How do AI and climate change affect fintech?
Climate change and new developments in artificial intelligence could possibly change the face of fintech, venture capital firm Team8 found in a report on the future of the industry published earlier this year.
The VC set out to answer the question “What will fintech look like in 2030,” and found that while many changes are possible and probable, a few potential if less likely changes could entirely change the face of fintech.
Fintech, or financial technology, is the term used to encompass technological changes and advancements to financial services and products.
AI is one of the global processes that has the potential to revolutionize the industry. When it comes to AI’s use in fintech, there is good news and bad news, said Team8’s Venture Creation Fintech fund managing partner Ronen Assia.
A more efficient financial industry?
“The good news is that it will make the financial industry much more efficient.” One example he offered of a process that could be revolutionized is taking out a mortgage. While currently, meetings with brokers and waiting for approvals can take weeks, AI could make this process last only a matter of days, and also offer more personalized solutions as it analyses individual clients rather than sorting people into broad categories as is currently done, Assia explained.
The bad news is that “Fraud will be a much bigger danger,” he added. AI is making imitating others much more affordable and simple, enabling fraudsters to impersonate people much more simply.
While banks traditionally are considered slower to innovate, because of the huge amount of data about their customers that they have, they have an advantage when it comes to AI, said fund partner Galia Beer-Gabel. While fintech companies are well-positioned to be a part of the incorporation of AI into banking because of technical know-how, the banks’ large data sets may enable them to train AI effectively, she explained.
“Large language models and the applications built on top of them [will] create extraordinary productivity gains and cost savings for banks,” the report found.
Overall, AI has the potential to “change completely how we get financial services,” Assia summed up.
Climate change also has the potential to create far-reaching changes in fintech, the report found. “Consumers’ concerns regarding climate change and the environment [will] lead to a significant realignment in incentives for businesses and financial services providers,” predicted the report.
While wars and current global tensions seem to create an environment that is not friendly to businesses, Beer-Gabel said that there are reasons to be optimistic.
“Times of instability and crisis, financial and non-financial, are times that bring to the surface a lot of needs, and often in the time after these crises very significant companies are born,” she explained.
Team8 is a VC focused not only on providing capital for the entrepreneurs they partner with, but on helping their partners build businesses. Part of how they achieve this is by doing their own in house research and forming predictions for the industries they are involved and investing in.
