AI in Fintech Market Outlook 2031
The global AI in fintech market size was USD 10.74 Bn in 2022 and is likely to reach USD 39.29 Bn by 2031, expanding at a CAGR of 15.5% during 2023–2031. The market growth is attributed to the rising integration of AI to automate banking & investing activities and for fraud detection.
In recent times, the convergence of Artificial Intelligence (AI) with the fintech industry has emerged as a transformative factor that has reshaped financial services. AI plays a crucial role in providing diverse capabilities such as fraud detection, predictive analysis, and personalized customer experience. Major banks and financial firms are integrating Artificial Intelligence (AI) and Machine Learning (ML) to improve operational efficiency, customer engagement, and risk management.
AI automates basic banking activities such as payments, customer service requests, transfers, and deposits. It also helps with the loan and credit card application process such as acceptance and rejection as well as provides a near-instant response.
Companies present in the fintech industry are heavily using AI for customer services, especially chatbots and personal assistants. AI and ML assist banking software development companies in improving security and detecting fraud.
The COVID-19 pandemic has changed the way people see financial services. The fintech industry bolstered during the pandemic, as the number of people using online banking services for transactional purposes increased.
This was due to the strict lockdowns and regulations imposed by governments across the globe to reduce the spread of the virus. With the increased usage of online services and UPI payments, companies competing in the fintech market heavily integrated AI-enabled services to offer seamless financial services and customer support. These factors boosted the market during the pandemic.
AI in Fintech Market Dynamics
Drivers
Increasing awareness among fintech companies regarding the benefit of integrating AI into their financial system drives the market. Fintech companies and banks have all the sensitive customer-driven data and AI & machine learning have the potential of processing a vast amount of data within seconds.
Fintech companies are adopting AI-enabled services to deliver customer-centric solutions, as the increasing number of people are using mobile banking and various fintech applications for daily banking activities.
Restraints
Lack of human intuitions and subjective judgment hampers the market. AI algorithm processes the data efficiently; however, it lacks human judgment. Embedded biased results are another risk associated with using AI in the fintech industry. In the fintech industry, decision-making is one of the crucial factors, as one wrong decision leads to major losses.
In the fintech industry, AI systems handle sensitive financial information, and organizations make financial decisions based on that. There are rising concerns regarding data privacy and security risks as all of that info is sensitive and customer-centric.
Emerging Opportunities
Increasing adoption of AI-powered chatbots is expected to create lucrative opportunities for the market. AI-powered chatbots are gaining popularity in the fintech industry, as they efficiently manage customer inquiries and transactions. AI-powered chatbots are becoming increasingly popular in financial services, especially in banking.
Conversational AI are used for customer support such as transaction history, balance inquiries, and even account openings. AI-powered chatbots help customers manage their finances and make payments effortlessly. Companies present in the finance industry are increasingly adopting AI-powered chatbots.
Scope of the AI in Fintech Market Report
The market report includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.
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Attributes
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Details
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Report Title
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AI in Fintech Market - Global Industry Analysis, Growth, Share, Size, Trends, and Forecast
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Base Year
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2022
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Historic Data
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2016–2021
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Forecast Period
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2023–2031
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Segmentation
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Component (Services and Solutions), Deployment Mode (On-premise and Cloud), and Application (Business Analytics & Reporting, Virtual Assistant, Credit Scoring, Customer Behavior Analytics, Quantitative & Asset Management, and Fraud Detection)
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Regional Scope
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Asia Pacific, North America, Latin America, Europe, and Middle East & Africa
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Report Coverage
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Company Share, Market Analysis and Size, Competitive Landscape, Growth Factors, Market Trends, and Revenue Forecast
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Key Players Covered in the Report
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Amazon Web Services, Inc.; Amelia US LLC; ACTIVE AI; Betterment.; ComplyAdvantage; Dataminr; Google LLC; IBM; Instructure, Inc.; Microsoft; Onfido; Oracle; Ripple; and Upstart Network, Inc.
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AI in Fintech Market Segment Insights
Component Segment Analysis
Based on component, the market is divided into services and solutions. The solutions segment is expected to expand at a significant growth rate during the projection period, owing to the increasing usage of AI-based fintech solutions by major banks. AI-based solutions help banks in reading vast amounts of financial and customer data within seconds, which aids in improved decision making.
AI solutions of some companies help fintech firms and banks in detecting and addressing financial frauds. It also helps in improving the client connection by offering advanced hassle-free solutions. The segment is expected to grow during the forecast period, due to the increasing adoption of AI-enabled solutions for improved and quick transactions.
Deployment Mode Segment Analysis
On the basis of deployment mode, the AI in fintech market is segregated into on-premise and cloud. The on-premise segment dominated the market in 2022, as banks and companies competing in the fintech industry are integrating on-premise due to the rising security concerns. Fintech companies have all the financial and sensitive consumer data.
The need for on-premise AI-based fintech services is growing, as the data theft and cyberattack cases are increasing. On-premise services have less risk of cyberattacks, as these services are installed on in-house platforms.
The cloud segment is anticipated to hold a major market share in the coming years, due to the increasing adoption of cloud-based solutions in the fintech industry. Cloud platforms allow fintech companies to scale their AI solutions easily, which help to handle the workload and demands. Cloud service providing companies are heavily investing in security measures to ensure that sensitive financial data processed by AI application remains secure and compliant with the industry regulations.
Fintech firms are leveraging on powerful cloud-based analytic tools to derive meaningful industry insights from vast amount of data. These insights help them in decision-making processes and risk management. The segment is expected to boost during the forecast period, due to the growing adoption of cloud-based solution by fintech firms and banks to enhance the efficiency and security.
Application Segment Analysis
Based on application, the global market is segmented into business analytics & reporting, virtual assistant, credit scoring, customer behavior analytics, quantitative & asset management, and fraud detection. The business analytics & reporting segment is expected to register a robust growth rate during the forecast period, owing to the increasing usage of AI for business analytics and forecasting purposes.
Fintech companies are using AI and big data-based solutions to improve operational efficiency. Artificial Intelligence (AI) helps fintech companies in forecasting and making improved business decisions.
The customer behavior analytics segment is projected to register a considerable CAGR during the forecast period. AI helps companies present in the fintech industry to analyze vast amounts of customer data to gain insights into customer behavior and preferences.
Furthermore, fintech companies can predict customer needs, detect patterns of fraudulent activities, and personalized services with the help of AI. Major banks and fintech companies are integrating AI into their systems, as it enhances customer experience, increases security, and help companies to make market-driven decision.
Regional Outlook
In terms of region, the global AI in fintech market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. North America is expected to dominate the market during the projection period, due to the growing usage of AI in the well-established regional fintech industry.
Moreover, increasing government investments and initiatives on AI is likely to drive the market in the coming years. For instance, according to the recent Standford University study report, in the fiscal year 2022, the US government spent around USD 3.3 billion on Artificial Intelligence.
Major banks in the region have started using blockchain technology for easy transactions and to keep a detailed track of each transaction. AI enhances blockchain systems by improving transactions through anomaly detection and pattern recognition.
Machine learning algorithms enhance the security of the blockchain network by identifying unusual activities and analyzing transaction patterns. Moreover, companies offering AI solutions are partnering with fintech and banking firms to provide advanced solutions, which is expected to drive the market during the projection period. For instance,
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In June 2022, Lucinity partnered with a fraud management company, SEON, to include real-time fraud prevention capabilities in its AML compliance software.
Segments
The AI in Fintech Market has been segmented on the basis of
Component
Deployment Mode
Application
- Business Analytics & Reporting
- Virtual Assistant
- Credit Scoring
- Customer Behavior Analytics
- Quantitative & Asset Management
- Fraud Detection
Region
- Asia Pacific
- North America
- Latin America
- Europe
- Middle East & Africa
Key Players
Competitive Landscape
Key players competing in the global AI in fintech market are Amazon Web Services, Inc.; Amelia US LLC; ACTIVE AI; Betterment.; ComplyAdvantage; Dataminr; Google LLC; IBM; Instructure, Inc.; Microsoft; Onfido; Oracle; Ripple; and Upstart Network, Inc.
These companies adopted development strategies, including mergers, acquisitions, partnerships, collaboration, product launches, and production expansion, to expand their consumer base globally. For instance,
- In March 2023, CSI, a leading provider of end-to-end fintech and RegTech solutions, announced its partnership with Hawk AI, a leading global provider of fraud and anti-money laundering (AML) prevention technology for payment companies and banks to deliver its latest products as well as WatchDOG AML and WatchDOG Fraud.
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