Artificial intelligence and fintech: An overview of opportunities and risks for banking, investments, and microfinance

Abstract

Artificial Intelligence (AI) is creating a rush of opportunities in the financial sector, but financial organizations need to be aware of the risks inherent in the use of this technology. Financial organizations are integrating AI in their operations: in-house, outsourced, or ecosystem-based. The growth of AI-based fintech firms has encouraged several mergers and acquisitions among financial service providers and wealth managers as they grapple with volatility, uncertainty, complexity, and ambiguity. AI's unique promise of combined cost reduction and increased differentiation makes it generally attractive across the board. However, perhaps other than fraud detection, these benefits depend on the scale of an organization. Risk arises from nonrepresentative data, bias inherent in representative data, choice of algorithms, and human decisions, based on their AI interpretations (and whether humans are involved at all once AI has been unleashed). Risk reduction requires a vigilant division of labour between AI and humans for the foreseeable future.

Digital Trading Applications and Bank Performance: Evidence from Russia

“…With regard to the research area of the article, information on banks' and brokers' operating metrics are utilized [44,45]. The first step consists of analyzing the relationship [1][2][3]. This proposes a detailed insight into the efficiency of institutions' operations, as it is best for them to maximize resource turnover.…”

“…The paper tests the hypothesis that brokers with existing mobile apps outperform banks without mobile apps in the financial sector. The methods include the analytical evaluation of the correlation of examined parameters and validity of the studied nullhypothesis [1,2]. The paper also uses methods of t-test and regression analysis between assets (dependent variable) and the profit to assets (independent variable) in Russia.…”

“…The main hypothesis is that the efficiency of brokers and insurance institutions compared to banks and others in Russia is related to the profit to assets among peers, which is declining as a sign of increasing efficiency. Many authors used this method to prove similar hypotheses [1,2]. Digital trading technology remains nascent even if it develops rapidly.…”

Cryptocurrencies for Microfinance

“…Although there are several studies discussing the effectiveness of microfinance (Banerjee, Duflo, Glennerster, & Kinnan, 2015;Hermes et al, 2011;Souza, Bassi, & Freitas, 2021), some authors argue that it is possible to improve the effectiveness of microfinance through technology, although there is an insufficient number of studies on this topic (Ashta & Herrmann, 2021;Elliot, Ngugi, & Malgwi, 2018;Rakkini & Geetha, 2021). Technology has allowed the banking system to achieve improved results for both financial institutions and consumers (Prisco & Strangio, 2021).…”

“…Technology has allowed the banking system to achieve improved results for both financial institutions and consumers (Prisco & Strangio, 2021). Therefore, it is expected that microfinance might also benefit from the use of technology in its operations (Ashta & Herrmann, 2021). However, there is little research on the use of technologies, their possibilities, and their impacts on microfinance.…”