How Artificial Intelligence is Disrupting FinTech
Exploring how AI is accelerating change in FinTech by improving fraud detection, creditworthiness analysis, and operational automation.
Hi there,
This week on Eximius Echo, we’re shining a spotlight on how FinTech founders are leveraging AI to address some of the industry's toughest challenges. As this technology evolves, its ability to drive efficiency and innovation is becoming clear. In this edition, we’ll explore three AI-driven use cases that are transforming FinTech, pushing the boundaries of what's possible in the sector.
FinTech is a highly complex industry in India, dealing with a broad spectrum of data, diverse user needs, and a stringent regulatory framework. Founders in the space are exploring innovative ways to streamline financial services, and AI is emerging as a game-changer. While its application in FinTech is still in its early stages, three major use cases stand out for their transformative potential:
1. Fraud Detection
One of the biggest challenges in financial services is fraud, especially with the rise of digital transactions. Fraud schemes are growing more sophisticated, and AI has become a powerful tool in combating these threats. By analysing vast amounts of data, AI can detect anomalies and predict fraudulent activity in real time.
AI-powered fraud detection systems use machine learning to scrutinise various data points like demographics, geolocation, device usage, and behavioural patterns. These systems can identify subtle indicators of fraud that traditional rule-based systems might miss. For instance, AI can detect fraud by analysing subtle user behaviour patterns, such as preferred merchants, product choices, and shopping times, to distinguish real users from fraudulent ones.
An example of this is Bargad.ai, which uses AI to analyse demographic, geographic, device, behaviour, and network data. Its AI-powered system mitigates digital fraud across sectors like BFSI (Banking, Financial Services, and Insurance), e-commerce, and gaming by identifying high-risk transactions before they cause financial damage.
2. Credit Underwriting
Traditional credit underwriting is often slow and reliant on a narrow set of data points such as credit scores and financial history. AI is revolutionising this process by allowing financial institutions to assess creditworthiness using a broader and more holistic data set. This includes alternative data sources such as transaction history, digital footprint, and even social behaviour.
Machine learning models analyse diverse data sets to create more accurate risk profiles, speed up approvals, improve risk assessments, and expand access to credit. AI-driven underwriting also helps lower default rates by offering a detailed view of a borrower’s financial health. Unlike traditional algorithms, AI can flag potential risks, such as life changes that may lead to higher expenses and financial stress in the next six months.
CreditVidya and Perfios are leading the charge in this space. CreditVidya taps into alternative data, while Perfios leverages real-time financial data and machine learning to offer smarter, faster credit assessments.
3. Operations and Back-Office Automation
AI is also playing a significant role in automating the back-office operations of financial institutions, which often involve time-consuming and repetitive tasks like document verification, data entry, and compliance management.
Automation powered by AI reduces human error, cuts operational costs, and improves efficiency. By handling routine tasks, AI allows companies to reallocate resources toward more strategic priorities like customer engagement and innovation. It also enhances compliance by monitoring regulatory updates in real time and ensuring documentation aligns with evolving standards.
For example, Neurofin.ai empowers banks and NBFCs by using Generative AI to speed up operational workflows by up to 90%. It automates SOP-driven tasks such as secured loan processing, account openings, and audits—freeing teams to focus on high-impact activities like follow-ups and policy adjustments.
Saison Capital and Credit Saison India are launching Astra, a program aimed at startups developing transformative FinTech innovations. Selected startups will have the chance to pilot their products with Credit Saison India, one of the country's fastest-growing NBFCs, managing over $1.5 billion in assets. Additionally, these startups will be considered for early-stage funding through Saison Capital.
Details: astra-creditsaison.com | Application: Apply here (deadline: Oct 31, 2024).
As AI continues to evolve, its applications in FinTech will only expand, driving greater security, efficiency, and inclusivity in financial services.
If you're working on an AI-driven solution in the FinTech space, we’d love to hear from you. Reach out to us at pitches@eximiusvc.com.