The upcoming democratization of financial services thanks to artificial intelligence

The financial revolution is here. Here, we take a deep dive with one of the best fintech venture capitalists in the world, Spyros MargresFounder Margrace Ventures, in the way artificial intelligence and related technologies are transforming a major industry. Spiros, is a senior advisor and investor in numerous fintech, health insurance, cybersecurity, healthcare, and AI sector companies, including two fintech startups with valuations over $1 billion.

Q: What issues, shortcomings or inequalities in financial systems are considered potential areas for transformation?

Margres: The financial technology industry – FinTech – seems to have arisen from the need to provide a democratic financial system, at least the FinTech companies that interest me. The long-term impact of those companies will be the true legacy of our industry. By democratizing the financial system, I mean an industry that provides unbanked or underbanked people — people with disabilities, minorities, or marginalized groups — by providing them with access to basic and fair financial services. Many of the financial services that most of us take for granted are inaccessible to rural and low-income people due to a lack of physical infrastructure, internet, smartphones, and computer access.

In addition, financial products are often too expensive for less privileged individuals and lack transparency and easy-to-understand terms. This makes understanding the actual costs and risks of these products difficult. Technology such as artificial intelligence is a great enabler, helping the financial industry to transform faster and in a more differentiated and democratized way that allows inefficiencies to be overcome or mitigated. Thus, AI can reduce disparities in accessing financial services between the rich and the poor.

Q: What kind of work is going on, and what success are we seeing?

Margres: AI is already widely used in the financial industry and is expanding into additional sectors such as banking, trading and lending, as in more accurate and accurate credit scoring systems being deployed through AI and big data. Artificial intelligence allows companies to make more informed decisions, improve fraud detection and risk management systems, as well as provide more customized and customized offers to individual customers.

Intelligent chatbots are also used to provide customers with more efficient and personalized customer service. Automation enabled by AI can streamline operations and improve the efficiency of financial services, reducing costs and improving customer experience. In addition, AI and big data can help identify and combat systemic financial market problems, such as money laundering and terrorist financing, that can undermine the stability of financial markets as we know them. Through steady and rapidly improving capabilities, AI has succeeded in reducing the costs of financial services and accessibility for those who are excluded or have limited access to traditional banking options.

Q: Are banks and financial institutions ready – or are new, tech-savvy players gaining ground?

Margres: With financial institutions and fintechs already deploying AI to improve services and stay competitive, it is likely that the savviest players in the tech space will be in a better position to take full advantage of the huge potential and achieve more success. As we know, the competition does not stop at traditional financial players, but is instead enriched by others, such as tech giants, who also want a piece of the pie.

Tech giants like Amazon, Apple, and Google have the technical expertise, vast resources, and customer base to gain ground in the financial sector. In a technology-led world, the problem with the financial industry is that tech companies have a business DNA built on deploying cutting-edge technology and driving innovation to achieve their growth strategies. However, to the extent that the financial industry is at a technological disadvantage compared to the tech giants, what speaks for them is the inherent and deep trust that customers have in established banks and financial institutions.

However, the financial industry’s genetics must be rapidly enhanced with the latest technology and innovation to remain competitive in the future. We must remember that tech giants will never want to be banks; They want to serve their customer base and make their solutions more effective. For financial institutions, the tech giants have the ability to take a large piece of the business pie, often as a very tasty and profitable piece.

The future competitive landscape will be determined by how much each player is willing to invest in technology and drive innovation to better offer customers. Fintechs have understood this much better than most banks, but increasingly, everyone is realizing that driving technological advancement is the only game in town, at least for those who want to stay in it.

Q: What are the challenges ahead in using AI to democratize the financial system?

Margres: As great as current and future AI solutions seem, challenges must be met to ensure continued success. AI models require huge data – both accurate and current – ​​which must be diverse and unbiased to avoid inaccurate results. We must be able to explain AI models so that they can be corrected if necessary, and also to ensure fairness, privacy and security. Another challenge to deploying AI models is data storage, and in Europe – as well as similar global formats and initiatives – access due to the General Data Protection Regulation, GDPR.

Effective security measures are essential to ensure the integrity and integrity of AI-based models. Moreover, implementing, maintaining, and scaling AI solutions is expensive, and many companies are emboldened to truly transform their business models into a full technology. Developing the necessary technology and training employees to use the system is an investment that companies must make.

In addition, AI-based systems may lack design for integration with existing processes, and thus may require significant customization prior to deployment. The financial industry is also highly regulated and is an environment of ever-changing regulations intended to protect consumers, which poses another challenge to AI. Therefore, all of us, including regulators, must understand how pervasive AI models work and their implications.

Thus, AI models must be trustworthy for use in the financial system. The better everyone understands AI models, the more confident we can be in fair publishing, protecting privacy, and avoiding discrimination. There is still a lot of work to do to continue to educate people and customers about the huge benefits of this complex technology. We must ensure that people believe and understand that AI will benefit them when it reaches its full potential, and we must remember that trust is still the core DNA of any business model, including that of banks.

Q: What advice would you give the companies you fund about the future ahead?

Margres: I remind my companies that even previously well-known companies that are heavily focused on technology can have offerings that feel out of date compared to current innovations and technological advances. The race never stops, and no player can become more than a memory if they rest on the laurels of their past initiatives.

Finally, explainable AI must be deployed to reduce costs and provide greater transparency and access. Everyone will benefit, and most importantly, really progress from the democratization of the financial sector, which should concern us all.

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