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Hi, fintech fam! đź’ś
Welcome back, everyone! I hope you all had a fantastic Thanksgiving break filled with food, relaxation, and quality time with loved ones.
As for me, I decided to take last Thursday off to recharge and rejuvenate fully for the final stretch of the year. And I am feeling ready and motivated to finish this year strong!
To kick off December, I’m hosting a "Sip and Shop" event on Monday evening in NYC to celebrate and bring the fintech community together.
The event will take place at the trendy Tarin Thomas jewelry store, and space is limited, so be sure to RSVP here as soon as possible.
I cannot wait to catch up with old friends and meet new faces while sipping delicious drinks and browsing the beautiful jewelry.
But first, let's dive into the latest news and updates in fintech.
INNOVATION
Artificial intelligence, the reigning buzzword of the year, has lingered in my thoughts this week, and for good reason.
Initially, my contemplation stemmed from OpenAI's recent decision to replace the only two women on its board with affluent white men, including figures like Larry Summers, known for dubious remarks on women's STEM aptitude and associations with Jeffery Epstein.
This shift raises a pertinent question: How will this impact the trajectory of AI, and more importantly, how should we, as leaders in the fintech realm, redefine our approach to leveraging this transformative technology for the betterment of financial services and humanity at large?
Enter Plaid's 2023 report: The Fintech Effect, a document that landed on my desk and promptly fueled my ruminations. A whopping 60% of Americans believe that AI will usher in a revolution in financial services within the next five years.
Delving into the report, it unveils the top use cases for AI in fintech, as per user preferences:
Lowering bills (and finding cost-effective alternatives)
Solving customer service issues
Providing budgeting advice
Finding and managing subscriptions
Offering financial education
Yet, while consumers foresee significant potential in AI across various domains, a caveat surfaces.
A resounding 7 in 10 Americans prefer reviewing AI's financial decisions before fully entrusting it to make choices on their behalf. This cautious stance indicates that, despite the enthusiasm for AI, there's a yearning for control and transparency in the decision-making process.
In essence, users are eager for AI to enhance their financial situations but need to be more open to entrusting it with decision-making authority.
Fintech As A Lifeline
Remember the stark reality confronting our industry: the financial services sector currently ranks among the least trusted, second only to social media.
Fintech, perched at the intersection of finance and technology, shoulders the formidable task of bridging this trust gap by infusing a sense of humanity into a transactional world.
Our responsibility is clear: we must champion the cause of making AI-infused fintech trustworthy.
Notably, Millennials and Gen Z, the demographics set to inherit $72 trillion in wealth, display openness to embracing new fintech apps incorporating AI technology, with 60% and 51% expressing their willingness.
Amid economic uncertainty affecting 89% of Americans, fintech emerges as a lifeline for over half of them, with 56% turning to digital financial tools. Tangible benefits include a better understanding of spending, progress toward financial goals, and reduced stress related to inflation challenges.
As we navigate the digital revolution in finance, the impact of AI on credit scores looms large, with 63% of consumers questioning the adequacy of traditional credit scoring.
Concerns regarding the perpetuation of societal inequities, particularly affecting Black and Brown Americans, underscore the necessity for transformative action.
The shift toward consumer-permission data, supported by 60% of consumers, offers a more accurate financial portrait.
Open Banking and Generative AI
Enter open banking, a concept that has revolutionized the financial industry by transforming how consumers interact with their financial data.
While the U.S. has primarily embraced open banking through private sector initiatives like screen scraping, new regulations from the CFPB are set to make it a mandatory requirement. This paves the way for generative AI to take center stage.
Open banking provides a comprehensive view of customers' financial lives, enabling generative AI to enrich and analyze this data.
The potential extends beyond structured data, hinting at a future where unstructured data, from images of deposited checks to transcripts of customer service interactions, could become part of the analytical landscape.
However, concerns about biases and discrimination embedded in AI systems persist within these advancements. Female researchers of color, such as Timnit Gebru, Rumman Chowdhury, Safiya Noble, Seeta Peña Gangadharan, and Joy Buolamwini, have been vocal about the dangers of AI magnifying societal discrimination and biases.
Their research highlights the lack of diversity in training data, contributing to biases in hiring practices and criminal sentencing algorithms.
Fintech professionals must acknowledge the real-world consequences of biased AI systems in the face of these challenges.
As AI continues to gain traction, it's imperative to take responsibility for ethical AI training practices to avoid perpetuating discrimination and biases.
The AI saga in fintech is at a critical juncture, demanding responsible decision-making, transparency, and concerted efforts to address biases in training data.
Fintech professionals need to be keenly aware of these challenges and take responsibility for shaping the future of AI in the industry.
Action Items
For fintech entrepreneurs and innovators, the data from the Plaid Fintech Report underscores the immense opportunities and consumer appetite for AI-driven solutions in financial services.
So, let's run through these trends to understand them better. Think of it as a guide for entrepreneurs and operators in developing and refining AI-powered products.
Here's a deeper dive into the data and additional examples highlighting how AI is improving financial services:
1. Consumer Preferences and Use Cases:
The top use cases preferred by users include (as seen above):
Lowering bills (53%).
Solving customer service issues (51%).
Providing budgeting advice (50%).
Finding and managing subscriptions (50%).
Offering financial education (49%).
2. Risk Assessment and Lowering Bills:
AI algorithms can analyze spending patterns, identify cost-effective alternatives, and negotiate lower rates, contributing to the top user preference for lowering bills.
3. Customer Service Enhancement:
AI-powered chatbots and virtual assistants can address customer service issues efficiently. These tools can provide instant responses, streamline query resolution, and enhance customer experience (if trained well).
Fintech entrepreneurs can focus on developing AI-driven customer service solutions to meet the 51% demand identified in the report.
4. Budgeting and Spending Advice:
AI algorithms can analyze individual financial data to provide personalized budgeting advice. This includes identifying areas for potential savings, recommending investment strategies, and helping users achieve their financial goals.
Entrepreneurs can develop fintech apps that prioritize AI-driven budgeting features, aligning with the 50% of users seeking such services.
5. Credit Score Enhancement:
Addressing the concerns raised in the report regarding credit scores, entrepreneurs can develop AI-driven credit assessment models beyond traditional scoring.
By incorporating consumer-permission data, entrepreneurs can create more inclusive and accurate credit scoring systems.
6. Open Banking Opportunities:
The concept of open banking, driven by data portability, offers fertile ground for innovation. Entrepreneurs can capitalize on this trend by creating platforms that integrate and analyze financial data.
Generative AI models can be employed to derive meaningful insights from structured data, and the potential expansion to unstructured data presents exciting long-term possibilities.
7. AI-Powered Risk Management:
For risk management in lending and investment, entrepreneurs can develop platforms that assess risk dynamically, incorporating real-time data to make more accurate predictions. This innovation can contribute to a more robust and adaptive financial ecosystem.
8. Personalized Financial Education:
Fintech entrepreneurs can develop AI-driven platforms that offer personalized financial education, aligning with the 49% of users interested in such services.
These platforms can provide:
Targeted content.
Interactive learning modules.
Real-time financial insights tailored to individual user needs.
The data suggests a fertile ground for fintech entrepreneurs and innovators to leverage AI in addressing consumer demands for more personalized, efficient, and inclusive financial services.
By focusing on critical use cases and addressing societal concerns, entrepreneurs can position themselves at the forefront of the evolving AI saga in fintech.
But all the innovation in the world won't matter if we allow technology to perpetuate cycles of sameness that we've seen fail in financial services.
So, I'll repeat:
We must remember that in a century where AI is poised to become one of the most influential technologies for humanity, getting it right hinges on the people behind it.
WTF ELSE?
Accolade Partners raises $325 million to back venture funds led by women, minorities
Leader or loser? The future of UK Open Banking hangs in the balance
Bridging the wealth gap: A new era of financial equality
Fintech Clara launches payment account in Brazil eyeing $1B in transactions
Why the pursuit of profits shouldn’t detract fintech from its original purpose
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I WANT IT, I GOT IT
📚 Today’s Read: Currently finishing my copy of The Bad Bitch Business Bible by Lisa Carmen Wang. And guess what? I’ll be interviewing her next Wednesday during a LinkedIn Live event. Follow me on LI here to get the details, or respond to this email with “bad bitch,” and I’ll send you a link to RSVP!
👀 Today’s Watch: This Bloomberg Original documentary is called RUIN: Money, Ego and Deception at FTX. As I draw deeper into the story, it becomes increasingly clear that this is not just a cautionary tale about one particular company but rather a cautionary tale about the dangers of placing blind faith in leaders who may seem like heroes at first glance.
🍣 Today’s Eats: One of my favorite ways to use leftover turkey is in soup. Turkey ramen? Yum. Turkey pho? Yes, please.
FINTUNES
Chloe is a talented pianist who was shocked to realize that throughout her entire career, she had never played a single piece of music composed by a woman. This realization ignited a desire to blend diverse musical elements. Chole's fusion of hip-hop, pop, and classical melodies showcases her creativity and skill, while reminding us of the limitless possibilities when we break barriers and push boundaries.
That’s all for now! Stay safe, everyone. Hug your loved ones. See you Thursday!
Love,
Nicole