The Future of AI in FinTechThe Future of AI in FinTechThe Future of AI in FinTech
Artificial intelligence is transforming how money moves and whom it reaches
When ATMs were first unveiled in the 1960s, they were considered the absolute cutting edge of financial technology. Fascinatingly, these automated teller machines allowed for funds to be attributed to an account holder, counted, and dispersed—any time of day and night—replacing human tellers.
This early model of online to offline movement of money presaged what we have now come to rely on almost exclusively: managing our entire lives, including a significant portion of our financial transactions, entirely from a phone or computer. Think Venmo, Zelle, Apple Wallet, and banking apps.
Artificial intelligence is responsible for much of this. Financial technology, or FinTech, was enabled through the digitization and analysis of data, making it so that today customers can apply for loans, transfer funds from different accounts, buy insurance, make trades, even buy cryptocurrency—and do so instantaneously, without ever having to leave their home.
Blockchain technology, another completely digital system, although still in infancy, has the potential to completely overhaul the exchange of goods and services in a way that practically eradicates the middle people—a role traditionally occupied by institutions like banks, corporations, and governments.
We’ll explore how AI is transforming the financial technology space, creating new and better products and services for end customers. We’ll also touch on some of the ways in which advances in the FinTech space can be used to create financial inclusion around the world for the nearly two billion people who are unbanked or underbanked.
The Evolution of FinTech
FinTech services have grown exponentially, revolutionizing products and the movement of money. Today, FinTech enables online retail banking, investments, trading, peer-to-peer lending, financial advisory services, portfolio management, and numerous budgeting tools. Through AI, financial services that would have previously required long, time-consuming processing periods and piles of documents are now either instantaneous or pretty close to it.
This growth has been disruptive to the traditional holders of money: banks. According to Henri Arslanian, 30 percent of banking jobs will disappear.1
Robert Nelson, a B2B bank operations manager in Chicago says, “What you see now is a lot of retail banks closing branches because people don’t need to go to the bank anymore to open an account, or transfer money, or apply for a loan. They can scan documents and sign things electronically.” But, he adds, “There are still a ton of complex transactions that require a tailored approach and a high level of skill to execute, and that’s not going away soon because of technology or AI. What we are seeing in the space is that the jobs that disappeared because of technological advancements are now being created on the tech side of things, so there’s tons of opportunity.”
Up until relatively recently, money hadn’t evolved very much since it was created. As early as 5,000 BC people exchanged small metal objects for goods and services. In the United States, paper money didn’t actually come into existence until the 18th century. Over the course of seven thousand years, the concept remained more or less the same: There was an agreed upon value for what currency was worth and what it could be used to purchase, and it was regulated by a centralized institution.
Today, blockchain holds the potential to radically transform how economies work. According to Bettina Warburg, blockchain, which is a “decentralized database that stores a registry of assets and transactions across a peer-to-peer network,” has the potential to create a value exchange between people that can completely collapse traditional institutions and push the need for human intervention into these transactions to the side.2
It creates an open infrastructure, trades in digital assets, and lowers risk, while also creating what Warburg calls a “shared reality of human exchange.”
The question then becomes: How will this exchange actually facilitate innovation and forward movement and not just “collapse” banking institutions, who are still, for the most part, the ones holding and investing people’s money? How do we avoid a global financial crisis?
These are just some of the issues that the technology leaders of tomorrow will have to weigh and solve for.
All the technological innovation in the way goods and services are designed, created, and traded doesn’t mean a whole lot to someone who is on the other side of the digital divide. Today, close to two billion people are unbanked or underbanked.3 This means that nearly 30 percent of the world’s population either doesn’t have access to a bank account and therefore a mortgage, insurance, or a small business loan, or, if they have a bank account, they are still not fully participating in the financial system in a way that is favorable to their lives.
When someone doesn’t have a phone, the internet, or a bank account—and this is often already the most vulnerable part of the population—it is a barrier to housing and travel, makes them more susceptible to robbery, and excludes them from personal and business growth.
What the technological leaders of tomorrow will inevitably have to consider when they design and lead new financial ecosystems, whether through biometric cards or the advent of a completely cashless society, is how to include this sizable chunk of the world’s population in a way that enables them to benefit from it sustainably.
Explore the Future of AI in FinTech with Columbia
At Columbia Engineering, the belief that technology cannot exist without humanity is a core driving principle to building the frameworks for a healthy, connected, and creative world. It’s why our online executive education AI program was developed: to help business leaders create a vision for how AI can be used to transform services, build new products, optimize operational efficiency, and disrupt all facets of industry—including financial technologies and beyond.
The program gives learners both a thirty-thousand-foot view and the deep technical expertise to lead engineers, developers, and programmers in executing their vision. As a learner in the AI executive education program, you will not only receive a holistic education capturing the fundamentals of AI, such as design and analysis of efficient algorithms, theoretical underpinnings, architecture, performance, datasets, and applications of neural networks and deep learning, you’ll also be challenged to explore how these relate to issues like security, privacy, data mining, and storage, as well as their legal and social contexts and frameworks.
1Arslanian, Henri. How FinTech is Changing the Future of Banking. https://www.youtube.com/watch?v=pPkNtN8G7q8. Accessed October 2021.arrow_upwardReturn to footnote reference
2Warburg, Bettina. “How Blockchain Will Radically Transform the Economy.” https://www.youtube.com/watch?v=RplnSVTzvnU. Accessed October 2021.arrow_upwardReturn to footnote reference
3Interview with Ajay Banga, Executive Chairman of MasterCard. https://www.youtube.com/watch?v=znwzw7kkmEo. Accessed January 2021.arrow_upwardReturn to footnote reference