The future of Fintech, according to AI

There has been an explosion in the computing power of artificial intelligence. To much fanfare, Open AI, a startup that raised $1 billion from MicrosoftMSFT
launched Chat GPT, an interface to interact with their AI model.

So this naturally felt like an opportunity to learn about the future of fintech – according to AI (especially since we are at the end of the year, the usual moment for future predictions).

Finally, we will dive into what this means. Here we go.

A conversation with Chat GPT about the future of fintech

Lazarow: Starting with the basics: what is fintech?

Chat GPT: Fintech, short for financial technology, refers to the use of technology to improve and automate financial services. This can include a wide range of applications and technologies, such as mobile banking apps, online payment platforms and investment advice based on artificial intelligence. Fintech has become increasingly popular in recent years as technology has advanced and more people have embraced digital financial services. The aim of fintech is to make financial services more efficient, accessible and user-friendly.

Lazarow: Where will we see the most fintech innovation going forward?

Chat GPT: It is difficult to predict exactly where we will see the most fintech innovation in the future, as the industry is constantly evolving and new developments emerge. However, some areas where we are likely to see significant fintech innovation include:

• Digital payments and money transfers: Fintech has already had a major impact on the way people make payments and transfer money, and this trend is likely to continue. We can expect to see more innovations in this area, such as the development of new payment technologies and the expansion of existing services such as mobile banking and peer-to-peer payment platforms.
• Blockchain and cryptocurrencies: Blockchain technology and cryptocurrencies have the potential to revolutionize the financial industry, and we can expect to see more innovations in this area in the coming years. This may include the development of new applications for blockchain technology, the creation of new cryptocurrencies and the growth of existing cryptocurrency markets.
• Artificial intelligence and machine learning: Fintech companies are also beginning to adopt artificial intelligence and machine learning technologies, which have the potential to improve the efficiency and accuracy of financial services. We can expect to see more innovations in this area as well, such as the use of AI to automate processes and make more accurate predictions.

Overall, the future of fintech is likely to be driven by a combination of these and other innovations, as companies continue to develop new technologies and find new ways to improve financial services.

Lazarow: Why artificial intelligence and machine learning?

Chat GPT: Artificial intelligence (AI) and machine learning are increasingly being used in the fintech industry because they have the potential to improve the efficiency and accuracy of financial services. Some of the key ways AI and machine learning are being used in fintech include:

• Automating processes: AI and machine learning can be used to automate repetitive tasks and processes, such as data entry and analysis. This can help reduce the amount of time and effort required to complete these tasks, and it can also help reduce the risk of errors.
• Improve decision making: AI and machine learning can also be used to make more accurate predictions and decisions. For example, machine learning algorithms can be trained on large data sets to identify patterns and trends that can be used to make more informed decisions about things like credit risk or fraud detection.
• Improve customer experience: AI and machine learning can also be used to improve customer experience by providing personalized recommendations and advice. For example, AI-powered chatbots can be used to provide customers with instant answers to their questions, and machine learning algorithms can be used to provide personalized investment recommendations.

Overall, the use of AI and machine learning in fintech has the potential to improve the efficiency and accuracy of financial services, and it can also help improve the customer experience.

Lazarow: What is embedded finance and where will it be used?

Chat GPT: Embedded finance refers to the integration of financial services into non-financial products or services, such as retail goods or technology platforms. The goal of embedded finance is to make it easier for consumers to access financial services in a seamless and convenient way. For example, a retailer may offer its customers the ability to pay for their purchases using a digital wallet or a mobile payment app, or a technology platform may offer users access to financial tools such as budgeting and investment tracking. In addition, embedded finance can also be used by businesses to access financial services such as loans or payment processing.

Lazarow: What are some of the most enabling regulations for fintech?

Chat GPT: There are a few rules that are often considered particularly enabling for fintech companies. Some examples of these regulations include:

• Financial Conduct Authority (FCA) sandbox, which allows fintech companies to test their products and services in a controlled environment before launching them to the public.
• The Payment Services Directive (PSD2), which introduced new rules for online payments and opened the way for the development of new payment services.
• The revised Markets in Financial Instruments Directive (MiFID II), which introduced new rules for the operation of financial markets and made it easier for fintech companies to access these markets.

Overall, these regulations are designed to create a more level playing field for fintech companies, allowing them to innovate and compete with traditional financial institutions.

Lazarow: What has fintech’s impact on society been?

Chat GPT: Fintech has had a significant impact on society, both in terms of the way financial services are provided and in terms of the wider economy. Some of the key ways fintech has impacted society include:

• Provides greater access to financial services: Fintech has enabled more people to access financial services, especially in underserved or underbanked communities. This has made it easier for people to manage their money and make important financial decisions.
• Increasing competition in the financial industry: Fintech has also introduced new competitors in the financial industry, which has helped to drive down prices and improve the quality of financial services. This has been particularly beneficial for consumers, who have more choices and options when it comes to managing their money.
• Supporting economic growth: Growth in the fintech industry has also contributed to overall economic growth. Fintech companies often create new jobs and contribute to GDP growth, and the increased competition and innovation in the financial sector has helped support overall economic growth.

Overall, the impact of fintech on society has been largely positive, as it has made financial services more accessible, affordable and convenient for many people.

Lazarow: In which geographies has fintech transformation been seen most acutely?

Chat GPT: The transformation of the financial industry through the use of fintech has been seen most acutely in developed markets, particularly in North America and Europe. In these regions, the combination of advanced technological infrastructure, a highly educated workforce and a strong culture of innovation has enabled both consumers and businesses to adopt fintech solutions quickly. In addition, regulatory environments in these regions have generally supported the development of fintech, which has also helped drive growth. However, fintech is also gaining ground in other parts of the world, such as Asia and Latin America, as more and more people gain access to technology and financial services.

Lazarow: How is fintech driving financial inclusion?

Chat GPT: One of the most important ways fintech is driving financial inclusion is by making financial services more accessible to underserved communities. For example, by offering mobile banking, fintech companies can make it easier for people in remote or rural areas to access financial services, such as transferring money or paying bills. This can be particularly important for individuals who do not have access to traditional brick-and-mortar banks. In addition, fintech companies can also offer financial products and services tailored to the specific needs of underserved communities, such as microloans or savings accounts with low minimum balances. This can help empower individuals and families to take control of their finances and improve their financial well-being.

What this means

Chat GPT demonstrates the power of generative AI.

This will affect not only fintech thought leadership (as this 1,500 blog post was largely created with its help), but also the delivery of financial services.

Some starting points:

• Investment research: One of the challenges for startups to become a public company is the availability of research coverage. This is generally reserved for larger companies with larger trading volumes. Generative AI can power the long side of investment analysis, giving research analysts the power to scale their work beyond a narrow number of stocks.
• Customer service: Out with standard, frustrating chatbots. Generative AI can power a new class of services.
• Transaction complexity: A large segment fintech has tackled has been private markets, which provide greater access and transparency to everything from wine, art, shoes to legal finance and boat reconstruction. Still, one of the biggest costs is legal. If Chat GPT can generate sophisticated answers to complex questions, it should be able to do the same for legal drafting. This should speed up the review of start-up agreements, but also all illiquid ones
• For you readers: do you think these takeaways were written by me or AI?