AI in FinTech App Development: Use Cases, Challenges, and How to Get Started

In quest of new opportunities to boost profits and cut losses, business owners usually turn to digital technologies. One such tech that is creating a stir is Artificial intelligence. With its vast possibilities, companies can now refine their daily operations, maximize security, and streamline business evaluation. Among other crucial benefits, the penetration of AI in the FinTech sector is high and its advantages are undeniable. 

As a result, AI has already been adopted on a wider scale and is expected to become a major requirement for mobile app development in the finance sector shortly. Statistically speaking, AI in the FinTech market is set to have a market value of $31Bn approximately by the end of 2030. 

This blog aims to provide you with a bigger picture of AI in FinTech software development services. It includes a comprehensive view of AI, its use case, and challenges in the finance tech market. Having worked on various FinTech development projects backed with AI, we will also help you understand how to get started with AI in FinTech. 

AI in the FinTech Market

FinTech, or financial technology is changing the future of traditional banking through digital technologies like AI, Big Data, blockchain, cloud computing, and the Internet of Things. Among these top trends in FinTech, AI stands out because it’s great at analyzing data and automating processes.

AI works well with other digital technologies, making the Fintech sector even more versatile in 2024 and for the future. It helps with security, customer service, auditing, and more in FinTech. This cooperation between AI and other tech makes it a valuable tool in the finance industry.

What are the benefits of AI in FinTech?

• Operational cost reduction

FinTech apps provide better accessibility to a wide range of financial services. Integrating intelligent automotive capabilities powered by AI is important in managing operational expenses. These cost savings are often passed on to customers, making AI in FinTech app development an affordable alternative. 

• Better payment system

AI is key in overseeing user verification and strengthening payment security. For example, PayPal uses ML to prevent fraudulent transactions and provide personalized customer assistance to users. AI is making payment systems secure and smoother for everyone. 

• Refined workflow

AI optimized workflow by automating mundane tasks in the case of customer support services. This involves tasks like collecting information and responding to common questions. Doing so, AI can help eliminate the possibility of human mistakes, making the customer support process smoother and more precise. 

• Boosted user engagement

Prompt responses increase the chances of higher user satisfaction. According to the Usability Engineering book, maintaining a user’s attention for more than 10 seconds is challenging. AI helps in instant query resolution, guaranteeing clients receive immediate answers. This enhances user engagement. 

• Data-driven decision-making

Budding FinTech startups and companies are leveraging Artificial intelligence to reshape financial services, making them easier for people to use. In a competitive market where users have many options, FinTech companies know they must use AI for smart choices. 

How is AI used in the FinTech industry?

FinTech startups have received $14 billion in funding during the first quarter of 2023. This huge influx of money shows how much people invest in new financial technology. One big reason is the potential of artificial intelligence or AI.

AI can improve things like automation, efficiency, and decision-making, and speed up FinTech software development. But how can we make sure AI helps FinTech users? One way is by using something called generative AI. This type of AI can create new things, like text or images, on its own. It’s promising because it could make AI more accessible and useful for everyone in FinTech.

1. Improvements in security

Artificial intelligence is making FinTech safer by improving data security. AI-powered chatbots help with customer support, like resetting passwords securely. AI also adds extra security layers, like fingerprint or facial recognition, making it harder for hackers to get in. Generative AI helps companies find and fix vulnerabilities in their systems, making sure sensitive data stays safe. Biometric security, like using your face or fingerprints, is becoming common in FinTech to make banking easier and safer.

2. Fraud detection

AI is helping FinTech by improving fraud detection. With the rise in scams and fraudulent activities, AI can monitor financial transactions in real-time and spot unusual patterns or behaviors that could indicate fraud. This helps FinTech companies respond faster and more accurately to protect their customers and reputation. Machine learning algorithms analyze large amounts of data to pinpoint potential fraud, like Mastercard’s Decision Intelligence technology which analyzes customer payment history to prevent credit card fraud.

3. Improvements in customer services

With the integration of AI services in FinTech app development by providing faster and more available customer service. Instead of relying on humans, AI-powered chatbots and virtual assistants are always ready to help users with their questions. This reduces the workload for customer service teams and allows them to focus on more complex issues. AI can also analyze customer feedback to improve services and offer personalized experiences, like custom financial advice and real-time expense tracking.

4. Robotic process automation 

AI isn’t just for improving customer experiences in FinTech—it can also help companies with their behind-the-scenes tasks. Robotic Process Automation (RPA) uses smart chatbots to automate back-end office tasks, like security checks and customer onboarding. This saves time and money for companies, making their operations more efficient. JP Morgan Chase’s COiN chatbot is a great example—it did 360,000 hours of work in just seconds, showing the power of AI in FinTech.

5. Predictive analytics

Artificial intelligence is helping FinTech by using predictive analytics to make accurate forecasts. This helps companies make smart decisions about investing or borrowing money. AI can find patterns in data that humans might miss, helping FinTech businesses stay ahead of trends and make better choices.

AI Risks in FinTech App Development

1. Machine learning biases

AI models can inherit biases from the data they’re trained on, leading to unfair treatment of customers. For example, if a loan application AI is trained on biased data, it may unfairly reject applicants from certain demographics. To reduce bias, train AI on diverse data and have humans review its decisions when possible.

2. Lack of transparency

Many AI models are like black boxes—they make decisions without explaining how or why. Without transparency, fixing mistakes or explaining decisions to customers is hard. To solve this, companies should test their AI models for explainability. This means being able to justify every decision in a way that makes sense to humans.

3. Regulatory challenges

The lack of regulations around AI in FinTech poses risks, as companies may use technology unethically or expose customer data to breaches. Without clear rules, companies must ensure AI tools are transparent and follow existing regulations. They can also create internal guidelines and have legal and cybersecurity teams review new AI tools to ensure compliance.

4. Data breaches

Sharing data with AI models, like large language models, can lead to security risks and data breaches. This can result in financial losses, legal penalties, and damage to reputation. To protect your information, avoid sharing personal or sensitive data with AI tools and choose models with strong security measures. At DianApps, we prioritize security and are working towards ISO certification to ensure our clients’ data remains safe.

5. Customer trust and acceptance

Customers may be hesitant to trust AI-driven financial systems due to concerns about transparency and data security. To build trust, FinTech companies should be transparent about how their AI algorithms work, how they’re integrated into workflows, and how data is used to train the models. Sharing a detailed AI policy with customers from the start helps reassure them of their data security and overall experience.

6. Lack of skills

Many businesses do not have the required in-house expertise necessary to design, develop, deploy, and manage AI systems effectively. They generally rely on the knowledge and experience of third-party service providers who easily define your security and regulatory needs. Before investing in any AI-related services, businesses should conduct internal training for their staff to help them understand the fundamentals of the technology. It is advisable to consult with a third-party software development company so that they can align expert suggestions with your organization’s preferences. 

Also read: Is AI Replacing Jobs of Professionals?

How Can DianApps Help You in AI-Powered FinTech Software Development?

In the world of financial services, the integration of AI is driving remarkable growth and progress. With AI making significant strides in space exploration and mobile app development, now is the time to embrace its transformative potential. To kickstart your journey with AI and gain a competitive edge, consider hiring mobile app developers today.

As AI continues to play an increasingly vital role in FinTech, early adopters may wonder how to leverage it effectively. Looking ahead, AI will become even more essential in FinTech, making it crucial to partner with a reputable custom software development company like DianApps. Our unmatched custom software development services can help turn your FinTech ideas into thriving realities.

What do we offer?

• Data analytics tools
• Predictive modeling
• ML fraud detection systems
• Computer vision
• Robo-advisers, chatbots, virtual assistants
• Any of your requirements

If you aspire to become the next FinTech success story, FinTech application development is the way forward. Let DianApps guide you on your journey to becoming a FinTech unicorn.