Welcome back to another edition of Mintos Insight, where we explore the future of finance. This edition is dedicated to the ever-evolving world of fintech, with a closer look at the power of artificial intelligence (AI).
AI’s transformative surge in fintech
Valued at an impressive $136.5 billion in 2022, the global AI market is poised to see an exponential growth surge. Research forecasts a compound annual growth rate of 37.3% for AI from 2023 to 2030. This rapid expansion is largely fueled by constant innovation driven by leaders in tech.1
AI adoption has seen remarkable growth in the financial sector since 2017, with up to 60% of organizations globally implementing AI technologies. Examples of this adoption include AI’s role in reducing financial fraud, improving customer service through AI-powered chatbots, and enhancing algorithmic trading.2
The transformative power of AI is not just limited to businesses– an estimated 11-37% increase in labor productivity is expected by 2035.3
As AI investment surges, over half of financial organizations have invested over $100 billion in AI.4 In the fintech landscape, AI’s influence is indisputable, bolstering cybersecurity and revolutionizing customer interactions. However, the integration of AI also brings forth regulatory hurdles.
Despite the challenges, the rising adoption of AI in the fintech space signals a promising future, reflecting its transformative potential in the sector. With potential to facilitate access to information and improve access to knowledge, AI opens up countless opportunities as we step into a new age. Striking a balance between the underuse and overuse of AI will be critical for ensuring a beneficial and sustainable AI integration in fintech.
Risk assessment: Harnessing data and technology
AI has been widely applied in risk assessment, improving accuracy and efficiency in various sectors. Banks and fintech companies are implementing AI solutions into their risk management systems to streamline decision-making processes, reduce credit risks, and provide tailored financial services through automation and machine learning algorithms. AI can evaluate data about risky behaviors and identify patterns related to past incidents, using these as risk predictors.5
Moreover, AI can enhance risk assessment by enabling real-time monitoring and early detection of potential risks. By continuously analyzing data and identifying evolving market trends and risks, AI-powered systems can provide timely alerts to financial institutions, enabling them to proactively manage and mitigate risks.6
While AI brings significant advantages to risk assessment, it’s essential to address potential limitations and challenges. Bias in AI algorithms and models is an important consideration that needs to be carefully managed. Developers must ensure that AI models are trained on diverse and representative datasets to avoid perpetuating biases that may exist in historical data.
Mitigating bias and ensuring transparency
Another challenge lies in the interpretability and explainability of AI models. As AI algorithms can be complex and operate as black boxes, it’s critical to develop methods that allow for transparent and understandable explanations of the factors influencing risk assessments. This means that while they can make highly accurate predictions, it’s often not clear how they’ve arrived at a particular decision. This lack of transparency can lead to issues with trust and acceptance, and it can also make it difficult to ensure that the models are operating fairly and not perpetuating biases.
Developments are set to occur in the field of AI regulation and policy in the EU to mitigate this. For instance, the Council of the EU adopted a general approach and compromise text on the proposed “AI Act”. The AI Act is expected to be finalized by the European Parliament by June 2023, establishing the world’s first rules on AI.7
AI-driven personalization in investment recommendations
AI and machine learning (ML) techniques have the potential to significantly enhance personalized investment recommendations. For example, AI can analyze vast amounts of data, identify patterns, and make predictions that can be used to tailor investment advice to individual clients.
An AI model may take into account a client’s risk tolerance, financial goals, and investment history, along with external factors such as market trends and economic forecasts. Moreover, AI can adapt to changes in a client’s behavior or circumstances, ensuring that the advice remains relevant and useful. By providing more personalized, accurate, and timely advice, AI can help clients make better-informed investment decisions and achieve their financial goals.
A real-world implementation of AI-driven personalization in investment recommendations can be seen in the use of AI by robo-advisors. Robo-advisors use algorithms to analyze a client’s financial situation and goals, and then provide personalized investment advice based on this analysis.8
For instance, a robo-advisor might recommend a diversified portfolio of stocks, bonds, and other investments that matches the client’s risk tolerance and financial goals. Over time, the robo-advisor can adjust these recommendations based on changes in the client’s circumstances or market conditions, ensuring that the advice remains relevant and useful.9
AI at Mintos: Forging the path forward
At Mintos, we acknowledge the game-changing potential of AI and are actively incorporating it into our services. Currently, we leverage several AI technologies to enhance customer interactions and streamline operations. These AI solutions provide automated customer support, improve response accuracy, and ensure seamless interactions– aspects integral to our investor services.
One of the most significant uses of AI at Mintos is in our partnership with Veriff, a third-party service providing AI-powered identity verification. Veriff employs advanced AI to detect identity fraud, ensure Know Your Customer (KYC) compliance, and enhance the user experience. By integrating Veriff’s AI solution, we have made the verification process more efficient and robust, effectively elevating our standards for fraud prevention.
Future integration and challenges of AI at Mintos
While it is too early to quantify the precise impact of these AI technologies on Mintos’ performance, we are optimistic. We foresee significant enhancements in employee efficiency and the quality of service we provide. Moreover, we are diligently working to establish clear metrics that will allow us to measure the success of our AI implementations effectively.
Looking ahead, we plan to intensify our AI integration. Our strategy involves identifying capable partners that can provide seamless integrations with our existing systems, with customer service as our immediate focal point. Furthermore, in alignment with our philosophy to simplify processes and embrace automation, we aim to automate routine tasks and free up our human workforce to focus on tasks beyond the current scope of AI.
Shaping the future with AI-powered personalization
We’re also investigating how to use AI to build more personalized investment portfolios for every investor based on their characteristics, needs, and investment goals. Such a capability would significantly improve our customers’ investing experience and financial outcomes.
However, we remain mindful of the challenges that come with implementing and maintaining AI models. For instance, we are aware that the quality of AI is intrinsically linked to the quality of its underlying data. Therefore, we continuously strive to update the data utilized by AI systems to ensure their accuracy. In addition, we’re committed to training our staff effectively to maximize their ability to work with AI technologies.
While AI has had a relatively minimal impact on Mintos’ operations to date, we foresee a significant positive impact from AI implementation over the coming years. This evolution, coupled with the effective integration of AI, will prove pivotal for Mintos as we continue to strive for a competitive edge in the ever-evolving fintech landscape.
Key takeaways for investors on Mintos
- Leverage AI for smart investing
As AI continues to infiltrate the fintech space, investors have the opportunity to leverage AI-driven tools like robo-advisors for personalized investment advice. By capitalizing on these AI technologies, investors can make informed decisions that align with their financial goals and risk tolerance.
- Stay updated on AI Developments
Rapid advancements in AI will continue to transform the fintech landscape. As an investor, it’s crucial to stay up-to-date with these developments to understand the implications for investing and the opportunities that may arise.
- Understand AI in risk assessment
AI’s role in risk assessment can streamline decision-making and manage credit risks. Awareness of how your investments are being managed, and the risks assessed by AI technologies, is essential for informed investing.
- Be mindful of AI limitations
While AI brings enormous potential, there are associated limitations, such as algorithmic bias and lack of transparency. Relying solely on AI without a comprehensive understanding can lead to unintended consequences. Balancing AI use with human judgement and insight can help in effective and ethical investing.
- Consider implications of regulatory changes
When a new regulation is introduced, it often means that companies must adapt their practices to remain compliant. For fintech companies, this might mean changing the way they use AI, the type of AI they can use, or the processes they must follow when implementing and using AI.
With new regulations like the EU’s AI act, such changes typically impact market dynamics, may affect your investment strategies and choices.
Mintos Activity: May 2023
Notes available for investments increased to €84 million (€72 million in April) at the end of May. This did not have an impact on interest rate movement in the market, as interest rate in EUR denominated Notes remained flat at 12.8%.
In May, €92.7 million was invested in Notes, “This is a decrease as compared to April, as restructured overdue payments were largely resolved. Currently, May has seen the second-best month in 2023, in terms of investments.”, shares Head of Partnerships, Peteris Mikelsons.
May saw an annualized average net return of 9.4% (YTD 3.8%). The all-time interest earned by investors on Mintos has now reached €230 million, and the total assets under administration are now €580 million.
Disclaimer:
This is a marketing communication and in no way should be viewed as investment research, advice, or recommendation to invest. There is no guarantee to get back the invested amount. Past performance of financial instruments does not guarantee future returns. Investing in financial instruments involves risk; before investing, consider your knowledge, experience, financial situation, and investment objectives.
1 Artificial Intelligence Market Size, Share & Trends Analysis Report By Solution, By Technology (Deep Learning, Machine Learning), By End-use, By Region, And Segment Forecasts, 2023 – 2030, Grand View Research (Accessed June 2023)
2 The state of AI in 2022—and a half decade in review, McKinsey (Accessed June 2023)
3 Artificial intelligence: threats and opportunities, European Parliament (Accessed June 2023)
4 Fintech and Artificial Intelligence in Finance, FinAI (Accessed June 2023)
5 Role Of AI In Risk Management – Applications And Challenges, United States Artificial Intelligence Institute (Accessed June 2023)
6 ibid.
7 AI Act: a step closer to the first rules on Artificial Intelligence, European Parliament (Accessed June 2023)
8 The Pursuit of AI-Driven Wealth Management, MIT Sloan Management Review (Accessed June 2023)
9 ibid.
