From the telephone to the internet, from legacy software to artificial intelligence, the finance sector has continued to advance with the latest technologies. Fintech today is focused on helping micro and small entrepreneurs across the world grow by providing them access to capital more easily and with a quick turn-around time.
Out of all the myriad technologies causing a disruption in the industry, which ones stand out? And more importantly, in an industry of constantly changing trends, which are the technologies poised to stand the tests of time?
We’ve identified 5 technologies that are not only creating great global impact but also possess tremendous potential to serve as the backbone of industries across the world.
1. Artificial Intelligence
With over 50 million MSMEs in India, NBFCs face the challenge of servicing loans to these unorganized segments while at the same time keeping a check on their delinquency and risk.
With specific algorithms in place, however, Artificial Intelligence or AI as it’s more commonly known can help in better decision making by assessing behaviour patterns and evaluating associated risks. This helps optimize the credit evaluation process especially when it comes to determining the creditworthiness of first-time borrowers.
AI led predictive analytics also make operations more secure. When it comes to timely detection of fraud such as falsified documentation, incorrect income declaration and more, AI can detect any discrepancy in the unstructured documents, thereby mitigating risks in the underwriting process. Consequently, key industry players are now able to take faster data-backed lending decisions.
An important aspect of AI is cloud computing which allows companies and developers to use more computational power by putting calculations “on-the-cloud” thereby reducing time as well as investment in massive “real world” hardwares. Cloud is changing the way data gets stored and processed. This is especially beneficial for NBFCs storing sensitive customer data.
“Today, business environments are very dynamic. If technology is considered a business enabler, then cloud is the technology enabler. Cloud provides companies the flexibility and agility to expand in a secure and cost effective manner.” – Ashish Ojha, VP – Head of IT, Aye Finance.
AI and data-based decision making will continue to be key areas of focus for NBFCs. Technology will take care of all that can be automated allowing humans to invest their energies in high-value tasks.
2. Machine Learning
Did you know that as of 2017, data surpassed oil in value?
“Nowadays there are tools of ML and Analytics which are very easy to understand; they are very powerful and can drive the company to the next level.” – Mayank Chhibber, Senior Manager: Data Science and Artificial Intelligence, Aye Finance.
Machine-Learning based systems of today are capable of consuming a vast volume of data and processing it further to present information that helps in decision-making and credit underwriting.
ML takes in various data points like user digital/physical activity records, credit history, payment history, and relevant parameters that can predict creditworthiness and risk quotient. AI/ML systems have been making exceptional impacts in the lending industry by not only helping in better credit evaluation but also providing real-time data that predicts possible consumer behaviour with high accuracy.
At Aye, we are in the process of using ML to build a model that enables an effective credit underwriting process to identify the future repayment behaviour of customers. Statistical methods like XGBoost, Random Forest and Logistic Regression are being applied to gain deeper insights into customer behaviour.
With the world split up in pro & anti cryptocurrency, blockchain technology, which is the underlying technology that supports crypto, offers numerous other significant features to the fintech space.
The technology offers many valuable benefits like secure transactions, automated auditing, credit scoring and “smart-contracts” that reduce risk and provide a better evaluation.
4. Biometrics & Facial Recognition
How many of us use digital banking apps on our smartphones where we can log in using our fingerprint? Security is one of the topmost requirements in the Fintech industry and technologies based on Biometric Authentication is being widely accepted throughout the sector. Formal banking institutions and NBFCs have begun utilizing biometrics to store fingerprints and retina details to strengthen user authentication and access. With smartphones and other scanning devices, customers can secure their data and access funds seamlessly.
Facial Recognition has similar benefits. NBFCs utilize facial recognition for user authentication and to help customers to easily verify themselves and gain access to their digital accounts and funds. This technology is especially helpful for entrepreneurs in smaller towns with slower internet connections. Facial recognition logins and security checks are not only much safer but also quicker than traditional username and password logins.
Both, biometrics and facial recognition have been immensely instrumental in optimizing various features like KYC, managing customer database, customer access, and security. Most importantly, they provide several benefits to the rural and underprivileged sections where people with limited exposure and awareness can now be secured from frauds and thefts.
Fintech giants are widely utilizing chatbots as a cost-effective support tool that is available 24×7. With a combination of an advanced comprehension of user-behaviour, preferences, and communication history, AI chatbots are successfully capable of managing customer support with efficiency.
They are not only prompt but also a reliable first point of contact.
In addition to performance, chatbots are an ideal solution to mitigate threats to data security. Chatbots record real-time data on user activity and communications, which in turn helps companies to hone in on their target audience and to accumulate future leads.
Where does Aye Finance stand when it comes to adopting the latest in Fintech?
At Aye, we have been able to go beyond the traditional norms of lending by utilizing AI/ML-based systems that have automated our credit evaluation process. It’s common knowledge that creating financial reports and other relevant business-related paperwork for several micro-entrepreneurs is often a tedious task. In such cases too where it’s hard for institutions to assess repayment capacity, agile technology steps in to get a thorough understanding of potential customers’ cash-conversion cycle.
Also, at the moment, we are focused on using data points like customer demographic data and business-related data to fine-tune our ML model. We aim to classify customers into specific categories according to potential loan repayment behaviour.
Embracing technology has enabled us to better serve Indian micro-enterprises while bringing them into the folds of the mainstream economy. “With the use of ML, we can ensure that our process becomes more efficient, and also with the reduction in rejection rate, we can bring in more customers in the fold of financial inclusion.” – Sovan Satyaprakash, Head – Strategic Programs, Aye Finance.
All in all, as fintech takes care of evaluations and automating key processes, MSMEs across the world can finally see their needs being better understood by NBFCs and governments. Micro entrepreneurs can look forward to highly fine-tuned lending processes coming to the forefront.
As technology evolves further, so are micro-enterprises in their ability to engage with tech and adapt to the newer, more convenient, alternatives offered. However, all technological advancement needs to be committed to growing in tandem with the sentiments and core concerns of their target audience, in this case, MSMEs.
After all, fintech that doesn’t consider human sentiment is failed tech.