AI in fintech: long-term value or shiny distraction?
We’ve attended a number of conferences this year and AI is a major talking point. Companies are keen to express their fervent passion for groundbreaking AI and how they’re using it in new and dynamic ways. When used appropriately, it’s true that it can have an impressive impact on operational efficiency and effect change at scale. But is AI always the appropriate solution?
With such buzz and hype around the AI era, it’s natural for companies to panic that they’re falling behind or becoming irrelevant if they’re not prioritising it front and centre. However, the greater danger is that a misguided focus on AI could distract fintechs from developing and branding their unique technology. Instead of distinguishing themselves from their competitors, over-reliance on AI risks companies all shouting the same message and becoming lost in a homogenous crowd.
This isn’t ideal when one of the key components of a successful marketing campaign is to be distinct.
Our article looks at the latest industry research examining the benefits and challenges to AI in the fintech industry.
Fintech still going strong
At a fintech conference this Autumn, Tulip Siddiq, economic secretary to the Treasury and City minister, highlighted the UK government’s focus on AI and data within the industry. Referencing fintech’s role in the economy, Siddiq asserted that:
“Fintechs are contributing an estimated £11 billion and more than 76,000 jobs to the UK alone, which is a huge number, and almost half of all of Europe’s fintech unicorns, most of which are household-name brands, are also based here.”
Fintech itself is still a significant growth area, despite investors’ excitement over new opportunities within AI. It is an extremely varied and complex landscape requiring intelligently designed solutions that improve the performance and operations of organisations. There is definitely a strong argument to be made for the fact that AI could help these endeavours immensely. However, adopters should ensure they’re doing due diligence to create solutions that match the business problem.
The distraction of AI
It’s easy to get distracted by what AI can promise. However, fintechs need to ensure they are looking far into the horizon and not investing in areas that will give them little return. Becoming overly fixated on AI may mean a business’s core proposition is diluted due to a failure to develop the areas and functions that make its technology useful and distinctive.
A recent Forbes article by Mantvydas Štareika, CEO at Fintech SME Leader Capital Box, emphasised that,
“Just because a tool is AI-powered doesn’t make it a uniquely advanced piece of technology. And automation, for its own sake, can often be a waste of resources that misses the bigger picture.“
Effectively, it’s a real shame when fintechs take a unique and innovative piece of technology and then neglect to develop its potential after getting sidelined by flashy concepts that add little practical value.
Štareika goes on to assert that while companies often feel a pressure to be unique and different to what’s come before, that isn’t necessarily the greatest selling point.
“Real technological advancement isn’t just about being the most out-of-the-box. It’s increasingly about being the most customizable and combining the latest available tools to solve the same business problems that never left.”
Above all, buyers are looking for clarity and reliability in their products with the ability to grow and adapt as technology – and global circumstances – change. This might not seem so dynamic on paper but for investors looking for products with long-term potential, it’s an attractive prospect.
The cost of technology
We previously spoke to Leda Glyptis, author and ex-banker. She made a compelling case for why businesses need to seriously review their technology estate and its past, current and projected costs.
“If I look back at the last 10 to 15 years, our engagement with innovation and fintech has been additive. We’ve bought things, we’ve built things, we’ve tweaked things, but it is very, very rare that a system will be completely grandfathered or switched off.”
Technology and infrastructure is growing at such a rapid rate that it requires a significant amount of expense and expertise to maintain legacy systems. The level of this effort often does not match the value such systems provide, and these old systems present huge risks as they connect to modern technology.
Fintech can solve the problems of many financial institutions without AI. The danger is missing out on huge opportunities by focusing on AI as a solution in itself and ignoring the myriad problems that fintech can already solve.
Rethinking AI use
If this article sounds like we’re down on AI, we’re certainly not. When used correctly, for example, in facilitating automation or enhancing specific processes, it can add significant value. However, it’s crucial that ambitious fintechs don’t see it as an all-singing, all-dancing end-solution or gimmicky marketing tool. Instead, companies should consider their individual technologies and determine the most appropriate solution for their specific needs.
About Us
At FS Partnership, we have extensive global experience in helping companies to stay relevant in an ever-evolving marketplace. We help our business partners to create a strong brand, intelligently position their offering in the marketplace and expand their client base. If you’d like to chat to our Managing Director, Chris Hopwood, about our previous work or your own specific requirements, please do get in touch for a chat on 07766 824209.
https://www.forbes.com/councils/forbesbusinesscouncil/2024/07/12/why-fintech-needs-to-think-beyond-ai/
https://www.globalgovernmentfintech.com/data-ai-focus-tulip-siddiq-fintech/
https://www.fsp-agency.com/leda-glyptis-a-year-of-violent-change/