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If you’re in the FinTech industry, you have heard of ChatGPT. It has been storming the internet. ChatGPT is a training model and a generative AI tool with Generative Adversarial Networks (GANs) algorithms that can predict real-life information based on its learning dataset.
Generative AI models have various uses for FinTech businesses, for instance, providing several FinTech solutions—from combating fraud to asset management and credit scoring. In this article, you’ll learn about the top five use cases for generative AI from the real world.
These examples will show you how to implement generative AI in your FinTech business and become more efficient. Read on!
In This Article:
The Top 5 Use Cases of Generative AI with Real-World Examples
The examples below show what generative AI for FinTech can do in the future. They offer endless possibilities for how AI technology will change how FinTech businesses and the banking industry work.
1. Generative AI for Fraud Detection and Prevention
As per Allied Market Research, the global fraud detection and prevention market was $29.5 billion in 2022 and is expected to reach over $252 billion by 2032, and generative AI in FinTech will play a crucial role in it.
With the advancement of AI capabilities, training models can analyze enormous amounts of transaction data and find unusual patterns that may lead to fraudulent transactions.
Additionally, gen-AI can detect unusual user behavior and sketchy patterns in data and prevent fraud from happening.
Generative AI is adaptive to learning and continuously updating with new data and patterns; staying ahead of potential threats will reduce financial losses. However, companies can manually update the dataset of their generative AI tech to quicken the tool’s learning.
Overall, financial technology companies can prevent and protect their customer service from any kind of digital fraud with this tech.
Example: PayPal using AI to combat fraud
PayPal is utilizing generative AI to identify patterns and anomalies in user behavior. They are detecting fraudulent patterns that show unusual activity.
PayPal collects data such as device details, session analysis, and third-party data. It allows the financial firm to create a detailed profile of users and transactions.
It uses machine learning models to analyze device data, sessions, verification checks, IP addresses, and user behavior to ensure a safe and secure transaction.
2. Generative AI for Credit Scoring and Risk Assessment
Regarding risk, FinTech companies are leveraging AI with pomp and show. Innovating credit scoring with generative AI helps calculate more accurate lending decisions. With the help of generative AI, financial services companies can analyze trends in the market, transaction history, spending habits, and other relevant data to make better and more informed decisions.
Additionally, generative AI for FinTech also plays a crucial role in credit scoring assessment. It can easily analyze customer data like credit history, buying behavior, and the income of an individual via its advanced algorithm.
Additionally, FinTech companies can use it for pattern recognition, reduce biases, and calculate an overall prediction of an individual's creditworthiness.
Example: Crediture uses Gen-AI for credit scoring
Crediture, a well-known credit scoring platform, leverages generative AI to generate credit scoring and risk management processes. They trained their systems on their extensive financial data to analyze economic conditions, industry trends, and more. The company can accurately predict bear markets, odd events, market instability, and recessions.
They also use generative AI algorithms to offer customized lending choices to business borrowers. These algorithms generate tailored credit product recommendations based on a company's financial status using Variational Auto-Encoders (VAE).
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3. Generative AI for Algorithmic Trading
Algorithmic trading in the forex market involves ordering automated and programmed trading instructions for price, time, and volume.
As per research in 2019, algorithmic trading is responsible for 92% of the total trading in the forex market.
With generative artificial intelligence, you can analyze market data trends and real-time market conditions to make future predictions. Further, you can automate the trading process for your financial products and trade based on data analysis and algorithmic pattern identification.
Example: Bridgewater Associates (the world’s largest hedge fund) uses AI
When most businesses were thinking about whether to leverage AI or not, Bridgewater Associates, the world’s largest hedge fund, had already accepted and employed it for a while. After years of analysis, they found that AI and other large language models can easily analyze data, test theories, and make a positive impact on decision-making.
Greg Jason, co-chief information officer at Bridgewater Associates, said in an interview about the potential of ChatGPT and other artificial intelligence (AI) models that with gen-AI applications, there is an increase in efficiency, a cost reduction, and improvement in the accuracy of market predictions.
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Read more4. Generative AI for Personalized Financial Services
In a USA study of over 1,000 people, it was found that 77% of Americans feel anxious about financial situations, and 58% said finances control their lives.
With the assistance of generative AI, financial advice such as investment decisions and financial planning are more accurate and less time-consuming. It can now analyze expenses, suggest investments, manage risks, and make customized investment plans for you.
For instance, generative AI can create investment portfolios tailored to a person's objectives and risk tolerance, modifying suggestions as needed. Additionally, it will give financial institutions an option to foster their clients with personalized services.
Example: Cleo, a personal financing app, uses ChatGPT tech
Cleo is your financial virtual assistant. It is an AI app that leverages ChatGPT to analyze your finances and give budgeting and saving suggestions. Once you link your bank account to the app, it will instantly analyze it and provide you with real-time updates and tips to make smart decisions.
Additionally, Cleo answers your financial queries inside the app with their implementation of gen-AI and natural language processing.
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5. Generative AI for Regulatory Compliance and Reporting
For financial services, it is critical for FinTech bodies to follow mandatory financial regulations. Thankfully, generative AI can help you stay aligned with financial regulations and eliminate the chances of violating regulatory compliances.
Generative AI can read vast financial and legal documents and monitor changes in regulations in real time. Leveraging this to your advantage, you can automate tasks, decrease human errors, follow important regulations, and avoid penalties.
Example: FintechOS, a cloud-based platform that helps financial institutions manage their regulatory compliance and reporting requirements
FintechOS helps banks and financial bodies deploy digital solutions. With its latest update to FintechOS 22, the company is focusing on enhancing digital transformations with its no-code or low-code approach.
Also, they regularly update their services to fulfill financial regulations. Overall, FintechOS offers customized services while adopting regulatory changes for various financial organizations.
The Future of Generative AI in Fintech
Generative AI applications are still scarce, but they will make numerous transformations in the FinTech industry. Let’s examine some enhancements of generative AI use cases in FinTech that you’ll see in upcoming years:
Enhanced Personalized Financial Advice
Generative AI will change the definition of personalization by providing tailored suggestions to each customer. It will analyze individual financial conditions, such as expenses, salary, savings, and investments, and offer solutions per their needs and requirements.
Next, it will generate a wide range of personalized strategies for customers, which will further decrease the workload of financial services companies. It will be a great way to save time, ensure customer satisfaction, and enhance customer experience.
Risk Assessment and Mitigation
AI will continue to develop and identify potential risks with more accuracy. With its development and advancement in training datasets, it can detect fraud and notify you. Overall, AI will enhance security and decrease financial losses.
Personalized Pricing
Currently, you have to pay high charges or standard prices for financial services and advice. But with AI, it can access your financial profile in real time with the available requirements and information.
Additionally, financial bodies can provide embedded finance services, such as payment gateways, to other businesses to help them use personalized pricing.
Overall, AI will ensure fair financial services prices and make it more affordable to the masses.
Makes Decision Making Easy
By analyzing different patterns, risks, and market trends, generative AI will help you make decent and calculated financial decisions. It will help your business eliminate risk and fraud and enhance financial outcomes.
Wrap Up
Now you know the top five ways generative AI and FinTech work together. From enhancing security to personalizing services, AI has the potential to transform the financial services industry for the better. You’ve only seen a few examples of what’s possible with this cutting-edge technology.
As this tech develops, we’ll witness additional uses in the FinTech domain. The companies that adapt to this tech will see growth soon. If you want to join this emerging tech, it’s the right time to jump on the bandwagon. Connect with the Geniusee, generative AI development company, that will help your FinTech business leverage the power of generative AI to improve your customer experiences.
