"The development of full artificial intelligence could spell the end of the human race."
This is a warning said by the late Stephen Hawking in a 2014 interview with the BBC. And in 2023, from the writing sector to actors, there is a lot of concern around the development and implementation of artificial intelligence (AI). However, there are benefits to the evolution of AI, especially in the Fintech sector.
So, how exactly does AI hold the potential to strengthen an already innovative sector for finance? Well, first, we need to start at the beginning.
The explosion of AI
The concept of AI has been around for almost a hundred years, with Alan Turing considered a forefather of the idea, but at the end of 2022, it became a part of the zeitgeist with the release of ChatGPT.
"As an AI language model, my primary function is to assist and engage in natural language conversations with users like you." – ChatGPT
Its release spurred both Google and Microsoft to release their own chatbots, countless startups to launch AI-powered services, and – most importantly for this topic – enterprises to think about replacing workers with AI. According to Harvard Business Review, companies that outright replace their employees with machine-learning programmes are bound to fall behind.
But, there's a bigger picture at play: how AI can help to prop up and enhance existing industries, instead of replacing them.
Replacing the old with the new
In an episode of the Fintech Exposed podcast, Jeff Parker, VP of Banking-as-a-Service at Marqeta, weighed in on the positivity of blending AI with fintech – especially when it comes to the credit system used throughout the banking world.
"The way we assess credit is archaic and outdated. You need a mortgage or credit card to access basic financial services, which many people can't or don't want to get," says Parker.
By using AI as a tool in fintech, more data points will be available to financial institutions when it comes to credit scores.
"It will enable us to offer finance services to a much broader scope."
Parker also raises an interesting point about which criteria are linked together to create the credit scoring system and create a better risk profile around consumers. He asks why the current systems can't look at – for example – Netflix and how a user has stayed subscribed to the system, showcasing their credit history in a different, more affordable light.
There is also the possibility that AI can bring legacy code up to speed, further enhancing the entire financial sector. The banking system is built on COBOL, a language developed in 1959, and one that many institutions are desperate to hire developers for.
“For a financial institution to make the transition off to a new platform is a risk. But I think Gen AI can now replace old infrastructure, old code with new code and help a financial institution transition to the modern era," said Robert Antoniades, Co-Founder and General Partner of Information Venture Partners.
And while rewriting an infrastructure may seem like a daunting task, it's the credit profile that may prove the bigger challenge.
Is AI becoming stupider?
Some experts have raised concerns that AI is becoming "stupider" in recent years. This is because AI models are increasingly trained on large datasets of text and code, which can contain biases and errors. As a result, AI models can sometimes make mistakes or produce incorrect results.
AI still requires humans to feed it information, to course correct its learning patterns, and to be used as a fall-back when this new wave of technology fails to deliver any meaningful information. As far back as February of 2023, alarms were raised when Microsoft's Bing chatbot sourced COVID-related misinformation from ChatGPT.
Without constantly fresh information, AI is a snake that keeps eating its own tail – a never-ending cycle of regurgitating information that it already knows, unable to learn and digest more. This is further exacerbated by the fact that most AI is trained on information without the creator's consent.
It also seems like ChatGPT might be devolving in intelligence at an alarming rate, especially when it comes to mathematical questions.
However, it is important to note that AI is still a relatively new technology, and it is constantly evolving. As AI models become more sophisticated, they will be able to learn from their mistakes and improve their accuracy. Additionally, AI models can be trained on more accurate and unbiased datasets, which will help to reduce the risk of errors.
Overall, it is unlikely that AI will become "stupider" in the long term. On the contrary, AI is likely to become more intelligent and accurate as it continues to evolve.
The partnership between fintech and AI
AI's integration into the fintech industry presents an exciting vision for the future. With each advancement in AI technology, the possibilities for transformative solutions in the financial sector expand exponentially.
One area where AI can make a substantial impact is fraud detection. By harnessing sophisticated algorithms and machine learning, AI systems can analyse vast amounts of data to uncover patterns and anomalies. This empowers financial institutions to detect and prevent fraudulent activities with greater efficiency than ever before.
With AI's capabilities, financial institutions can develop customised financial products, services, and solutions that cater to the diverse needs of individuals from various socio-economic backgrounds. This ensures that everyone, regardless of their financial circumstances, can access and benefit from a wide range of financial services.