Generative AI is for Chatbots, Not Fintech. Or Isn’t It?

Exploring how startups can focus on real-world applications to drive value instead of chasing trends.

Everyone knows AI can power chatbots to handle customer queries or churn out generic content. But what about fintech? 

In 2023, the market for AI in fintech was valued at $42.83 billion, and by 2029, with a steady growth rate, it will surpass the $50 billion mark. 

While AI tools have improved, they're still not foolproof and can miss the mark without human oversight. A study points out that while AI can help query laws and draft documents, the final call still needs a human touch. 

The real potential of AI goes far beyond the surface-level applications. The truth is, in the right hands, AI is transforming how we think about more complex fintech areas like fraud prevention, risk assessment, and even investment strategy. The key phrase here? “In the right hands.” 

Let’s explore some of the most prominent, non-generic uses of AI, which go beyond siloed processes and lead the future of AI in finance.

The Digital Watchdog

Fraud is a multibillion-dollar problem. According to the Federal Trade Commission, consumers reported losing over $8.8 billion to fraud in 2022 alone. AI is a great match for a digital keeper here, analyzing transaction patterns in real-time to flag anomalies.

Take Mastercard, for example. They’ve integrated generative AI into their fraud detection system, allowing them to identify compromised cards faster than ever. Also, PayPal employs machine learning to analyze transaction patterns, effectively identifying and mitigating fraudulent behavior.

AI is helping banks fight fraud and revolutionizing their compliance processes. Traditional anti-money laundering (AML) systems are notorious for being slow and riddled with false positives. Meanwhile, Google Cloud’s AI-powered AML solution is a more accurate alternative, saving banks millions in compliance costs while improving detection rates.

Breaking the Credit Mold

Traditional credit scoring is outdated and excludes millions of potential borrowers. AI changes that game by analyzing non-traditional data, such as online behavior and spending habits. Developing an AI-powered credit score system is the challenge that can move the needle here.

The vivid example here is Upstart, a leading fintech player that uses AI to assess creditworthiness, especially for people with thin credit histories. Thanks to Upstart, loans have become more accessible, and risks have been better managed.

There are more ways AI can bring amazing results to credit scoring. By implementing machine learning algorithms to analyze customer data, American Express has achieved a 10% reduction in default rates and a 15% increase in customer approvals for credit. 

Via Varejo, one of Brazil’s top retailers, teamed up with Zest AI to rethink how they assess creditworthiness. It resulted in a 15% boost in credit approvals, all while slashing delinquency rates by 20%. All these are evidence that smarter algorithms can strike the perfect balance between inclusivity and risk management.

AI Meets Wall Street

On Wall Street, seconds can mean millions. A report by the U.S. Senate highlights that many hedge funds have been employing AI and machine learning technologies to inform trading decisions for decades. For instance, Renaissance Technologies relies on AI for high-frequency trading, using predictive models to execute trades in milliseconds. 

This isn’t just about speed but amplifying decision-making. AI-driven trading tools analyze vast amounts of market data to identify trends humans might miss. 

Qraft Technologies manages multiple AI-powered exchange-traded funds (ETFs) that have outperformed traditional benchmarks. Their AMOM ETF gained 36% in 2024, surpassing its benchmark's 32% gain. That way, AI-driven strategies have the potential to introduce greater volatility during market stress periods.

“Our AI ETFs have been at the forefront of using AI to reshape the asset management industry. As we commemorate their anniversary, we not only reflect on their success in navigating market volatility and delivering substantial returns, but also look forward to the future.”—Francis Oh, COO and APAC CEO from Qraft.

Personal Finance with Personality

Managing your finances doesn’t have to feel like a full-time job. Thanks to AI, financial apps are evolving into powerful, intuitive tools that simplify everything from budgeting to investing. 

Apps like Cleo use conversational AI to simplify personal finance. Cleo is a chatbot with personality, offering spending advice that feels more like chatting with a friend than talking to a bank. By 2023, Cleo generated £51.6 million in sales, operating exclusively in the U.S.

Another similar tool is Trim, personal finance assistant that focuses on cutting unnecessary expenses. It monitors subscriptions, negotiates bills like cable and internet, and provides debt payoff tools. By slashing hidden fees, Trim helps users save potentially hundreds annually.

Rethinking Fintech

Implementing AI isn’t easy. From engineering roadblocks to unclear ROI, it’s no wonder many companies struggle to go beyond basics.

Partners like INSART help fintech startups overcome technical and strategic challenges related to AI adoption. By entering their business acceleration program, startups can focus on creating value instead of getting stuck in the weeds. 

These startups participating in the accelerator program are rethinking old processes entirely while writing the future of AI in finance:

• Complify is involved in compliance report automation using generative AI. It’s removing manual work by introducing a 360-degree integrated compliance management system that covers the case management workflow, including creation, analysis, disposition, and approvals.

• Analytic Marketing is a predictive analytics platform that helps financial institutions and regional brands optimize customer engagement. We’ve seen AI-powered personalization before, like Starbucks’ Deep Brew; now, Kristina Vaughn is building a similar tool in fintech. The platform personalizes marketing campaigns to improve ROI and go beyond generic campaign metrics to deliver actionable insights tailored to customers’ behaviors.

• Another venture, Couplr AI, is transforming client acquisition for insurance and wealth management firms. Using a blend of AI-driven insights and behavioral finance principles, it matches clients with the most suitable advisors. Couplr AI creates deeper connections that enhance trust and retention by eliminating the guesswork in client-advisor matchmaking.

• AI for B2B Procurement? Prlmnt is shaking up the procurement space for financial services and insurance companies. This AI-driven platform automates vendor comparisons, provides data-backed recommendations, and incorporates crowd-sourced performance metrics to streamline procurement processes. 

The Bigger Picture

As you see, saying that AI is only for chatbots (or any other generic purpose you can fancy) is like saying the Internet is only for emails. Today’s fintech is only scratching the surface of what generative AI can do, and those who harness its deeper potential now may be building the foundations of tomorrow’s financial ecosystem. The industry seems to be ready to reimagine itself around AI. Are you?