The AI-Embedded Finance Revolution: Transforming Financial Services

The hype surrounding artificial intelligence (AI) is not going to die down anytime soon, and combined with the widespread use of embedded finance, it looks set to revolutionize the way we approach financial services.

While Bloomberg is looking to create its own version of ChatGPT, this isn’t about the kind of generative AI that produces images, or other media in response to questions. Instead, the revolution comes from the power of machine learning in the way that it allows financial services to learn from customer information and make quick decisions. By analyzing vast amounts of data, AI can support financial services to better understand the needs of their customers and enable them to offer unique solutions – all in one streamlined journey.

We introduce built-in economics

You’re probably pretty familiar with built-in finance and realize you use it regularly.

To confirm, embedded finance refers to the integration of financial services into non-financial applications, such as Uber, Deliveroo or when shopping. The premise is simple, and several of us use it every day. By building the financial service we need into an application or website, customers can have a seamless experience where all activity (from order to payment) takes place in one journey, thereby increasing revenue for companies.

Now, AI is increasingly playing a central role in embedded finance, as it enables and accelerates real-time processing of payments and transactions. AI-powered payment processing systems can efficiently and securely process payments, reduce the risk of fraud and ensure that transactions are completed at a much faster speed – much to the delight of business owners.

The innovative partnership between AI and embedded finance means these technologies are having a significant impact on financial services, making processes more efficient. But how else does it make waves?

Let AI take the risk

Risk is a huge element of financial services, and when not executed correctly, it can have serious consequences. It is estimated that the cost of cybercrime will reach $10.5 billion annually by 2025, and combating this will require an intelligent and machine-driven solution.

The power of AI can quickly produce more accurate risk assessments, analyze vast amounts of data, and identify patterns and trends that human error might miss. AI’s analysis of this data allows them to make more accurate predictions about credit risk and fraud, saving both financial institutions and customers from losing money. Furthermore, AI’s role in risk assessments removes layers of complexity, and is a powerful asset for Fintechs, given that there are over 185 banking regulatory changes every day that could affect them.

Better to serve the customer

AI-powered chatbots and virtual assistants can support businesses by providing immediate solutions to customers and reducing the workload of customer service representatives. While AI can’t do everything, it can resolve lower-level queries, direct customers to where they need to be, or escalate issues where necessary to a real person. Time-sensitive employees will appreciate the integration into the workforce to answer customer questions quickly. This synergy between real workers and AI will help increase productivity, as long as it is focused on support rather than replacement. Between 2019-2023, there was a 3,150% growth in successful chatbot interactions, making this a transformational offering for Fintechs to adopt.

How AI becomes personal

Personalized experiences matter, and we’re more likely to buy from a business or brand when their recommendations to us feel relevant. AI has an essential role in delivering personalized experiences in embedded finance, by successfully aggregating and analyzing data, making it easier to deliver personalized services to customer needs and preferences.

These insights improve customer journeys, with AI anticipating their expectations and providing them with what they need at the right time – driving growth and increasing customer loyalty. This appetite for AI innovation is only increasing, with the personalization software market expected to reach $2.2 billion by the end of 2026.

It’s as easy as 4 clicks

AI improves personalized customer experiences by making them faster. For example, the built-in loan process can be accelerated by enabling a 4-click journey, allowing financial services ecosystem partners to offer personalized financing solutions to potential customers. Through the power of AI and machine learning, this simple journey is both practical and transparent, with the fundamental customer experience in mind.

The future of artificial intelligence and embedded economy

AI is proving to be a driving force in the expansion of embedded finance. With the sector projected to reach $248.4 billion by 2032, AI is meeting the demand from organizations to enhance embedded finance functions to improve the engagement and satisfaction of their customers.

By augmenting embedded finance with AI, the result is a customer-centric and frictionless financial service. As financial institutions continue to embrace the innovative powers of AI-powered technologies, we can expect to see a positive transformation in the embedded finance space.

About the author

Nima Montazeri, Chief Product Officer for embedded financial solutions at Liberis, has developed effective products that enabled affordable access to healthcare for millions worldwide. Former Product Manager at BabylonHealth, Nima played an important role in the launch of Babylon’s products in the US, Canada and Southeast Asia. With previous experience as Head of Technology at ThoughtWorks Ventures, Nima helped scale-ups and startups with their product and technology strategies. Currently, Nima acts as an advisor to early stage technology startups in the UK.