Today, fintech providers have little choice but to leverage the latest technology at risk of being left behind.
Chief among these technologies is generative AI (Gen AI), the catalyst for a new generation of innovative solutions across the fintech, finserv and payments landscape.
Between 2022 and 2023 alone, Finastra’s State of the Nation survey found the number of decision-makers at financial institutions who had improved AI capabilities rose from 30% to 37%. In 2024, the numbers are only heading one way – upwards.
A recent McKinsey report found that 90% of financial institutions have, to some degree, a centralised Gen AI function in their infrastructure as of March 2024. These figures are on an unstoppable upward trend too.
The rapid rise of Gen AI in fintech
Speaking to us earlier in the year, Claudio Truzzi, Director of the Research and Innovation Activities Support Office at the Université Libre de Bruxelles in Belgium, describes the swift emergence of Gen AI in fintech as “remarkable.”
He said: “At first, AI in finance was mostly used for number crunching – analysing data, building models. But Gen AI can do so much more, changing how we think about, deliver and run financial services.
“Unlike specialised AI, which typically follows predefined rules and models, Gen AI’s unique strength lies in its ability to create and innovate.”
Indeed, as data has become unified, more accurate and efficient, financial services firms and fintechs have been able to generate large language models to deliver personalised consumer experiences: after all, customer-centricity is the key to modern financial services.
“With more data, Gen AI can be used to create personalised payment experiences, such as suggesting relevant payment methods or status updates, aid in fraud detection and to help improve customer loyalty and satisfaction,” Erin Nicholson, Global Head of Data Protection and Privacy at Thoughtworks, told us in January.
AI used in fintech and finserv also extends to pattern anomaly detection – a critical feature in cybersecurity and customer authorisation.
Eric Lefebvre, CTO at Sovos, said: “There are several other areas in which AI can study patterns of customer interaction and system usage to help better plan for everything from system capabilities and uptime to customer service, monetary flows and staffing.”
Gen AI in payments
In the world of payments, Gen AI is undergoing digital transformation at pace, as financial institutions embrace multi-cloud and hybrid-multi-cloud models.
“Composable architecture allows payment firms to shorten innovation cycles and improve time to market with an agile and configurable tech stack,” says Jeroen Hölscher, Global Head of Payments Services at Capgemini.
“And as more payment firms shift to SaaS-based composable architecture, we can expect payments innovation to pick up pace.
“Additional initiatives like the ISO 20022 migration, CBDC pilots and instant payment services are further catalysing the innovation process.”
The need to drive AI innovation has not always been for the sake of innovation alone. Strong macroeconomic headwinds have made life tough for businesses, particularly SMEs. So by providing more efficient and simpler ways for their customers to pay, these businesses have been able to eke out additional revenue they otherwise may not have.
Alan Irwin, VP of Product and Solutions Europe at Global Payments, told us: “The primary driving force behind innovation in paytech is the push to support businesses by developing more efficient and convenient ways for their customers to pay.
“Merchants that want or need to increase their revenues and expand into new markets must have strong levels of customer loyalty, something that can be earned by providing consumers with quick, easy and safe payment experiences that are tailored to their specific preferences.”
Gen AI in fintech: A constant stream of innovation
News of fresh Gen AI innovations in the fintech and finserv space is landing with increasing frequency.
Last month, Temenos launched its first Responsible Generative AI solutions for core banking, as part of its Gen AI-infused banking platform, to help banks revolutionise how they interact with their data to transform efficiency, operations and product management.
Just two weeks ago, Quantexa debuted its new Gen AI suite, Q Assist, with HSBC and BNY Mellon, to help organisations augment decision-making across front-line and information workers.
The reach of Gen AI is boundless; it has even helped Klarna save US$10m in marketing costs with its quick ability to run marketing campaigns and generate images.
As new regulations – the EU AI Act for one – start rolling out, the scope for AI’s use in fintech and finserv will start to become crystal clear, and we can expect to see its application be used in increasingly innovative ways, as the fintech industry barrels head first into its digital future.
