameters: product portfolio, geographical reach, regional presence, and strategic alliances

Custom Research: Stratview research offers custom research services across the sectors. In case of any custom research requirement related to market assessment, competitive benchmarking, sourcing and procurement, target screening, and others, please send your inquiry to sales@Stratviewresearch.com

Recent Developments

• In March 2023, InsurTech startup i3systems collaborated with Microsoft Azure for AI programme and deliver industry-leading accuracy in document and data intelligence for crucial BFSI processes.
• In August 2022, Alliant Credit Union, a fully digital and top 10 credit union in the US partnered with Upstart, a leading AI lending marketplace, to offer AI-powered personal loans nationwide.
• In July 2022, Salesforce launched new AI-powered innovations for financial services industry that offer more targeted and trusted automation to assist teams unlock insights, drive operational efficiencies, and deliver excellent customer service.