AI in Fintech Market

Market Overview

The global AI in fintech market was valued at USD 9.75 billion in 2021. It is projected to reach USD 38.39 billion by 2030, growing at a CAGR of 16.45% during the forecast period (2022–2030).

AI has the potential to significantly improve both the security of financial data and the effectiveness of financial processes. In the case of fraud detection, AI watches online transactional activity so that any deviations and prospective frauds can be discovered in real-time and immediately stopped. Moreover, AI helps automate various banking, financial services, and insurance (BFSI) activities, such as online consumer engagement via chatbots, claims to process, and FAQ answering (FAQs). AI solutions are in greater demand than managed and professional services because they perform question and answer processing, natural language processing, generation, facial recognition, video and image analysis, and audio recognition. Cloud implementation has increased revenue for AI in fintech market participants because AI interprets and learns from historical data, makes recommendations, and analyses current patterns. AI solutions find the most widespread use in the fintech industry for quantitative and asset management, facilitating the extraction of large volumes of data.

Market Dynamics

Market Drivers

• Advancement in Technology

Artificial intelligence (AI) in the fintech technology market is anticipated to grow due to technological advancements enhancing financial service providers' business processes. Increasing internet penetration and geographical data availability are the market's primary drivers. AI and machine learning have assisted banks and fintech companies by enabling them to process vast amounts of client data. In March 2022, KBC Group, a multi-channel bank insurer based in Belgium, started commercializing its portfolio of AI apps through Discai. The company started by releasing an AI tool to prevent money laundering.

• Increase in Demand for Individualized Financial Services

A rise in the adoption of chatbots by banks and increased competition among banks for maximum market share have led to the increased popularity of customized financial services among end customers. Various banks offer budget management apps driven by AI technology, which assist consumers in achieving their financial goals and enhancing their money management process. Moreover, Robo-advisors are one of the other quickly rising trends in personalized financial services. They target investors with limited resources, such as individuals and small to medium-sized organizations, to manage their assets. Moreover, AI-based Robo-advisors can use standard data processing techniques to develop consumer financial portfolios and solutions, including trading, investments, and retirement planning. Moreover, with the advent of usage-based loans, AI technologies are assisting in calculating the most appropriate interest rate for each individual, hence driving the expansion of AI in the banking sector.

Market Restraints

• Inadequate Regulation in the Fintech Industry

Increased regulation may endanger Indian fintech firms by inhibiting innovation and increasing operating expenses. Regulatory clarity will strengthen the sector in the future by allowing it to gain customer confidence and attract additional money. As fintech firms expand dramatically, regulators will likely pay increased attention to them. A few platforms have already been implemented as regulatory measures, including the Bharat Bill Payment System (BBPS), Payments Bank Licenses, and Unified Payment Interface (UPI). The regulator must create an environment conducive to innovation while adhering to customer protection, data security, and privacy considerations. With the rapid acceleration of innovation, authorities generally react reflexively to certain market activities.

Market Opportunities

• Increasing Awareness of Cloud-Based Firewalls among Small and Medium-Sized Businesses

There will be significant market expansion opportunities as small and medium-sized businesses become more aware of the advantages of cloud-based firewalls, particularly in emerging economies. For example, in May 2022, the Czech Republic Finance Ministry, which is in charge of economic policy, revenue service, insurance, the government budget, banking, and security, launched a project to maximize the potential of fintech apps and data used in the country's financial services. The project was undertaken by the Organization for Economic Cooperation and Development with funding from the European Union and in conjunction with the DG REFORM-Directorate-General for Structural Reform Support of the European Commission. In addition, it will contain a feasibility analysis of the probable development of a sandbox in the Czech Republic, as well as the prospects of data in financial services, so that fintech innovation can be founded on shared data. Fintech has evolved inside the investment management industry. Adopting advanced technology and solutions, such as artificial intelligence (AI), big data, and machine learning to assist businesses in analyzing investment opportunities, improving their investment portfolios, and managing associated risks has been considerable.

Segmental Analysis

The global artificial intelligence in fintech market is segmented by component, deployment, and application.

Based on components, the market is divided into Solutions, Services, Managed, and Professional.

The solution segment is predicted to hold a significant market share during the forecast period because it manages the massive volume of data generated to gain meaningful insights and make more well-informed decisions. In addition, corporations place a significant emphasis on creating new chances for growth and revenue generation, which contributes to an increase in the preference for artificial intelligence and advanced machine learning algorithms across industries. However, owing to a surge in demand for cloud-based AI services among end-users, the service segment will likely experience a growth at the highest pace over the projection period.

Based on deployment, the market is divided into cloud and on-premises implementations.

Cloud-based deployment strategies hold the largest and most significant fraction of the market share. The most notable advantages of implementing cloud computing in financial technology are increased scalability, higher security, more innovation, and increased flexibility. These benefits are currently having an impact on significant trends that are driving expansion within the fintech industry. Cloud computing allows financial companies to speed up the process of bringing new products to market, adjust their business strategies in reaction to significant global events such as the COVID-19 pandemic, and adapt to new market trends and needs. It is possible to harness this agility, and it is likely that in the years to come, this will rank among the most practical advantages that fintech companies can gain.

Based on application, the market is divided into credit scoring, fraud detection, chatbots, quantitative and asset management.

Voice chatbots read customers' actions for digital banking, which are then processed to provide the most comprehensive service possible from the company. The AI assistant will direct the customer "on the correct path" after examining requirements, patterns of behavior, and processes, which will cut down on wasted time. The back-office operations of interactive voice banking are streamlined, the customer engagement process is simplified, and the level of user security with banking service providers is increased. With Fiserv's Virtual Banking Assistant, you can deliver intelligent, AI-driven conversational experiences to your customers, allowing you to develop, maintain, and engage your customer base while simultaneously lowering the costs of your call center. This dynamic and innovative platform engages your customers in conversation through any channel or application, including your digital banking app, Alexa, Google HomeTM, Facebook Messenger, etc. It comprehends muddled and obscure language and promotes financial wellness while gaining actionable insights.

Regional Analysis

The global artificial intelligence in fintech market is segmented into four regions, namely North America, Europe, Asia-Pacific, and LAMEA.

North America is expected to grow substantially during the forecast period. This is anticipated due to the widespread adoption of most fintech solutions, the region's robust economy, and the investment made by both the government and private businesses to develop and expand research and development. For instance, Canada's ecosystem for financial technology is constantly undergoing development. There are around 700 fintech companies in Canada, with 18 established in 2021. The proliferation of new businesses that provide services based on artificial intelligence to various financial sectors is the primary force propelling growth in the fintech market. Principal applications comprise business analytics and reporting, virtual assistants, and customer behavior analytics, amongst other things.

It is projected that the Asia Pacific region would be the sector of the market that will expand at the quickest rate due to the rapid growth of local businesses and greater levels of technological advancement in the region. In addition, Europe is also experiencing considerable expansion in the sector due to the widespread acceptance of fintech, the development of the digital ecosystem, and investments made by the public sector in the region. For example, the United Kingdom has contributed 17.3 million euros to develop a digital strategy to encourage colleges all around the country to use robotics and artificial intelligence (RAI) technology.

The Middle East and Africa are at a disadvantage in the financial technology sector since they do not have enough money, the quality of their infrastructure, and the limited adoption of digital technology. Dubai and Bahrain are, across the region, the countries that have the most developed financial technology markets. One example is Dubai's Al Roadmap relationship with IBM, which resulted in the first Al Lab being constructed. Because of this relationship, machine learning and artificial intelligence capabilities have been leveraged to improve municipal and governmental services and experiences. These factors will probably support the market's growth across the area.

Recent Developments

• In June 2022, First Responders Get Tech Help from AWS Edge Devices.
• In June 2022, Amazon Re: Mars Is The Place To Be If You're Into Machine Learning, AI, Robotics, and Space.
• In June 2022, Eclit chose HPE GreenLake to launch a new cloud offering and expand its managed services portfolio.
• In June 2022, Fair Isaac Corporation, Fintech banking platforms are appealing to younger generations.

AI in Fintech Market Segmentation

By Components

• Solutions
• Services
• Managed
• Professional

By Deployment

• Cloud
• On-Premise

By Application

• Virtual Assistant
• Business Analytics and Reporting
• Customer Behavioral Analytics
• Fraud Detection
• Quantitative and Asset Management

Regional

• North America
• Europe
• Asia-Pacific
• LAMEA