Author: Ji Xiang   Master of Finance 2018  Tongji University   Industrial Securities Co., LTD

Through the combination with big data technology, artificial intelligence has covered various financial application scenarios such as marketing, payment, investment and customer service. Recently, China’s major commercial Banks have signed strategic cooperation agreements with four major internet companies, aiming at the application field of FinTech, especially to improve the intelligence level of financial services through artificial intelligence. In the Three-year Action Plan for Promoting the Development of the New Generation of Artificial Intelligence Industry (2018-2020) issued by the Ministry of Industry and Information Technology, finance is also explicitly listed as one of the important fields for the application of artificial intelligence.

1. AI Application Scenarios in Financial Field

Scenario 1: Credit Investigation and Risk Control

Artificial intelligence can realize intelligent credit investigation and approval, extract various features from information to build models, and conduct multi-dimensional portraits of users. According to the model score, the user’s personal credit is evaluated.

Scenario 2: Anti-fraud

Financial users need to verify the authenticity of identity, which involves technologies like face recognition and voice recognition that can be achieved through artificial intelligence. In addition, AI can detect anomalies in transaction data and provide timely and reliable security for users and institutions.

Scenario 3: Robo-advisor

Robo-advisor conducts portfolios across multiple markets and large asset classes to spread risk and pursue long-term returns. It actually makes private banking services intelligent online and more widely available to ordinary people.

Scenario 4: Marketing and Customer Service

AI can accurately find users through user portraits and big data models, achieving precision marketing. Intelligent customer service can solve most problems of users, greatly improving customer service efficiency while reducing labor costs.

Scenario 5: Investment Decisions

Artificial intelligence can find the correlation between multiple events through natural language processing technology, and make predictions based on the collected market historical data, analyzing and judging the growth of enterprises, so as to assist investment decisions.

2. AI Application Advantages in Financial Field

Risk control and management, labor cost reduction. First, data collection and processing. Second, Risk control and prediction model; Third, credit rating and risk pricing.

Intelligent quantitative trading realization. Inno TREE enterprises use machines to automatically select high-quality projects and launch supernova enterprises every week, successfully increasing the probability to 30% for enterprises to obtain a new round of financing within the next six months.

Customers attraction improvement of financial institution. Artificial intelligence can realize batch humanized service for customers, which will bring profound influence to the financial industry，becoming an important means for banks to communicate and develop customers’ financial needs.

3. FinTech Brought New Opportunities to Payment and Clearing Industry

Market participants become more subjective. FinTech innovation has promoted the extension of the payment industry chain to the fixed end, adding more participants based on the original payment and clearing mode, such as internet enterprises, merchants and terminal providers, etc.

More diversified payment products and channels. Payment methods expanded to online payment, mobile payment and other emerging payment from the traditional cash, bank card payment.

Integration acceleration of payment and business service scenarios. FinTech provides payment innovation that can drive business model reinvention and make payment business closely related to business service scenarios.

Integration acceleration of payments and other financial services. FinTech has promoted the penetration of payment into other service fields, pushing rapid growth of financial services such as consumer credit, making it a significant tendency of integration of payment and other financial services.

4. New Challenges of FinTech Innovation

Cultural differences and collisions among market participants. In the payment and clearing market, due to the large differences in corporate strategies and business models among the parties involved, it is necessary for all parties to strengthen communication and exchange and explore a common culture in line with the development of the whole industry.

Technology risk may become the primary risk affecting the healthy development of payment and settlement. The development of FinTech strengthens the relevance between participants in the payment business market, and the complexity and diversity of the development of emerging payment businesses increase the possibility of systemic risks in the payment market.

FinTech innovation challenges the existing regulatory system. It is difficult for the existing separate supervision mode to keep pace with the development of the industry. And the separate operation and supervision mechanism has difficulty in preventing the potential risks brought by cross-operation.

5. Thinking and Prospect

Driven by the internet and big data, the application of artificial intelligence in the financial field has made a breakthrough. It can greatly improve the efficiency of standardized and institutionalized work, and reduce costs while presenting better service experience for customers. Due to issues like information security and lack of supervision, artificial intelligence without doubt can not completely replace human.

At present, artificial intelligence is more applied in automation and standardization. Whether it can achieve true “intelligence” in the future, innovation on the basis of better learning capability and understanding is the way.