Rohini Gupta, Director and Lead Regulatory Advisor at FinregE, shares her thoughts on what we will witness in the fintech sector during 2023
This year is set to be a momentous one for fintech as businesses involved in this sector are expected to become more innovative and experience faster growth.
This is largely driven by the 2023 trend of artificial intelligence (AI) and machine learning (ML) use by companies for analysing data, running systems smoothly, interacting successfully with customers, and overseeing processes. This is because these clever technologies offer numerous benefits to businesses – from improved productivity levels and profits to the creation of better products and the provision of improved experiences for customers.
The success of this trend, however, depends on the compliance of fintech firms and their willingness to operate at a fast pace whilst staying compliant with regulations.
Is The Use Of AI & ML A New Trend?
Both artificial intelligence and machine learning have grown in popularity in the financial services sector during the past year. So although not a new trend, AI and ML are set to explode in the fintech industry in 2023 as more and more businesses understand the capabilities of these technologies to provide relevant and company-enhancing data and efficiencies.
Understanding AI & ML
Part of data science, AI and ML will become more powerful during 2023 as adoption rates by fintech increase. As well as enhancing the accuracy and breadth of data insights for business, artificial intelligence and machine learning enable the delivery of regtech too which means companies can use the tech to manage regulatory processes and ensure they remain compliant as they innovate.
There are companies that used AI and ML within regtech in 2022 that are now experiencing cost savings thanks to being able to automate cyclical tasks and monitor data security to ensure any non-compliance with financial regulations is spotted quickly and resolved without issue or impact. This has the added bonus of freeing these firms from the worry of remaining compliant as they scale up – they can simply grow and know that the technology in place would alert them if they did anything that wasn’t compliant with the regulations.
Regulations & Fintech
There are regulations in place to manage the innovation of financial services institutions and make sure the products and services provided by this sector have customers’ best interests at heart. The financial services regulator Financial Conduct Authority (FCA) introduced the Consumer Duty rule for fintechs and companies in the financial industry and provides a high standard of operation for all businesses.
Fintechs must know their customers and make sure they meet their needs through their offerings. This includes offering relevant products and services and ensuring all communications can be easily understood and are supportive.
The requirement to be compliant and in line with regulations may be challenging for fintechs but is ultimately positive – by using AI and ML and thoroughly analysing customer data, firms can provide products and services that customers really want and will use, and ensure their innovation continues to be good for society as a whole.
As fintechs grow fast and innovate rapidly, there need to be strict regulations in place to prevent any knock-on effects on the financial services industry and to keep inclusion at the heart of it all so as many people as possible can benefit from fintech.
It is likely that during 2023, new publications of AI regulations will be issued and built on last year’s ones that included the EU Artificial Intelligence Act, US Blueprint for an AI Bill of Rights, and several from UK regulators. Stakeholders and industry-involved people must make sure they respond and engage with all regulation proposals to shape them into supportive and value-adding rules for the sector.
Fintech In 2023
Fintechs should continue to grow and innovate in the New Year, adopting both inclusion and compliance into everything they do. By staying compliant whilst using AI and ML to accelerate growth and innovation, fintechs will continue on a successful path.
About the author
With 15 years’ experience in the banking and investment sectors, Rohini Gupta is a Director and Lead Regulatory Advisor at FinregE, a company that uses technology to make financial regulation easy.